Tax breaks not welfare for the rich, says PM

By Misha Schubert, Deborah Gough

September 28, 2004

Giving child-care tax breaks to wealthier families was not "upper-class welfare," Prime Minister John Howard said yesterday.

Mr Howard argued that no means test should apply because child care was an unavoidable expense in earning an income for many Australians.

The Prime Minister also rejected claims the extra taxpayer subsidies would encourage child-care centres to put up their fees, knowing parents were getting financial relief.

Under the Coalition's child-care policy, parents claiming the means tested Child Care Benefit will be entitled to a 30 per cent rebate on child-care costs. But the means test is relatively generous, meaning that even families on high incomes will be eligible for the rebate.

"The 30 per cent rebate will not be means-tested, no, and I don't believe it should be," said Mr Howard. "If you decide to work and if you have young children .. . there is an unavoidable cost involved. It's a working expense and there should be some recognition of it. Just as other expenses associated with earning your income are tax rebatable or deductible, so is this."

With a chronic shortage of places around the nation, Labor has claimed the tax breaks may encourage price hikes by some centres. Mr Howard disagreed: "I don't believe that will happen because there are always some forces of competition."

Asked why low-income families should subsidise the cost of child care for wealthy couples, Mr Howard said that was part of any universal system.

"I don't regard tax breaks as upper-class welfare. I regard tax breaks as a recognition that you need to have incentives in our society to facilitate choice."

The Coalition's plan also offers family tax benefit increases of up to $300 to stay-at-home parents. Mr Howard said his package was designed to keep the choices about child care "neutral".

"I think it (the policy) is a breakthrough and finally get this whole work-family thing into proper balance. It finally, emphatically, says to both groups 'We're not taking sides, we're not saying which is right or which is wrong'. "You're both right and what you should do is to choose what you think is best for your family and for your circumstances and we will, to a certain degree, support that choice ."

Child care commentator, Australia Institute research fellow, Dr Michael Flood said the Coalition's policy was a step away from its conservative social preference for stay-at-home mothers by offering the rebate.

Australian Family Association national vice-president Bill Muehlenberg criticised the Coalition's increase in benefits for stay-at-home mothers by up to $300 as paltry by comparison to the 30 per cent rebate.

But he said it was better than Labor's moves towards free child care. He said Labor's policy was an attempt to make it more acceptable to have children in child care, but agreed that the older a child was the less the damage in them attending care.

"What we would really like to see is a voucher system or something like that where a parent can essentially be paid to stay at home. They can invest the money, do whatever they want with it. We think people should have a choice," Mr Muehlenberg said.

Community Child Care Victoria chair, Lynne Wannan said she thought the Labor policy while limited in what it offered on alleviating child-care costs but appeared to deal with structural problems in the system.

l think Labor's policy is more strategic. What they have done is looked at the facts and the problems and tried to address them. It is not perfect but it is a good start," Ms Wannan said.

Representing commercial operators, the Child Care Associations Australia president Gwynn Bridge said: "We feel that the 30 per cent rebate across the board will certainly be welcomed by families using child care." Eva Cox from the Women's Electoral Lobby said a recent ANZ study found that child-care costs had risen 30 per cent in three years.