Liberal agreements with provinces will be scrapped; $100 a month payments per child under six will begin; cheques won't trigger clawback of other federal benefits.
Ottawa (3 May 2006) - The Conservative government made it official Tuesday, axing a national network of child care agreements negotiated by the former Liberal government with all 10 Canadian provinces.
The system will lapse when the current fiscal year ends next March 31, Finance Minister Jim Flaherty confirmed in the first Tory budget since the Mulroney era of the 1980s and early 1990s.
In place of the Liberal plan, the Harper Conservatives announced formally that they will move ahead with $100 a month payments ($1,200 a year per child) to Canadian families with children six years of age or under. The payments, which start July 1, will cost $3.7 billion over the next two years.
As predicted, the grants will be taxed at the income level of the lowest-earning spouse, meaning that upper income families, those most likely to have a stay at home spouse, will benefit to a greater degree than those on lower incomes, where both parents work outside the home.
The only concession by the Tories to their critics is a commitment that they will not allow the child care grants to trigger additional clawbacks from families receiving the Canada Child Tax Benefit of a GST tax credit.
No new spaces
Meanwhile, Flaherty announced, effective in the 2007-08 tax year, that the Tories will "replace" the Liberal child care plan with $250 million a year in grants and tax credits to create new child care spaces.
Critics were quick to attack the plan, pointing out that, despite the large sums of money the Conservatives are spending, they will not directly create any new child care spaces.
Critics were also quick to fault the Tory scheme for its 'Celine Dion approach' to child care. (Potentially, the wealthy Quebec-born singer would be among those in line to reap the maximum benefit.)
For example, a two-earner Ontario couple (with a child under six) making a family income of $50,000 a year would be able to keep only $871 of the $1,200 after taxes compared with a stay-at-home parent who would able to keep $1,134 - even if the working spouse earns a six-figure salary.
The Tories hope to counter this criticism by claiming that, overall, the budget will leave all families better off when the impact of all measures is taken into account.
These initiatives include a much-promised 1% cut in the GST, effective July 1, a new $1,000 exemption for work-related expenses, and a number of new and smaller tax credits affecting books for students, youth sports expenses and public transit passes.
Business wins as usual with Tories in power
Meanwhile, the big winners - as is traditional in Tory budgets - were corporations and the business community.
The corporate income tax rate will be reduced to 19% from 21% (by 2010) and the corporate surtax and capital tax will be eliminated altogether. Meanwhile, the 12% small business tax rate will also be cut by a full point to 11% effective in 2009.
Hidden away in the budget is a lot of potential bad news for the future of many existing social programs. The government plans to find $2 billion in savings from departments over the next two years, a level that could rise steeply after that date to finance the new Tory agenda. NUPGE
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