Taxing times for minding children

It’s time to act so that children cared for by childminders cannot and should not be disadvantaged, writes Heino Schonfeld.

IT WAS recently reported that Revenue is “clamping down” on childminders, even asking grandparents to fill out tax returns for their caring income.

Childminding is a substantial area of economic activity. But its turnover can only be estimated as much of it is transacted in the so-called black economy.

However, if it is assumed that there are about 40,000 childminders, and averaging two children cared for at €5 an hour for five days a week, we are arriving at an estimated turnover of about €100m a year. This is most likely a serious underestimate.

The annual tax take from this income — if collected — would be substantial. However, much of this activity and income remains hidden from Revenue and is not collected.

In Budget 2006, the government introduced the childcare services relief, the purpose of which was to provide an exemption from income tax to individuals who provide child minding services to not more than three children in their own homes.

The ceiling for the relief was €10,000 but was increased to €15,000 in 2007. It is important to note that PRSI remains payable on this income to ensure individuals who provide the services can build up entitlements under the social welfare acts.

The objective was threefold:

- To increase the supply of services;

- To encourage providers to leave the black economy;

- To improve the quality of provision.

In order to support the last objective, the provider had to notify her local county or city childcare committee, and a number of resources were available to assist her practice, such as an advisory service and small grants for equipment.

However, the measure has been a spectacular failure, if judged by the above objectives. There is no evidence that the tax exemption led to an increase in supply. It appears far more likely the tax exemption was in fact “deadweight”; ie, subsidised an activity which would have taken place anyway.

The exemption may even have decreased supply as it only applies to income up to €15,000 and not at all if the income exceeds this amount. A registered childminder would therefore be careful to stay below the income limit in a given year.

In any case, the number of childminders that registered did not exceed 500, compared to a total estimated number of up to 40,000. The limited supports to childminders registered under the scheme to improve their practice were put in place in 2006/7, but have since been substantially eroded since or cut entirely.

Under current legislation (Child Care Act 1991), childminders who look after three children or fewer are not required to notify the HSE, be registered, or inspected. There are no regulations governing this large part of provision for very young children. No Garda vetting is required, no minimum qualifications or training, no checks on minimum environment standards.

The main weakness in the scope of the pre-school regulations is the almost complete absence of regulation for home-based childminders, even though it remains one of the most widespread forms of childcare in Ireland today.

Only about 250 childminders are currently notified to the HSE and therefore subject to regulation and inspection. Estimates of the total number of paid, non-relative childminders are in the range of 20,000-30,000, implying that only around 1% of paid, non-relative childminders are regulated, according to the Start Strong advocacy group in 2012.

The expert advisory group for the soon-to-be-published Early Years Strategy recommended to “introduce the regulation and support of all paid, non-relative childminders, with the amendment of the Child Care Act 1991, and the regulation of out-of-school childcare”.

“A transition phase prior to the removal of the legal exemptions from regulation would allow for the provision of supports and awareness-raising of the benefits of regulation for children, parents and childminders. It would be essential also to review the regulations and the inspection process to ensure they are proportionate and appropriate to childminders’ home environment.”

The Government is reluctant to regulate and support this large sector of provision, fearing cost and administrative difficulties.

However, the need and task is there. Children being cared for by childminders cannot and should not be disadvantaged. There should be no exclusion just for the modality of provision.

There are many working precedents and examples of how to support and regulate family home care in other jurisdictions without putting barriers in the way of supply and the informality of childminding.

Why not learn from them? Most recently Joan Burton, the social protection minister, said it is in the best interests of children if all childminders are fully trained and accountable. She was quoted as saying: “Where people are childminding in the home, and it’s the preferred option of a lot of women… that they should be registered and that there should be levels of training so that we ensure that childminding in the home that it provides, if you like, the most up-to-date services for children.”

Well, yes, let’s do that, and now please.

* Heino Schonfeld is early years development project manager with Barnardos and director of Leitmotiv Consulting. These views are entirely his own.