Expensive childcare – public money, poor pay, private cash cow


Now we have competing child care policies but neither party seems prepared to deal with the core issue: the increasing commercialisation of child care and the contrast between unaffordable fees and high profits.

The proposal by the PM to offer a 30% tax rebate for child care costs is likely to encourage centres to raise fees and make child care less affordable. The rebate, paid after the end of the financial year, will not ease the weekly costs of care, unlike the Labor option.

Labor offers a day’s free child care (as long as you pay less than $50 per day) but only for 3-4 year olds, not younger or older users of care. Labor promises to act on the problems of unplanned growth and is offering capital funds for community based child care, which may deter some growth in the commercial sector. Neither side seems to be prepared to tackle uncontrolled high fees which generate big profits at public expense.

The last rich list shows two new millionaires with listed commercial child care chains. Stand out owner of ABC Child Care has since bought out Peppercorn Child care for $130M, and now controls about one fifth of all centre based services, worth about $800m.

Yet at the pointy end of parental needs, the picture is less rosy: high fees, limited choices and sometimes no choices at all, high turnover of underpaid staff and continuing mal-distributions of services. On average, about half of such centres’ income comes from Commonwealth subsidies.

Profits from child care have been possible because of this government’s abrogation of control over centres. Payments moved from the direct funding of child care centres to an income tested fee subsidy paid to the parents. In 1991, about 40% of funding was paid directly to the centres allowing the government some control over fees, and access. Now 90% is paid as fee relief to the parents, so governments has no control over centre budgets.

This fits the market model. A spokesman for the Minister, Larry Anthony, recently said: ‘the federal government did not give money directly to childcare operators but to parents who then made their own choice [sic]about where to send their children’. Therefore the centres, now mainly commercial and not community owned, set their own fee levels on the basis of what the market can bear.

Market models don’t work if parents rarely have choices of places, and shifting children on the basis of cost savings is really not an option most parents would choose. The industry is obviously doing well, as shown in an ANZ August 2004 industry brief encouraging investors which stated that 2002-3 showed a 17% increase in fees in that year, and a further 12.2% in 2003-4 year despite inflation rates of 2.5%.

There is a shortage of qualified staff in the industry, and pay rates are abominable. Award rates for child care assistants are lower than car parking attendants and low even at more senior levels, given both the skills required and the importance of their tasks.

A government task force last year expressed concern that increased fee subsidies would just encourage more fee rises. What is needed is some form of fee control, so the question for policy makers should be how to change the payment system so government can the power to approve service budget which limit the fees, contain federal costs, allow for fair award rate rises for staff and ensure a modest profit for efficiently run services. Centres would comply with certain criteria before having access to public funding, which may discourage cowboys and allow a community service to function as such.

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