Leyonhjelm saves $100m by amending new childcare reforms

David Leyonhjelm, with the help of Derryn Hinch has amended the government’s childcare package by preventing those earning $350,000+ from receiving subsidies.

However, it wasn’t an easy decision.

“I do not like this bill. Putting more money into child care is a bad idea, and $1.6 billion is a lot of money. Childcare subsidies take money from taxpayers and give it to people who have children and choose to send those children to child care or family day care.

The taxpayers who pay this money are both rich and poor. Some have children and some do not. Many of them enjoyed no subsidised child care when they were a child. They might have been raised by a stay-at-home parent, a relative or a neighbour, or their parents may have paid for their child care without a subsidy. So why do we subsidise child care?

It is true that childcare subsidies go to disadvantaged families, for whom child care represents an important complement to their personal efforts to raise their own children. But childcare subsidies also go to families that are not disadvantaged, for whom child care is no better than their personal efforts to raise their own children. The only argument for providing childcare subsidies to families that are not disadvantaged is that the subsidies might prompt parents to return to the workplace, where they pay tax. But this argument has nothing to do with the welfare of the child.

Getting a parent back to work paying tax helps the government and the economy. It might help the parent in the long run too because they are less likely to lose their job skills. But we should not pretend that it is for the benefit of the children.

We should also admit that the argument about childcare subsidies prompting parents to return to the workforce does not apply to parents in high-income families. For these families, the decision about whether to stay at home or go back to work depends on nonfinancial motivations. The idea of someone deciding whether or not to return to work based on a childcare subsidy of a few thousand dollars a year while earning several hundred thousand dollars a year cannot be taken seriously.

So, while a case can be made for childcare subsidies for disadvantaged and low-income families, there is no reason whatsoever to provide childcare subsidies to high-income families. In fact, it is immoral to force low-income couples, some of whom have tried and failed to have children, to fund the childcare subsidies of high-income couples who have won the jackpot by having children but do not wish to stay at home to look after them.

It is like forcing those in wheelchairs to pay for the running shoes of the able-bodied. My amendment is a measured attempt to confront this immorality.

The government’s bill sets childcare subsidies as a percentage of the lesser of the actual childcare fee and a fee cap. The government intends this percentage to drop below 50 per cent once family income exceeds $250,000. The government’s bill outlines how the subsidy would then fall on a sliding scale until family income reaches $340,000, where it would remain at 20 per cent of the actual fee or fee cap, up to a maximum of $10,000 a year.

My amendment would commence that reduction in the subsidy below 50 per cent at incomes over $200,000, not $250,000. It would apply the same gradual rate of subsidy withdrawal as in the government’s bill, but the withdrawal would not stop at $340,000. It would continue so that, once income reached $350,000, the subsidy would drop to zero.

The government has agreed, in negotiations with me and Senator Hinch, to cease childcare subsidies at $350,000. I commend it for that. However, the government has so far only committed to support Senator Hinch’s amendment, which calls for a sudden cessation rather than a sliding decline.

A family on an income of $349,000 would go from receiving 20 per cent of the actual fee or fee cap to nothing, simply by receiving a $1,000 bonus. It is not the best way to do it. Unlike this alternative amendment, my approach would reduce the subsidy for high-income families in the range of $200,000 to $350,000.

Paying money to people with incomes of that kind cannot be defended. It is classic middle-class welfare.

In many cases, the money is coming from the taxes of people who are earning far less than that. It leaves less money in the budget to help people who genuinely need help. Back-of-the-envelope calculations suggest that my amendments could affect around 100,000 high-income households and reduce government spending by around half a billion dollars over the forward estimates period. This is important because continuing deficits and growing debt represent a grave disservice to the next generation.

My amendment is an opportunity to go some way to reducing this disservice. I commend these amendments to the Senate.”