Tom Parlon (Laois-Offaly, Progressive Democrats)

I agree with the speakers on the significance of the problem. The recommendation is essentially a system of tax allowances at the standard rate of income tax for those paying for child care services. The allowance proposed is limited to the amount actually paid in the year, or to €7,000, whichever is less. If the taxpayer has insufficient income to use up all the allowance, the excess is lost. This issue was discussed at great length on Committee and Report Stages of the Bill in the other House. I welcome the opportunity to outline to the House the Government's current policy in this area.

The difficulty with using a tax as a support in this area is that parents who are already below the tax paying threshold can gain nothing from it. These are the people who can least afford to pay for child care services and whom we should be most interested in helping, whether by way of work, extra skills or further education. Over the past number of years, the Government has considered carefully the whole area of child care. It decided as a matter of policy that child benefit is the main instrument through which support will be provided for parents with children. One of the main benefits of this approach is that whereas tax relief would be of little or no benefit to people on low incomes, the provision of support for parents through the child benefit route means equality of treatment for all recipients. Overall expenditure on child benefit this year is estimated to be in the region of €1.9 billion. Child care benefit is certainly expensive and a substantial amount of money has been provided for this area. The actual amount of money provided has increased by 279% since 1997.

In order to address the availability of services, the supply of formal child care places has also been stimulated through a programme of investment under the national development plan equal opportunities child care programme. The programme funds capital development projects to increase places, support staffing costs for facilities, target disadvantage and improve child care quality. From 2005-09, the capital budget for the planned programme will be €313 million, which is expected ultimately to create approximately 17,000 places. As we all know, facilities create competition, which brings down prices.

The Government has also undertaken through a series of tax measures to favour the supply of child care facilities by the use of capital allowances for the provision of child care facilities and relief from benefit-in-kind taxation for free or subsidised child care where this is provided by employers. Senator Ryan raised this issue. The Finance Act 1999 introduced capital allowances for expenditure on the construction, refurbishment or extension of child care premises which meet the required standards set out in the Children Act 1991. Under the decentralisation programme, my Department will examine child care facilities in the new Departments throughout the country.