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Costly government child care isn’t a winning solution

Author: Franco Terrazzano 2021/04/27

There’s a big difference between making something affordable and playing a shell game with the costs.

Unfortunately, the feds are choosing the latter with their new child-care program.

The federal 2021 budget allocated $30 billion over the next five years towards a national child care program in an attempt to bring costs down for parents. This will be added on top of the $27 billion in direct payments parents already receive every year.

The budget says “it is time for the rest of Canada to learn from Quebec’s example.”

We should indeed learn from Canada’s experience with government-run child care.

And the first lesson is that these program costs tend to balloon quickly.

Since Quebec introduced its government child-care scheme, costs have gone-up from $300 million in 1997 to over $2.7 billion this year. Even after accounting for inflation, that’s a six-fold increase.

Newfoundland and Labrador shows a similar picture. Its government child-care costs have gone up three-fold in the five years before it boosted its per-child subsidy.

The feds’ debt will reach $1.2 trillion this year. If we couldn’t afford a federal government day-care program before COVID-19 when the deficit was $20 billion, what makes Finance Minister Chrystia Freeland think we can afford a costly, and likely to balloon, program after just posting a $354-billion deficit?

This costly program shouldn’t be mistaken as a free lunch for Canadians. It may save parents some money today, but those savings will mean a big bill for their children and grandchildren to pay.

There’s more problems with government daycare than just the finances.

About 55,000 children were unable to access a child-care spot in 2019, according to Quebec’s Auditor General. This is despite every government since the scheme was introduced adding thousands of new spaces every year.

As it stands, there are about five kids trying to fit in every four taxpayer-funded spaces. Because of this scarcity, people have had to get creative to get their children in one of those spots.

That’s how, every year, roughly 30,000 Quebec children are able to by-pass the government’s centralized space-allocation system according to Quebec’s Auditor General. They have been able to do so because their parents know the right people. Meanwhile, thousands more are on waiting lists because of a lack of social capital. At the very least, this problem highlights why taxpayers shouldn’t be subsidizing child care for wealthy families.

The government can play a role in making child care affordable, but a large, overly bureaucratic program is the wrong way to go about it.

Affordability is determined by two things: how much something costs, and how much money people have in their pockets.

And it’s on the latter where the government should act. After all, income taxes, sales taxes, carbon taxes and all other kinds of taxes amount to a family’s largest yearly expense. In fact, taxes take up about 45 per cent of a family’s budget, according to the Fraser Institute.

By taking less money out of families’ pockets in the first place, the government can improve affordability in all aspects of life, including child care.

And despite Prime Minister Justin Trudeau promising not to raise taxes, Budget 2021 introduces a raft of new taxes and tax hikes, including higher tobacco taxes, a vaping tax, sales taxes for digital services and a luxury goods tax.

All this on top of recent booze and carbon tax hikes, along with future carbon tax hikes and a second carbon tax. Not to mention the walloping tax hikes that are in our future if the feds don’t muster the spine to rein in spending.

While affordability and child care are key concerns for all families, bringing in a costly government child-care program and sticking the future generation with the tab isn’t a winning solution.

By Renaud Brossard, Quebec Director, Canadian Taxpayers Federation; and Franco Terrazzano, Federal Director, Canadian Taxpayers Federation

This column was originally published in the Toronto Sun on Apr. 25, 2021.