Michael McDowell (Dublin South East, Progressive Democrats)

When the parties opposite were in office, there was such crippling taxation on ordinary families that the complaint was that there was no point in two spouses working because the State took everything off the poor spouse who joined the labour market and it was not worth his or her while. The situation has changed dramatically.

The Government originally made available €317.4 million, including €177 million in European Regional Development Fund and European Social Fund support, for the development of quality child care under the equal opportunities child care programme for the period of the present national development plan. Such has been the immediacy of the Government's response to the pressures to increase that funding that the amount set aside in the national development plan for the equal opportunities child care programme in this period has increased from €317 million to €499.3 million, an increase of 57% from the original allocation. In addition, the Government has made a firm commitment to provide ongoing funding following the conclusion of the national development plan.

The programme aimed originally to increase the number of centre-based child care places by 28,300, or 50%, by the end of the programme period. Funding allocated to date will lead to the creation of 36,500 new places and, most important, of these, 20,500 were already in place by June 2004, two years into the plan. These new places are located throughout the country, with a significant number in areas of urban and rural disadvantage and they serve to make centre-based child care services available at local level.

Last Friday, as Senator O'Meara acknowledged at the time in slightly less charitable tones than in this debate, I announced a major allocation of capital funding because my colleague, the Minister for Finance, Deputy Cowen, had made additional capital funding available to me in budget 2005. This brings to over €67 million the amount of large scale capital for community-based projects which I have announced to benefit over 70 capital projects since budget day last December.

The success of the equal opportunities child care programme is a testament to the work of the many community-based not-for-profit groups and private child care providers who responded to the State's invitation to develop quality child care services to meet local need. I expect to announce many further capital grants during this year to continue to build upon the dynamism of the community-based sector. In managing such a major investment programme, some delays are inevitable as projects must be subjected to thorough appraisal. It is also essential to manage appropriately the financial flows of Exchequer and EU funding.

I wish to deal with the issue of child benefit. To help all parents the Government parties in 1997, as part of their child care strategy, considered a number of strategic options. It was not a matter on which there was party division but there was a vigorous debate within Government as to which option was fairer or more socially just. One option was to put all the eggs in one basket and have a series of Government subsidies through the taxation system. However, this would not avail those not paying tax and, because of the tax reform policies of the parties in Government, the tax bills of many families are very low. The alternative view was to put the money directly into the pockets of families through child benefit.

I will repeat again, because it was worthwhile when we were dealing with the Labour Party motion, what has happened with regard to child benefit. Overall expenditure on child benefit has increased almost four times, from €506 million in 1997 to an estimated €1.916 billion, just short of €2 billion, in 2005. During this time, the minimum monthly rate per child has risen dramatically from €36.83, the rate which we inherited from the socially enlightened parties in this House, to €141.60 next month in 2005, a rise of 272%. When those who talk about supporting families with children had the opportunity — and God knows they lecture us about what a wonderful economy they handed over in 1997, how competent they were, how the place was booming, how everything was going swingingly — in 1997 they were giving some children child benefit of €36.83, or the equivalent of that, which is about €9 weekly.

These unprecedented increases make a significant contribution to all parents, not just those in employment, or those who choose centre-based child care. Income tax credits, on the other hand, would naturally only benefit those who pay income tax. Given the progress achieved by this Government in taking low-wage earners out of the tax net, tax credits would be of little or no benefit to the low paid, forgetting altogether about the unemployed. Refundable tax credits, as proposed by the Labour Party motion, would similarly be of no benefit to those parents whose child care needs are met by family members, or through other informal arrangements.

That is not to say that the tax system does not provide reliefs which help taxpaying parents. The Government provides relief through benefit-in-kind taxation, where employees have child care provided to them at a subsidised rate by their employers. In addition, the tax system treats many parents with dependent children very favourably through the one-parent family tax credit, the widowed parent tax credit, the incapacitated child tax credit and the home carer tax credit.

Individualisation was introduced to help those families and alleviate the tax burden on families where both parents went out to work. Such matters are forgotten about because individualisation got the attribute of being a bad thing even though the Irish Congress of Trade Unions had supported it vigorously up to the moment when it was introduced and it then abandoned it, at least as far as public debate was concerned.

The Government also fosters the development of private child care services through tax incentives available to investors and service providers. In other words, the tax system is being used. The Government has continued to develop early education to support disadvantaged children in their early years. The Early Start project has been established in 40 primary schools in designated areas of urban disadvantage in Dublin, Cork, Limerick, Waterford, Galway, Drogheda and Dundalk, making a total of 1,680 places in those centres available to give children from these areas special supports to prepare them for primary education.

I am the first to admit that we could and must do a lot more. I make no pretence otherwise. I admit that during the next general election the child care issue will be one of the battlegrounds on which the election is fought. I have no doubt about that. However, I ask people that when election time comes, and it will be some time yet as far as I can see, they remember who did something and who did nothing in this area. They should attach some credibility to the achievements of those who delivered, even coming from nothing, to use Senator O'Meara's phrase, compared to those who presided over nothing and did nothing in the area. Let us remember that fact.

There is a significant issue of supply to be considered by the body politic and I will be interested to see contending theories developing over the next while. Voucher systems, as canvassed admittedly in a sketchy way by Senator Derek McDowell, could, on their own, if there were no increase in supply, massively increase the cost of child care and be of very little incremental value in terms of social advancement.

There are other ways of looking at increasing child care. If I can, in the same sketchy way as did Senator McDowell, put forward one area where there must be political debate and a careful examination. There are many people who would supply child care services in an informal setting if we were to extend to them the same kind of taxation treatment as we did in income disregard for people who, for example, take lodgers into their homes. Currently, many people accommodate lodgers on an income disregard system because that was seen as one way of increasing supply of accommodation, of sharing it out and encouraging people to do so. If we are serious about increasing the supply of child care, an income disregard system would be well worth considering for those who would be in a position to supply it if it were not for the fact that they would lose social welfare entitlements or be heavily taxed.

I am not excluding the notion that in the future we might go down the road of special taxation treatment for child care expenditure but in that regard, two things must be borne in mind. Unless that system were run in a totally fair way it would tend to benefit the haves rather than the have nots. It may also have the effect of increasing the cost rather than the supply of child care places. We must, therefore, be careful of unintended consequences.

We are a society that has moved from nothing to something and we are implementing, ahead of target, a very worthwhile equal opportunity child care programme. Second, for the reasons I gave earlier, it is not true to say that the taxation system does not assist child care. Third, if as a society we are to commit further resources to the subsidy of child care we must be careful that the way in which we do that does not simply drive up its cost and not increase its supply. Measures directed at the creation of additional capacity are of more interest in the long term to most parents than measures which simply give them the illusion of getting some State help if the effect of that State scheme is to run up prices yet again with capacity not expanding to meet the demand.

I agree that many parents feel that the current burden of child care is a significant budgetary item. Anyone who disputed that would be living on another planet. What we need now are creative solutions to the problem, not old, hackneyed thinking taken down from the shelf. We will have a general election in two years' time and this will be a central issue. Proposals put before the electorate cannot be gimmicks. We cannot do what my good friend Garret FitzGerald once did, namely, propose that £9.60 be taken from the husband's wage packet and given to the wife. We cannot have solutions that rob Peter to pay Paul. We cannot introduce inflationary subsidies for child care which put it outside the reach of those least able to afford it and play into the hands of those who can most afford it. We must have a system based on the notion of increasing the supply of child care of adequate quality.

I am not suggesting that we have yellow pack child care or that we should have houses used as holding pens for children at cut-rate prices. Child care is hugely important in a child's potential development and its quality is all-important. In terms of equality, tackling disadvantage depends on delivering high quality child care.

I ask the House to adopt the Government amendment as it views matters in a fairer light. I also ask the House to note that Senator O'Meara's comment that this Government was "coming from nothing" says more about the party she represents than the Government of which I am part.