Jimmy Deenihan
Question:111 Mr. Deenihan asked the Minister for Finance if the Government is committed to introduce special tax credits for working parents to help them pay for child care; and if he will make a statement on the matter. [18896/00]
Written Answers. - Tax Reliefs.
Jimmy Deenihan
Question:112 Mr. Deenihan asked the Minister for Finance the plans, if any, he has to introduce radical child care taxation measures in his next budget to entice more women back to work; and if he will make a statement on the matter. [18897/00]
Jimmy Deenihan
Question:113 Mr. Deenihan asked the Minister for Finance the Government policy on child care tax breaks; and if he will make a statement on the matter. [18898/00]
I propose to take Questions Nos. 111 to 113, inclusive, together.
The Government is conscious of the wish that has been expressed for a recognition of child care needs through the tax system. However this raises a number of issues. There is the question of equity between parents who stay at home to care for children and those who have to meet additional child care expenses when they go out to work. There is also the need for a balanced treatment of those who are in the tax system and those who rely on social welfare benefits.
The expert working group on child care reported to the Government in February 1999. Its recommendations covered a wide area, including financial supports for parents availing of child care services, and a particular complaint was the lack of supply of high quality, affordable child care.
Following consideration of the report by an interdepartmental committee, the Government agreed that the most urgent task was to increase the number of child care places. As a result, in budget 2000 I decided to implement a major package of measures to that end. These measures will cost £46 million in a full year and include a £10 million grant scheme towards the cost of upgrading child care facilities.
In addition, the 1999 and 2000 Finance Acts provided a number of tax reliefs to encourage the provision of child care facilities and increase the supply of places. The 1999 Finance Act introduced capital allowances for expenditure on the construction, refurbishment or extension of child care premises which meet the required standards as set out in the Child Care Act, 1991. These allowances were improved in this year's Finance Act. For expenditure incurred on and from 1 December 1999 100% capital allowances are allowable in year one.
The 1999 Finance Act also provided an exemption from a benefit-in-kind charge where employers provide free or subsidised child care for their employees. The exemption applies where the employer makes a premises available or, if a joint scheme, is involved in both the management and financing of the child care facility.
Child care was also identified as a priority in the national development plan which has allocated £250 million to be invested in child care over the next seven years. In recognition of the importance of the quality and cost of child care for quality of life, the Government decided recently to allocate an additional £40 million over and above the £250 million allocated in the national development plan.
Taxpayers in general have benefited from the tax improvements introduced in the recent budget and Finance Act, 2000, that is, the two percentage point reductions in both the standard and top income tax rates, the increase in the personal allowances of £500 single/£1,000 married to £4,700 single/£9,400 married and the widening of the standard rate band.
Under the new standard rate band arrangements the single standard rate band is increased to £17,000. Two income married couples will have a combined standard rate tax band of up to £34,000 per annum, with a maximum transferability of £28,000, which is equal to two single bands of £17,000 each. This means that the second spouse will now have his or her own standard rate band worth up to £6,000 which reduces their tax bill by £1,320 per annum.
This will provide an incentive to enter employment and particularly for married women to re-enter the workforce as they will now have the benefit, of their own standard rate band. Previously their spouse would have used up all of the couples married allowances and standard rate band, meaning that, generally speaking, the second spouse would start paying tax at the higher rate from the first pound.
As part of the Programme for Prosperity and Fairness, the Government is committed to adopting before the end of 2000 an equitable strategy to support parents in meeting their child care needs. The strategy will be implemented in the period of the programme and will address the question of direct payments per child.