In announcing the terms of reference for a productivity commission inquiry into childcare, opposition leader Tony Abbott said “Australian families need a child care system that is not only affordable, but ensures that people can work flexible hours whilst knowing that their children are receiving high quality child care”.
Everyone would agree with this worthy goal but Tony Abbott’s narrow vision is unlikely to get us there.
The inquiry is considering a range of options including subsidies, rebates and tax deductions, to improve the accessibility, flexibility and affordability of child care for families facing diverse individual circumstances.
But these options simply tinker around the edges of a system that needs an overhaul. Abbott’s assumptions are that affordability and flexibility are possible by re-arranging the current system with maybe some reduction in proposed quality improvements to fund extra services such as nannies.
Instead, what is needed is a root and branch review that could assess whether the current market-based user-pay subsidy can also offer the affordable quality he is asking for.
One option the coalition should consider – not dissimilar to our current model for nursing homes – would require replacing the present market based parent/customer fee relief system, (part income-tested benefit and part rebate) with a contract between funder and provider.
The government would offer a proportion of funding via a negotiated agreement with a service, or group of services that specified the hours of operation, numbers of places by age, the pay rates of staff, the fees to be charged and maybe the provision of outreach flexible workers.
This control over costs, provisions and results could meet the needs of children, parents and staff at probably little more cost than the current system. This model is already in place for a limited set of services under the Budget Based funding model which covers many Aboriginal services that don’t fit the market model.
Market model doesn’t work
This funding model is similar to an earlier version of child care funding. The Hawke model, which I helped devise, worked very well in the eighties.
Places were allocated to locations with proven need, with approved budgets and fee rates. Funding was varied to cover the extra costs of higher ratios of staff for babies, particular needs of children and low incomes of many parents. These were community services, with a few small businesses, which were seen as part of local supports for families.
But by the mid-nineties, this system was replaced by the neo-liberal market model. The current funding model – a John Howard special – removed the direct funding of services entirely from the system, replacing it with standardised fee subsidies for parents.
The rhetoric is straight economics 101: parents are the best judges of the quality of care so they will choose the right services. They are assumed to be able to compare prices, hours, quality, like choosing a Laundromat, and be ready to move the child if there is a better local offer. The model assumed a level playing field between consumer and provider but a perennial shortage of care in most areas put the power into the providers hands.
If you run a business, small or large, you decide your costs, prices and quality of product as part of your sales pitch. You set the fees at the level the market will bear which maximises profits. As most of those running child care services now want and need to make a profit, costs rise and services provided to those who can pay.
The results were problems with quality of care and costs, but also mal-distribution of services and places. The standardised rebate paid the same for babies so it made little commercial sense to offer places. Extra hours pushed up costs, so flexible hours went and many parents found it very hard to find affordable accessible care where needed.
The incoming Labor government realised change was necessary but went for the soft, relatively unfunded option of upgrading the quality of care. They raised the child care rebate to reduce costs but continued to fund parents not services. So they neither control the locations or age mixes of services. Fees currently range from around $70 per day to $150 and many waiting list are long.
A modern man
The government is now facing other pressures that Abbott has ignored in his inquiry. The workers are very low paid, just over $18 per hour, so staff turnover is threatening quality and provision of services. Uniting Voices, the union, is running a campaign that asks the Federal Government to directly subsidise staff wages via services.
Abbott is trying to exploit the fact that many parents are not happy with what they have or can’t have. It seems as if Tony Abbott is just making a pitch to “working mothers” to prove again that he is really a modern man.
With a wife in the industry, he must know the problems but is offering soothing words rather than serious options for change.