CHILDCARE PLAN, CHILD BENEFIT CLASH.

One of the centrepieces of the Trudeau government's 2021 budget is Ottawa's expanding role in daycare. Unfortunately, it involves confusion and contradictory policy that warrant clarification.

Budget 2021 proposes $27.2 billion over the next five years to reduce daycare costs by 50 per cent by 2023 and lower the average daily price of daycare to $10 within five years. The budget loosely recognizes that daycare is a provincial responsibility and so commits to working with the provinces. Although the budget expresses these goals relatively clearly much of the plan remains opaque or even contradictory.

First, the new daycare initiative took centre stage but actually represents only a fraction of new spending. Budget 2021 proposes $152.5 billion more program spending over the next five years than was planned just 20 weeks ago in the November economic statement. Of that, 17.8 per cent goes to the new national daycare initiative — formally known as the “Canada-wide

Early Learning and Child Care Plan.”

Second, although the government characterizes the new spending as childcare, it's targeted more narrowly than that. “Childcare” covers a host of arrangements, including care by parents and other family members, neighbours and nannies, as well as licensed regulated daycare. The government's initiative includes only formal, licensed daycare.

Third, the budget downplays the serious complexity of working with the provinces on a cost-shared program, especially given the state of provincial finances, expectations of rising healthcare costs and Ottawa's history of reducing the share of the costs it pays once programmes are established. Simply put, it's not clear how most provinces can afford a big, new cost-shared program with the federal government.

Fourth, and perhaps most curiously, the nearly $30 billion planned for daycare is at odds, at least to some extent, with one of the Liberal government's other signature reforms — the Canada Child Benefit (CCB). In Budget 2016, two previous federal programs were replaced by the CCB, which was heralded as giving “Canadian families more money to help with the high costs of raising their children.”

One idea behind the CCB was that more money for families would allow them to make their own decisions about how best to take care of their preschool and school-aged children. In 2020, the maximum benefit (excluding provincial add-ons) that the CCB paid for children under six was $6,765, while the maximum for those between the ages of six and 17 was $5,708. And, critically, CCB payments are tax-free. Depending on family income, the tax-free benefit from the CCB can be substantial and help families make their own decisions about their children's best interests.

The CCB is already a more expensive and generous program than its predecessors. In its 2018-19 version, for instance, spending under it has been estimated to be $5.4 billion (or 28.9 per cent) greater than the programs it replaced — and that's before an ad hoc increase in benefits during COVID.

Finally, it's important to put this increase in permanent spending in proper context. All told, the Trudeau government expects to borrow $331.9 billion over the next five years, bringing the national debt (adjusted for financial assets) to $1.53 trillion. The financial pressures of an aging society, coupled with increased discretionary spending by Ottawa, mean there's no balanced budget in sight.

The Trudeau government continues to be either unable or unwilling to prioritize federal spending, control expenditure growth or manage the unnerving explosion in federal debt, which all risk the health of public finances and the programs they support. The Canadians it helps enrol in daycare today will end up paying for all this spending tomorrow.

DEPENDING ON FAMILY INCOME, THE TAX-FREE BENEFIT FROM THE CCB CAN BE SUBSTANTIAL.