Labour’s childcare subsidies won’t help most parents

In a speech and a press release, Prime Minister Jacinda Ardern said 54% of all New Zealand families with children will be eligible for subsidised childcare assistance.

More than 10,000 additional children will become eligible for support under an expanded programme, she told the Labour Party conference. The childcare subsidies were widely reported in media outlets as half or ‘‘more than half’’ of children soon being able to get subsidised care.

What we found

On the surface, the announcement sounds generous. It’s not that simple. It will not make a difference for the majority of the 195,000 children in early childhood education (ECE).

And for many it does affect, the change is likely to be minimal. Childcare subsidies are a welfare support measure, available to low and middle income families. The subsidy can be used for preschool children in ECE, and before and after-school care for older kids.

The previous National Government froze the parental income thresholds for the subsidy in 2010. This meant over time fewer families were eligible and the number of children it was claimed for more than halved, from 52,600 to 24,800.

As part of a review, the Ministry of Social Development decided to raise the thresholds and the subsidy amounts, starting from April, 2023. This is what Ardern announced.

It will cost $48m per year. The ministry estimates that, with the changes, the subsidy will be claimed for an extra 10,300 children, bringing the total to about 35,000 children receiving the subsidy.

The ministry’s Regulatory Impact Statement shows the plan was for a one-off increase to catch the subsidy up wage-wise to where it was in 2010. It will then be adjusted annually to match wage growth.

Even with those changes, the number of kids who will claim the subsidy from April is still fewer than it was in 2010.

So where did the claim about ‘‘half of all families with children’’ come from? Social Development minister Carmel Sepuloni’s office says the 54% figure represents all of the families with children under the age of 14, who would be eligible for the subsidy based on income.

But income is not the only qualifier. To access up to 50 hours the applicant has to be the main caregiver; they have to be working, studying, or training; and the other caregiver must be unable to look after them.

Taking this into account, it is questionable that the full 54% would qualify – and this total includes beneficiaries, who can only access a maximum of 9 hours of support, not the full subsidy.

And that 54% is also calculated using the new maximum income threshold, which is $140,244 before tax. On this income, a family must have at least three children to qualify for even the lowest level of subsidy ($1.88 an hour). For families with two children, the threshold drops to $124,644, and for families with one child, $109,096.

To get the highest level of subsidy, of $6.03 an hour, a family

with three children must earn below a combined before tax income of $66,092. These new thresholds are still a significant increase, though.

This will boost the subsidies for families already receiving them, as well as making more children eligible. There is no reason to doubt the ministry’s analysis that 10,000 more kids will likely receive them, and that it will make childcare assistance near-universal for single parent families.

In summary

As a cost-of-living measure, the changes will make a difference to thousands of low and middle income families, depending on how many children they have, if they are working, how much they earn, if their children are in formal care, and if they apply and qualify.

But to say 54% of all families with children are eligible is not true. It’s limited to low- and middleincome families.