National leader Christopher Luxon has promised a quarter of a billion dollars worth of tax rebates to parents struggling with the rising cost of childcare, striking deep into Labour territory.
His policy, dubbed FamilyBoost, would give families a 25 per cent rebate on their childcare expenses, up to $75 a week ($3,900 a year) for families earning up to $180,000.
He promised to pay for the $249 million cost of the scheme by slicing into the ballooning cost of consultants. National reckons it will save $400m a year by cracking down on consultant spending.
When asked how he felt about large numbers of consultants losing their jobs, Luxon said he felt “very good about that”.
“To the big time partners at consulting firms up and down New Zealand: thank you very much, but your money is going away and we’re giving it to hardworking families who deserve it,” Luxon said.
He said that he was not concerned firing large numbers of consultants would mean things not getting done. Regular public servants could be used in place of consultants. He said Labour had expanded the regular public service by 14,000.
He also dismissed the idea the rebate would simply see childcare providers put up their prices - a criticism National made of Labour’s policy to increase student living cost assistance by $50, which saw landlords putting up rents. Luxon said childcare was a competitive market, which would keep prices low.
The policy was announced at Luxon’s State of the Nation speech in Auckland where he set the scene for the political year.
“Kiwis are doing it tough right now because of Labour’s cost-of-living crisis. It is particularly hard for young families to make ends meet when they’re facing rising rents and mortgage rates, skyrocketing grocery bills, and paying for childcare,” Luxon said.
“National’s FamilyBoost childcare tax rebate is expected to help 130,000 low- and middle-income families keep more of what they earn, with up to $75 more in their after-tax pay each week,” Luxon said.
“Families earning up to $180,000 will receive a 25 per cent rebate on their early childhood education expenses, to a maximum of $3,900 per year depending on their income.
“A teacher and a plumber earning $125,000 between them who are spending $300 a week on childcare would receive a weekly rebate of $75, paid fortnightly by IRD to their bank account,” he said.
While families earning up to $180,000 a year will qualify for the policy, the amount they will receive tapers off once a family’s annual family income reaches $140,000. Maximum weekly rebates for families earning $150,000, $160,000 and $170,000 are $56.25, $37.50, and $18.75, respectively.
The rebate will apply to families using licenced early childhood education providers, including kindergartens, kōhanga reo, education and care centres, and licenced home-based care.
The policy takes deep strides into Labour territory. At its conference last year, Labour lifted income thresholds for childcare assistance, allowing more people to qualify for Government subsidies.
But that policy was costed at just $189m over four years, a fraction of the $249m per year National reckons its own policy will cost.
Childcare costs are an emotive issue for National too. At the party’s 2022 AGM, National members openly wept as they talked about how spiralling childcare costs were hurting families.
Members discussed the fact that high childcare costs were keeping women out of the workforce because families could not afford the costs of childcare.
Luxon took aim at new Labour leader and prime minister Chris Hipkins accusing him of leading a “bloated” government that has made New Zealand “more insular” and “withdrawn from the world”.
Luxon accused the Government of driving up the cost of living with excessive spending, and being focused on things that don’t matter.
“Labour has concentrated on things that don’t matter – like its Auckland harbour cycling bridge, its co-governance agenda and the now-shelved merger of TVNZ and Radio New Zealand.
“What Government except this one would have thought those were priorities when families are worried about losing their own homes because they can no longer afford their mortgages?” Luxon said.
“It’s not good enough to say you’re going to lower greenhouse gas emissions, but not do it. It’s not good enough to say you’re going to build affordable housing, but not actually do it. Talking about it gets you a headline,” he said.
“But only doing it makes a difference,” he said.
Luxon said Labour had “embraced isolation – cruelly locking out New Zealanders from the only country they call home, even after the virus was well established here”
“No wonder we’ve become more insular. More withdrawn from the world,” he said.
Luxon turned the focus on Hipkins, targeting his record in the education and public service portfolios.
“In 2018, Chris Hipkins as State Services Minister promised to reduce spending on contractors and consultants. Instead, the latest data shows the annual spend has skyrocketed to more than $1.7 billion – up from $1.2 billion,” Luxon said.
“National will direct public sector agencies to end the culture of relying on contractors at a premium to do the regular job of a public servant. The culture of public servants rebranding as contractors – only to do the same job at twice the hourly rate – is chronic in Wellington,” he said.
The John Key National Government put a cap on the size of the public service in response to fiscal fears during the financial crisis.
But over time, the cap simply meant that public service departments hired contractors instead of permanent staff.
In 2018, Hipkins lifted that cap, hoping that departments would hire ordinary pubic servants rather than contractors - saving the Government money.
Instead, spending on consultants continued to balloon.
Labour, the Greens, and Act all attacked the policy.
Deputy Prime Minister and Social Development Minister Carmel Sepuloni said the policy “doesn’t target those who need the most help, particularly those on the lowest incomes”.
“The policy is a rushed response to our work on childcare, which includes helping parents with the cost, helping make early childhood centres more sustainable and ensuring good teachers stay in the profession because they’re paid what they’re worth,” she said.
Sepuloni said the party appeared not to have thought about the fact the policy would stimulate greater uptake of childcare.
“It also appears they haven’t properly thought through how they’ll pay for it. When we introduced 20 Hours ECE in 2007 there was an increase in average hours attended per week for three and four-year-olds of around 8-10%. If just a quarter of the 130,000 households increase the number of hours their child spends in childcare by 5 hours a week, their policy blows out by around $70 million a year – and that’s likely to be a conservative estimate,” she said.
Sepuloni also hinted at further announcements to come from Labour.
“Last year we announced the first steps in our childcare assistance changes. I indicated at the time, this was the first step, and an in-depth review of childcare was close to completion. New Zealanders will get to see our plans, which are based on careful analysis and facts soon,” she said.
Green co-leader Marama Davidson said “childcare is a public good, not an individual work expense”.
She said the Greens would “extend 20 hours of early childhood education to two year olds, and re-design the Working for Families scheme to make sure children have the best possible start in life, and are supported to grow up and thrive”.
Act leader David Seymour noted the policy was left wing enough it was one Labour might be able to steal.
He said the best way of lifting family incomes was through tax cuts.
“Under ACT’s fully costed tax changes from our alternative budget a sole parent with two children earning $70,000 would save $2,276. Importantly, all earners would benefit, every teacher, nurse, and police officer would keep more money under ACT,” he said.