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The due date for submissions to the Productivity Commission’s Inquiry into Childcare and Early Learning has now passed, and the Commission now begins the process of preparing a draft report for the Federal Government. This draft report will be available in early July.

It is worth discussing the likely paths that the Federal Government will take when the Commission delivers its final report at the end of October.

The National Quality Framework (NQF) was a national push to set baseline standards for children’s education and care. It was a Federal Labor initiative but was signed up to, and continues to be implemented by, State and Territory Governments of both sides of politics.

It set significant new standards for qualification requirements, ratios and supporting children’s learning to be phased in between 2012 and 2020.

Despite some showing some limited support during the 2013 election campaign, the Government has generally attacked the quality reforms as being an unnecessary regulatory burden and described centres as drowning “in a sea of red tape”.

The Assistant Minister for Education Sussan Ley has directly linked the implementation of the NQF to a sharp increase in fees for families.

The biggest political issue in the children’s education and care sector is affordability. Between June 2012 and June 2013 there was a 45c rise in the average hourly fee for children’s services in Australia, on top of similar increases in the preceding years.

When in Opposition, the Coalition used the fee increases to consistently attack the Labor Government.

It is clear from the most recent data that the out-of-pocket spend for families remained at a relatively low level of 8-9% of total income across all income brackets, due to Labor’s increase in the Child Care Rebate from 30% to 50%.

But due in part the byzantine nature of the subsidy system and an effective political campaign of negativity from the Opposition, the narrative on runaway fee increases struck a chord with families.

The Coalition has strived to continue that narrative in Government, firmly placing the current issues of affordability onto the Labor Party.

The Government will surely be aware however that this will only work for a short period of time. Politically, this issue will soon be owned solely by them.

The Government has so far resisted committing to any specifics on changes to the childcare sector, stating that they are waiting for the Productivity Commission to provide their final report.

But when it comes, the Government will need to provide a clear and detailed response to the issues facing the sector.

The key funding lever for the Government is the Child Care Benefit and Child Care Rebate subsidies (both introduced by the Howard Government).

They may seem completely unconnected, but recent refusals by the Government to provide industry assistance to Holden and SPC Ardmona may actually provide us with some insight into their thinking on the CCB/CCR subsidy.

The decision to deny assistance packages to those companies has demonstrated that the Government is prepared to make tough decisions on spending taxpayer money to support businesses.

The childcare sector is currently a majority private enterprise, with private operators making over two-thirds of the sector. The rest are run as not-for-profit community services.

The CCB/CCR subsidy essentially acts as indirect industry assistance to the operators of children’s services. Approximately $5 billion a year is spent on that subsidy – a not insignificant amount of money. Is it possible that the Government would consider lowering that amount of subsidy?

This would come at a huge political cost. In the June quarter 2013 over 742,000 families accessed some form of formal childcare.

Having spent their time drawing attention to the affordability issue as a political weapon, the onus is now on the Government to take steps to address it.

To complicate matters, they have instructed the Productivity Commission that any suggestions they put forward must be within “current funding parameters”. This leaves them with only a few options.

Either the CCB/CCR subsidy is lowered, a politically “courageous” decision as Sir Humphrey might put it, or the quality standards currently being implemented by the National Quality Framework are drastically rolled back.

Given the political considerations, the second option is far more likely. Which puts a lot of the Government’s statements in the media into context.

The focus on “over-regulation” and “red tape” in the media since the implementation on the NQF, and its intense focus over recent weeks, can be seen as laying groundwork for a large-scale downgrading of those reforms.

They can be sold not as a cut on quality outcomes for children, but as a cut on red tape.

This would be a disastrous outcome for Australia’s children. Advocates for quality education and care have stressed the importance of taking early learning seriously as in investment in Australia’s future prosperity.

It would be shame indeed if political expediency hampers a once-in-a-generation opportunity for the Productivity Commission Inquiry to recommend sweeping structural reforms to quality and affordability – without choosing one over the other.

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One thought on “Where will the Government be heading on early childhood education?

  1. Very good piece Liam, but unfortunately I have no faith that this generational opportunity will produce the structural change the sector needs. On the contrary, I expect further tinkering to be the only material outcome.

    What ever happens, whether it being a relaxation on staff qualifications and ratios, or a means-tested CCR (either of which is risky), surely a supplementary strategy under consideration would be to more strictly enforce the work/study/training test that governs CCB and hence CCR. This has a couple of significant advantages for the Commonwealth: It’s relatively easy (doesn’t require legislative change); it would yield quick results; and it’s politically expedient. It’s also the sort of thing that could come out of the commission of audit which will be out before the budget, without needing to wait for the PC draft report.

    Let me explain the sort of tinkering which I see as being not only possible, but likely. To begin with, let me lay out the broad picture.

    Centrelink is responsible for: determining a families eligibility for childcare benefit (CCB), and therefore childcare rebate (CCR); calculating the amount to be paid; and distributing the payment. CCB is distributed directly to childrens’ services via CCMS and must be strictly applied against fees charged to the family for the care provided. By contrast, families have the choice to distribute their CCR entitlement to the service to be applied against their fees, or to have it distributed directly to them. Anecdotally, approximately 30% of families choose to have their CCR sent directly to them quarterly in arrears.

    Families that receive CCB are, by definition, families that have a household income amount that is below the means-tested cut-off. Where income fluctuates for these families, so too does the percentage of CCB that these families receive. These families may have contact with Centrelink frequently throughout the year. At any rate, if the family circumstances change and the family fails the work/study/training test, Centrelink will find out about it fairly quickly.

    So how does Centrelink ensure that “…you and your partner participated in work-related commitments at some time during the week in which you used child care or are exempt from that requirement”? By self-reporting, that’s how. This is most likely a satisfactory arrangement for those families that depend on Centrelink- that is, those who have far more to lose than they stand to gain by misrepresenting their situation.

    But what of the families that have a single household income greater than the means-tested limit? What incentive do they have to self-report their situation? Or rather, what disincentive to not report? When was the last time that a Centrelink fraud campaign ran targeting households where one parent earns more than the limit but the other parent doesn’t satisfy the work/study/training test?

    If the Commonwealth chose to strengthen the work, training and study requirements whilst enforcing more frequent self-reporting compliance, then I would expect they could claw back many multiples of the additional administrative cost. For even tighter compliance, albeit at greater cost, the Commonwealth could increase a families evidentiary requirements that they meet the work, training or study test at all times. If they put their mind to it, it wouldn’t surprise me if they could reduce CCR outlays by several hundred million dollars a year. If it’s true that 30% of families can wear the cost of childcare as it is incurred, and can receive their CCR some months after the event, says there is scope to target CCR. All it takes is a bit of inventive thinking to derive a test that doesn’t involve means-testing, and some ‘End of the Age of Entitlement’ thinking. On that measure, this Government is half-way there.

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