Kela chief backs ending home-care allowance

Kirsi Varhila, the new director of Kela, is ready to end the current home-care allowance and replace it with other forms of support, Yle reports. The number of people using the allowance has almost halved in a decade.

Varhila said the 2022 family leave reform and lower fees for early childhood education have reduced the need for the allowance. It has also been criticised as a poverty trap for women.

The issue returned to public debate this summer after the Ministry of Social Affairs and Health published a report proposing that the allowance be abolished and replaced with a longer period of parental leave.

Varhila began as Kela director in August. She previously served as permanent secretary at the Ministry of Social Affairs and Health and as director of the wellbeing services county of Satakunta.

She said the allowance should be reconsidered as part of a broader review of benefits for families with children. About 110,000 people used it ten years ago, compared with around 60,000 today.

The home-care allowance was established in the 1980s as an alternative to municipal day care. Varhila said the family leave reform, which gave both parents an equal quota of parental leave, has increased families’ freedom of choice and partly replaced the allowance’s original purpose.

She described the allowance as outdated, particularly because new early childhood education services have been introduced at the same time as their fees have been reduced.

Support or poverty trap?

The home-care allowance can be paid for a child under the age of three who is not in municipal day care. The basic allowance is 377.68 euros a month, with an additional 113.07 euros for each other child under three. At least 25 per cent tax is deducted from the payments.

Varhila said the allowance can be a significant addition to the grocery budget for people on low incomes. However, many people move to unemployment benefits because they are higher. The general support introduced in May, for example, amounts to around 800 euros.

The allowance has also been criticised as a poverty trap for women. Varhila said statistics support this view: highly educated people and those in a strong position in the labour market use the allowance for considerably shorter periods than people on low incomes.

She said the issue is largely about women because the allowance is directly connected to women’s employment, their position in the labour market, their pay levels and, consequently, their pensions.

Supporters of the allowance have also argued that it is important because of Finland’s low birth rate. Varhila rejected that argument, saying the allowance has no effect on birth rates.

Likely election issue

The allowance has been the subject of a long political dispute. Its roots lie in red-earth cooperation, in which the Social Democratic Party secured municipal day care and the Centre Party secured the home-care allowance.

This summer, the National Coalition Party, the prime minister’s party, said it wanted to abolish the allowance and extend parental benefits. Families would receive more support, but for a shorter period.

The Centre Party, the Christian Democrats and the Finns Party have traditionally supported the allowance. Varhila is a Social Democrat by party background. The party has not yet announced the details of its election platform, although it has previously been prepared to consider shortening the period for which the allowance is paid.

Varhila said Kela aims to bring benefit reform into the political debate as part of the work of the parliamentary committee on social security. She said Kela’s goal is for every benefit to serve the specific purpose and life situation for which it was designed.

Personally, she said, she is ready to give up the home-care allowance, but the decision belongs to democracy and politicians.