The Government may be prepared to spend up to €1.2 billion on a new childcare package, according to a document circulated by the Paris-based body, the Organisation for Economic Co-operation and Development (OECD).
The document, dated October 10th, summarises a series of key meetings with leading Irish civil servants, central bankers and policy advisors, and suggests the Department of Finance is gearing up to announce one of the largest childcare packages ever.
It says the Government is likely to spend "somewhere in the range of" half to 1 per cent of national income on the package. Based on national income for 2004, this would mean a package of between €600 million and €1.2 billion, although the document does not say over what time period the money might be spent.
The scale of the spending is likely to be indicated in the estimates, but the full details will not be revealed until Budget day, the document suggests.
The document, produced by a leading OECD official, suggests that childcare is regarded as a top priority by the Government, because of its political sensitivity.
"Helping parents reconcile work and family life is a top priority in the preparation for the next budget, not least because the majority party in the coalition Government lost two by-elections where childcare and commuting took centre stage," says the document.
Because of this background, the document suggests spending on the childcare package will be extremely generous.
"There were converging indications that the package will be big, probably somewhere in the range of half to 1 per cent of national income and that it will focus on expanding the supply of childcare," it states.
The document does not include extensive details on the package, but it says it will concentrate on early childhood education facilities. "In terms of policy response, the Government looks likely to focus on the supply side despite the evidence suggesting that demand side initiatives would be more effective."
The document suggests the OECD secretariat would like to see the Government adopting a different approach. In particular, the OECD expresses worry that the Government plan could simply push up the cost of childcare provision.
"The OECD secretariat recommended the alternative of supporting the demand for childcare services and letting market forces organise the supply in response to the choices of parents (with appropriate phasing-in and some supply-side measures, as a large, sudden demand-side package would just push up prices in the short term)."
The document says the OECD recently told Government officials that one way to increase female participation in the workforce would be to shift to a form of individual taxation. This is a view shared by the ESRI, says the document.
However, Department of Finance officials are recorded in the document as being sceptical of this ever happening.
"The Department of Finance broadly agreed with the economic reasoning but felt that the chances of moving to individual taxation were slim, given that one-income families would lobby heavily against such a change and had proved in the recent past that they commanded strong support," says the document.
The OECD suggests one approach might be to make child benefit conditional on both parents working. The Departments of Finance and the Taoiseach are recorded as saying this idea has been studied, but the climate in Ireland does not favour "discrimination between mothers at home and mothers at work".