Former Prime Minister John Howard has condemned claims that family tax benefits (FTBs) are “middle-class welfare”, lambasting both the Coalition and Labor governments for cutting the $19 billion-a-year payments to families with children.
A report in The Australian said Mr Howard was “unhappy” about cuts to family payments that had withdrawn assistance to stay-at-home parents while spending on child-care subsidies had increased. “Too much of burden of adjustment has fallen on single-income families,” Mr Howard said. Spending on FTBs is set to fall by $500 million in the next three years.
Mr Howard’s Coalition government introduced a “baby bonus” ($5,000 per child at its highest point) to assist parents with the cost of raising a family. The aim was to encourage families to have more children so as to lift the birth rate and counter our rapidly aging population and obviate the need for tax increases due to fewer working-age taxpayers in the future.
Mr Howard introduced a child tax refund in 2001 and the baby bonus in 2004. The birth rate’s long downward trend – it reached an all-time low of 1.73 births per woman in 2001 – was reversed and it climbed to 2.02 in 2008, a year after Mr Howard lost government.
Since then, the birth rate has fallen to 1.79 (2016), below the level of 2.13 needed for the population to replace itself.
The ALP in 2013 reduced the baby bonus to $3,000 for second and subsequent children, and announced that it would scrap the baby bonus entirely the following year, which the newly elected Coalition government did in 2014.
The ALP also planned to freeze the indexation for three years on FTB Part A for higher income earners. The current government has frozen FTB’s indexation for two years and scrapped the school kids bonus introduced by the ALP. At the same time as family assistance has been withdrawn or reduced, subsidies to child-care centres have continued to increase.
The government spent $2 billion on child care and parental leave in 2005. In 2017–18, child-care subsidies amounted to $7.55 billion and will rise to over $10 billion by 2020.
Despite the massive taxpayer funds directed to child-care centres to encourage female workforce participation, and generous paid-parental leave schemes, participation rates among women aged 25–44 years has only increased 1-2 per cent. With general unemployment and underemployment rates around 23 per cent, and around 33 per cent among youth, why are we attempting to force mothers back into the workforce while singles can’t find a job?
The unfair advantage given to those who place their child in institutionalised day-care while financially penalising those who wish to care for their own children needs to be dealt with. Income splitting, whereby single-income families could split the taxable income with their spouse, would go some way to addressing the current inequity in the system.
Dual-income families pay less tax than single-income families on the same pre-tax income, receiving two $18,200 tax-free thresholds while also receiving up to $7,613 per child each year in subsidised child care, courtesy of the taxpayer. The level of assistance given to all families to ease the financial burden of raising children needs to be increased.
With ever-increasing child-care subsidies clearly not reversing the current downward trend in birth rates, one would have to ask, is the skewing of assistance away from all families and towards the child-care industry, an ideologically rather than economically driven policy? That is, are government advisers who believe in institutional rather than parental rearing of children and spruik the supposed benefits of increased female workforce participation, whispering distortions into the ears of politicians,and dictating government policy?
Repeated surveys have shown that most Australian women prefer to care for their own children rather than relinquish that role to a child-care centre. Coercive government policies are depriving women of choice and forcing families to use Paid Parental Leave and subsidised child care.
In 2016 the media reported that $1 billion of fraudulently obtained money was received through dodgy commercial child-care operations over a two-year period. Directly assisting families would prevent such fraud.
Another problem with institutionalised child care is the significant adverse affects it has on children. A 2009 Senate Committee looked at high-quality child-care research and found that formal early child care stunted children’s social, emotional and behavioural development. A National Institute of Child Health and Human Development (NICHD) study of over 1,000 children in the U.S. found that children placed in centre-based day care were more likely to engage in risky and impulsive behaviour, suffer depression, aggression, anxiety, lack of empathy and behavioural problems proportional to the amount of time spent in the day care.
These problems were related to the “dosage” of time spent in day care rather than to the quality of the care and were also shown to be “contagious” when the affected children mixed with others who had not been subject to institutionalised day care. Even 15 year olds who had spent long hours in institutionalised child care when young were found to have abnormally low cortisol levels, indicating increased stress in early years.
So, why is the Government ignoring the Senate Committee’s findings that show institutionalised child care has disastrous effects on children, even into adulthood?
Income splitting, removing all child-care subsidies and affording all families equal financial assistance with the cost of raising a family would remove discrimination, giving parents a real choice in how best to raise their children. It would raise the birth rate, prevent fraud and improve the long-term social and educational outcomes of children.