25 Mar 2024

Childcare subsidies to start from July, families eligible for up to $75 a week

6:33 pm on 25 March 2024
Finance Minister Nicola Willis announced the government's "mini-Budget" on 20 December 2023.

Finance Minister Nicola Willis. Photo: RNZ / Samuel Rillstone

The FamilyBoost childcare subsidy will begin from 1 July this year, with the refunds being paid out from October, Finance Minister Nicola has announced.

Rather than being paid fortnightly as the party had proposed, it would be paid out once every three months, and parents would be required to apply using invoices from early childhood education providers.

National campaigned on the scheme ahead of last year's election, promising a 25 percent rebate up to a maximum $75 a week on childcare costs.

Repayments for those earning between $140,000 and $180,000 would be gradually reduced from 25 percent, and families earning more than $180,000 would be ineligible.

The fee payments would also be calculated after the 20 hours free and Ministry of Social Development childcare subsidy had been taken into account, but could be claimed on top of those other entitlements.

Speaking at the weekly post-Cabinet media briefing, Willis said about 21,000 families would be entitled to the full payment. About 100,000 families would benefit from the policy, she said.

Registrations for the scheme were set to open in September, with applications for the preceding three months (July-September) beginning from 1 October.

The rebate would be split between separated parents provided they each separately met some of the cost, with each parent submitting separate invoices. Grandparents would also be eligible to claim for costs paid in their name for care of children they lived with.

Claims could only be made once per three-month period, although parents could choose to claim less often if they wished. They would be made online, with families who did not have access advised to use public libraries, IRD service kiosks, or through whānau members.

The government said more information on applying would be available after Budget Day, 30 May.

Finance Minister Nicola Willis announced the decision after the usual Monday Cabinet meeting, alongside Prime Minister Christopher Luxon.

"Many families are struggling with high housing, food, and childcare costs. One of our priorities is to support families to get ahead by helping them with the high cost of living, including help for those bearing the brunt of childcare costs," she said.

"Being able to afford ECE fees can also be a barrier to entering the workforce, particularly for the second earner in a household. FamilyBoost will make it easier and more worthwhile for families with young children to work by directly assisting them to pay those ECE fees.

"Parents and caregivers will be able to submit their ECE invoices every three months via myIR, with FamilyBoost refunded as a lump sum. Parents should start collecting invoices from 1 July, so they can begin to apply and be refunded from October 2024."

Luxon said the policy would normally be announced at the Budget, but was being revealed early so officials could get to work on it before July.

He said the government was delivering on National's promise for the amount, even if "it's delivered in a slightly different way, due to the administrative complexities".

Asked what assurances they had the early childhood centres would not simply increase their fees, he said: "if they did that, parents will simply vote and walk".

The scheme would work by parents submitting applications through Inland Revenue via the myIR website, including invoices from ECE providers. Household income would be calculated by the department using three months of actual reported income.

When the policy was first announced in the lead-up to the election, National had proposed the payments would be made fortnightly, directly into parents' bank accounts.

At the time, Labour's spokesperson Carmel Sepuloni said it would not target those on the lowest incomes who needed the most help and would likely end up costing more than National predicted due to increased uptake of childcare services.

It had then been costed at $249m a year, to be paid for from the $400m National expected to save by reducing the use of contractors and consultants in government departments.

Willis said the policy was now expected to cost $723m over the four-year Budget period, having initially been estimated at $967m over that time.

She said New Zealand parents on average paid about 37 percent of their income for childcare costs, compared to the 17 percent across the OECD.

Labour had campaigned on extending the 20-hours ECE free policy to two-year-olds, cancelled by the coalition.

An analysis of the policy by IRD pointed out that no department held the data on early childhood fees they would have needed to make the payments automatic.

It warned that requiring parents to apply could mean fewer families applying, and although it could be made more automatic over time there was a risk it could be difficult to shift away from the original model. The more automated approach would have taken longer to set up and cost more at the outset, but would eventually be more efficient for parents and IRD alike.

Willis said the government was aiming to streamline the application process over time, by working with ECE providers.

"We are determined to reduce the administrative burden for parents."

The IRD analysis noted that high ECE costs disproportionately affected women, Māori and Pasifika, contributed to the gender pay gap, and added pressure preventing women re-entering the labour market.

However, it also noted the policy itself would proportionally affect more Europeans and Asians because they were more likely to be paying for childcare than Māori and Pasifika.

'A big step in the right direction'

Early Childhood Council chief executive Simon Laube said the move would be a welcome relief for parents facing rising costs, "particularly those with the highest fees".

He said FamilyBoost should help stimulate demand from parents, helping the overall sector.

"It's great to see there's a consultation period on the proposed changes, so we can see if the rebates are easy for parents to claim. The process needs to be straightforward for both parents and centres to be a success.

Laube said it was a "big step in the right direction', but did reinforce the "urgent" need for a broad funding review.

"It needs to including both Ministry of Education and Ministry of Social Development's targeted funding support to families who don't pay fees currently. We'd hate to see any non-fee centres introducing fees to capture Family Boost payments."

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