A lack of childcare facilities is constraining the labour market, preventing women, in the main, from taking jobs, the Small Firms Association (SFA) has said. The organisation called on the Government to regulate and develop the sector.

In its annual winter economic statement, the SFA said it wanted the Government to introduce "grant/equity swaps" for the provision and upgrading of childcare provision.

The SFA said issues such as regulation, property prices and planning restrictions were more of an obstacle to the development of more childcare facilities than simple tax breaks for parents.

"The treatment of childcare in the tax/social welfare systems are key factors in determining work incentives for spouses, and female labour force participation. A significant amount of childcare is provided in an unregulated market which in the main is not tax compliant. The number of regulated childcare places is contracting while the demand for child care places will increase significantly over the coming years. This problem is constraining labour market participation," the SFA said.

However, the organisation cautioned that providing tax breaks without increasing the number of places available would simply increase the cost of childcare.

Other priority issues for the Government included reductions in income tax; tighter control by Government on current expenditure; greater investment in infrastructure; a continuation of debt reduction; addressing planning delays; addressing labour market pressures through action on housing and training and educational initiatives.

"Exceptional levels of growth now pose a challenge in terms of how to use the successes to ensure that the economy remains competitive and continues to deliver improvements in the quality of life for all its citizens," the SFA said.

On income tax, the organisation said there was now a significant case for reducing both the headline rate income tax and also extending personal allowances.

"At a time when tax revenues and surpluses are running at an all time high having a higher rate of income tax of 46p makes no sense," the document said. "The SFA is calling for the top rate of tax to be reduced to 40 per cent and the standard rate to be reduced to 22 per cent." The statement also said the cost and availability of housing was restricting the labour market and impacting on mobility and wage inflation.

"There can be little doubt that the planning authorities must move toward increased density development, which will of course, require better and more creative design standards. In addition, more land should be zoned for residential development, in particular along or adjacent to major transport routes," the SFA said.