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analysis

Backpacks and shoes at a daycare, in Langley, B.C., on May 29, 2018.DARRYL DYCK/The Canadian Press

The Conservative plan for a refundable tax credit for child care expenses takes aim at the thousands of Canadian parents stuck on wait lists for regulated child care spaces, families that will have to wait years for the capacity expansion at the heart of the Liberal plan for a ramp up in subsidized care.

It’s a campaign pitch from the Tories of some benefit – now – for any family paying for child care versus the Liberal proposal of big benefits for those fortunate enough to have their kids in a subsidized spot.

But over the long term, that balance would shift under the Liberal plan to both subsidize daycare spots to bring down costs and fund the expansion of supply. Meanwhile, the Tory plan does nothing directly to expand capacity, meaning that the party is more focused on alleviating the symptoms of a strained daycare system.

The Conservatives would replace the current tax deduction for child care expenses and replace that with a refundable tax credit that would reimburse families for as much as $6,000 in annual child care expenses. In doing so, the Tories would also scrap the Liberal plan to spend billions of dollars a year to drive down child care fees (including a 50-per-cent reduction in average fees by the end of 2022 on the way to an average daily fee of $10 in fiscal 2025-26) and to increase the number of subsidized spots. The NDP is proposing a similar plan to push down the daycare fees that parents pay to $10 a day.

“What we’re proposing is to help all families, in Quebec and across the country, directly and immediately,” Conservative Leader Erin O’Toole said Wednesday on the campaign trail in Quebec City.

He said the Conservative plan “will create more spots,” but did not elaborate on how that might happen. Economists and child care advocates say that without direct intervention, the supply of high-quality daycare spaces won’t expand.

Speaking in Vancouver on Wednesday, Liberal Leader Justin Trudeau said the Conservative plan would not help families struggling with daycare bills. “We’ve signed historic agreements, including right here in British Columbia, to ensure that Canadians see their child care costs cut in half over the next year,” Mr. Trudeau said.

Mr. Trudeau’s claim would be true for only a minority of Canadian families lucky enough to have secured a regulated, subsidized daycare spot. As Canadian parents can attest, there are lengthy lineups for those spots in many regions – and those waiting in line will not directly benefit from the Liberal plan.

With skimpy data in the child care sector, it’s hard to determine just what proportion of parents will see their out-of-pocket fees fall. But Morna Ballantyne, executive director of the advocacy group Child Care Now, says there are currently enough high-quality regulated daycare spots for 29 per cent of Canadian children up to 12 years of age. The remainder would be split between families using private daycare, informal care arrangements or no care outside the home.

Ms. Ballantyne, who strongly supports the Liberal approach, said capacity would significantly expand over five years under the party’s plan, so that between 50 per cent and 60 per cent of children aged 12 and younger would have access to a subsidized spot. That would still leave a significant chunk of families outside the subsidized system, however.

The Liberal campaign noted that the Trudeau government has increased the Canada Child Benefit, giving families tax-free cash for any purpose, including daycare.

By contrast, the Conservative daycare plan would make regular reimbursement payments to all families, commencing in 2022; the party hasn’t said when the first payment will be issued. The Conservative campaign did say that the Tory daycare plan would create more spots and increase the quality of care by putting more money into the system, and increasing parents’ choice of daycare provider.

Tammy Schirle, an economics professor at Wilfrid Laurier University, said it’s clear that market forces won’t spur the creation of sufficient capacity, in part because parents don’t have enough information to gauge whether a particular operation is of high quality.

The Conservative proposal has been criticized as favouring higher-income families, but the numbers don’t bear that out. In fact, the Tory plan sharply tilts benefits toward lower-income families, making it a progressive policy (in technical tax policy terms, rather than the broader political meaning of left-leaning). The campaign said its proposed benefit would be in addition to similar credits that some provinces, including Ontario, offer.

Families with incomes of $36,570 or less would qualify for the full 75 per cent tax credit, allowing them to recoup up to $6,000 in child care expenses of at least $8,000. That full credit would amount to as much as 16.4 per cent of such a family’s income.

Contrast that benefit with a family with much higher income of $162,975 or more. That family would only be reimbursed for 26 per cent of child care expenses of up to $8,000, leaving them with a maximum payment of $2,080. That is lower in dollar terms than the lower-income family; it’s also much lower as a percentage of income, just 1.3 per cent.

There are few specifics on what target the provinces propose to hit under the Liberal plan. British Columbia is a rare exception, with the province committing to reduce the average fees that parents pay for a regulated and funded child care spot for children aged five and under to $21 by the end of 2022, down from $42. That reduction would save a B.C. parent $5,040 over the course of a full year.

Gordon Cleveland, an associate professor emeritus at the University of Toronto, said the Conservative plan is “better than a kick in the face” but does nothing to increase supply or reduce fees. He noted that fees in Ontario are much higher than the $6,000 top payout under the Conservative plan, meaning that even a family receiving the maximum benefit would be out of pocket thousands of dollars.

While Ontario has yet to sign on to the Liberal plan, the Canadian Centre for Policy Alternatives has estimated that Toronto parents with an infant in a subsidized spot could save more than $11,000 in 2022.

Rob Gillezeau, assistant professor at the University of Victoria’s department of economics and school of public administration, agreed that the Conservative daycare proposal does little to increase the supply of high-quality daycare spaces.

He supports the idea of the federal government intervening to increase supply. But he said the Conservative proposal does address the real and pressing need to help families outside of the subsidized system while that expanded capacity is being built.

Prof. Schirle agreed, saying that a multipronged approach is needed to both increase capacity, as the Liberals propose, and to ease costs across the system, as the Conservatives advocate. “Why not do both?”

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