Tova O’Brien: Childcare refund may be own goal for National

Tuesday, 26 March 2024

Tova O’Brien is Stuff’s Chief Political Correspondent and host of the weekly political podcast, Tova.

ANALYSIS: A win for parents, another own goal of sorts for National.

National’s brought forward its FamilyBoost policy - which will see families earning under $180,000 get a refund of up to $75 each week on childcare costs.

It’s a good policy insofar as it puts cash back into parents pockets where it's desperately needed.

Though Labour argues it’s a bad policy because parents still have to pay the upfront cost whereas its policy extended free ECE to under 2 years olds. Right now it’s only free for 3s and 4s.

There’s no quarrel over the need to do something. New Zealand’s early childcare costs are astronomical compared to other similar countries. Couples here pay 37% of their income on ECE, the OECD average is 13%.

So the policy is good news for some parents, 100,000 households to be more precise including 21,000 who get the full $75.

Where it’s an own goal for National is in a few areas - the number of families who benefit, the cost of the policy and the implementation.

First, the number of families. Tens of thousands of families miss out on the policy as it was announced by National on the election campaign.

At the time, National promised the policy would help 130,000 low and middle-income families.

Between the election and its first 100 days, National managed to lose 30,000 families.

This is because some of the families it had thought would receive the rebate already get other forms of subsidy which preclude them.

That lower number of beneficiaries also helps explain National’s other calculator fail, it costed the policy $967 million over four years, it’s now going to cost $723 million.

Finding $244 million in change down the back of the couch ain’t a bad problem to have - unless you’re one of those 30,000 missing families.

And the final discrepancy between the policy as announced versus now is the mechanism by which it’s delivered. And this is the one that will be most cumbersome for parents.

National assumed it would be able to easily give this cash refund back to parents but because IRD doesn’t hold all the necessary data to do so, parents will instead have to invoice IRD every few months to get their refund.

The alternative option would have meant upgrading IRD’s systems which would take 2-3 years and would also mean a massive broken promise for National which it was not willing to wear.

As the official risk assessment of the policy says choosing the faster option places high compliance costs on families which could reduce the take-up of the policy, it also “comes with significant costs to the government both fiscally and to cover the administrative costs imposed on IRD”.

All of these departures from the election version are classic symptoms of policy in opposition meets reality in government when ministers have access to the full apparatchik of the public service and the data it holds.

National won’t be put in the stocks over it and nor should they - especially when it helps some families in this neverending cost of living crisis - but it does raise legitimate questions about what else National might deliver differently.

We’ve already seen the $800 million cost blow out for interest deductibility for landlords and less backdating than was promised in the coalition agreement.

The multi-billion dollar question is what changes, if any, will be made to its flagship tax cut policy in the Budget.

The Council of Trade Unions has done some numbers suggesting National is missing $3.83 billion to pay for the cuts - most from NZ First killing off the foreign buyers tax and the revenue it would have brought.

The Finance Minister Nicola Willis dismissed the CTU’s numbers out of hand, saying the union should instead think of its members, the working parents set to benefit from the policy, but she failed to address either the existence of the shortfall or whether it could really be that big.

Voters will forgive the government’s budgeting “overs and unders” and “swings and roundabouts”, as Willis is calling it, when it comes to cost changes on the margins which are honest mistakes when you don’t have access to all the information.

What voters might have shorter shrift for, however, is if these fiscal slips turn into a fiscal landslide requiring far greater austerity than bargained for.

What do you think of the Government's childcare rebate scheme? Leave your comment below. If you’re using Stuff’s iOS app you’ll need to visit Stuff.co.nz on a browser to view and post comments.