A national subsidized child-care plan is one of the signature achievements of the Trudeau government.
Whatever one thinks of the Liberals’ approach (and the details leave much to criticize), the broad thrust of better access to lower-cost child care is sound policy. Not only that, it’s a program that, on paper at least, has been launched in co-operation with the provinces rather than simply handing down an Ottawa-inscribed decision.
Indeed, the 2021 budget pointed out that billions of dollars being spent over five years would ”bring the federal government to a 50/50 share of child care costs with provincial and territorial governments.”
Federal budget 2023
This is part of a series on the federal budget to be unveiled on March 28.
Seniors: Let’s close public spending’s generation gap
Health care: Provinces need more tax room, not blank cheques
Defence: Canada’s indefensible military spending
Hiring: Liberals must stop the spree
Unfortunately for the provinces and territories – and for parents – that 50-50 split will be a fleeting achievement. For starters, Ottawa has made no commitment to that effect; its written agreements with the provinces and territories don’t contain formal cost-sharing language.
If inflation had remained quiescent, that might have been a minor inconvenience for the provinces, daycare operators and parents. Instead, surging prices have eroded the buying power of the federal daycare commitment, opening up a significant gap in the inflation-adjusted value of Ottawa’s funding.
Two years ago, the Liberals announced $27.2-billion in cumulative funding over five years. That amount was essentially unchanged, at $27.5-billion, by the time of the 2022 fall economic statement last November.
But inflation projections had jumped significantly. The 2021 budget foresaw a 2-per-cent increase in the Consumer Price Index in 2022. By the time of last fall’s update, that figure had more than tripled, to 6.8 per cent, for instance.
There’s a smaller upward move in projected inflation for 2023, before the forecasts intersect in 2024, when inflation is predicted to be 2.1 per cent. (The projection is marginally lower than the Bank of Canada’s January outlook.)
Higher-than-expected inflation eats away at the purchasing power of Ottawa’s child-care dollars. Daycare operators face bigger food bills, higher energy expenditures and, most notably, larger payroll costs.
To keep pace, Ottawa would need to boost its expenditures by hundreds of millions of dollars a year, as the chart shows.
And what will happen if the Liberals decide not to increase their child-care outlays? The provinces could fill the resulting funding gap – with Ottawa breaching the spirit, if not the letter, of the joint child-care initiative.
Or the provinces could decide to follow the federal government’s lead and refuse to provide additional funding. At a minimum, that would slow the growth of subsidized spaces. So, fewer parents would be able to find a subsidized spot. Perhaps daycare operators would be allowed to raise their fees; that would imperil the pledge to reduce out-of-pocket costs to parents to an average of $10 a day per child by the middle of the decade.
What all of those scenarios have in common is Ottawa diluting the promise it made two years ago – to great fanfare – to launch a new social program that would not only buttress economic growth, but create a more equitable path for women to enter and stay in the work force.
Usually, it takes Ottawa a decade or two to walk away from a shared fiscal commitment with the provinces. In the case of child care, that stroll is starting much earlier.
Next week’s budget should be broadly focused on spending restraint.
Child care, however, needs to be an exception, with Ottawa fulfilling the moral commitment it made two years ago to be a full partner in a national subsidized system.