Profit-making from government funded community services should be banned

Jul 10, 2023
Children's hands drawing on coloured sheets. Childcare.

Why the new ALP government’s new Child Care funds should restore its social benefits and stop funding the failing profit/market model.

It has been 50 plus years since the McMahon Liberal government included preschool funding, the first since WW2. In 1972 the new Whitlam ALP Government promised the funding of Children’s services programs to meet both children and parents need for day care to ensure access to paid jobs. The funding was offered to nonprofit based services including existing more limited hour services.

The next decade saw the community sector, councils and parental co-ops grow as only non-profit services were funded. However, Keating, when PM decided to fund individual privately owned services, often run from home by qualified teachers. This allowed Howard PM to continue with new commercial centres, despite scandals.

My recent article in this journal raised the problems of these type of changes over the last decades, Fees rose, and the recent expanded spread of commercial care services tended to ignore lower income or more isolated locations rather than the earlier models of community-based non-profit services.

The ACCC, with its competitive hat and roles, has now delivered its Government funded report on the structures and costs of the present programs. The changes needed will be delivered as separate tasks with the Productivity Commission. The objective mainly set to improve access and encourage more women into paid jobs. No one appears to be set to improve the access to such services, The ACCC has delivered its first report on data that covered both the distribution of such services and parental views of their needs.

The data that they produced show that:

  • childcare fees were rising faster than inflation by 20%
  • larger services systems were more expensive
  • Private services were higher priced, by an average of 7%
  • Disadvantaged families paid more of their disposable income than richer families.
  • Prices are higher where there is more childcare available, so location counts.
  • There has been a 17% increase of approved centres since 2018 and 22 but not uniformly distributed.
  • Affordability is claimed as a threshold issue so cuts can reduce use.
  • Activity affects eligibility for subsidy and excludes many families at lower incomes.
  • Some areas have few places available, become deserts.

It is useful data but has limited capacity to value important community services offering extra and essential benefits to children, parents and localities.

The Directions of the govt to the ACCC were ‘to conduct an inquiry into the MARKET for the supply of childcare services from January 2023’. The ACCC ‘was consulting with stakeholder groups and providers’ but it is noticeable that none of these, bar possibly parents, focus on the social aspects of care and benefits for children! The process so far could be used for service stations or other shops and factories manufacturers. There is nothing apart from some concern about low-income user costs that looks at the equity and social wellbeing values of such services and their roles in communities. Yet their own parental Data collections showed up some broader concerns about services that are not just financial.

I have included the following extract from Lisa Bryant’s just published article in Womens Agenda’s website with examples of how too many for profit centres misuse the current system. This is one example to show how it works.

Then there is our largest corporate provider of childcare, G8 who own around 440 centres. They also don’t invest a lot of their money in their educators – just 62%. G8 also confirmed in its 2022 accounts that they still owed $37 million dollars of the 60 million they discovered they had underpaid their employees way back in 2020. As well as the big changes the Labor Government made to the childcare subsidy system to attempt to make childcare cheaper for families, the hourly rate cap on fees goes up every July by CPI. This year, like every other year, this enables providers to improve their margins. After this year’s extraordinarily high CPI increase was revealed G8 announced it would increase their fees for the second time this year after a January increase. The fact that they timed this to align with the CPI uplift (10 July), not the first week of the financial year (3 July) makes one wonder what level of opportunism they are engaging in.’

She finished by stating to government ‘they have just one choice. Change the system! ‘

On her evidence, the current issues of fees, quality and location indicate that we are failing to ensure we have affordable quality child care. She is looking at fixing the finance model, so I suggest we need to add the social aspects of care that are ignored.

My suggestions are based on the early setting up of centres, which I was involved from the 70s on till the 90s. Children’s services were seen as contributing to societies that were concerned about children’s needs for care and offered ways of their learning social skills as well as the basics for later school learning. Families became more mobile and often limiting the numbers of children, so the social aspects of early learning involved the development of language, social skills and friendship competencies. Mobile smaller households may not offer children the contact with other families or relatives. It was also promoted by feminists who wanted to have capacity to use tertiary skills and other abilities and contribute to household income. These needs continue in our changing societies.

The centres that were started were often run by councils or parent groups, as well as education services. They were essential for immigrant families to learn languages and integrate new parents to relate to other families. We took part in fund raisers and social networks and often contributed to local events. These roles are lost as the largely money making models currently do not generally cover locally social contributors and attractions.

There are new residents that join and there are services that are badly needed by new parents. So we lose social contributions to local families and activities.

If we are to establish more social wellbeing networking and engagement, we need local services we value. The often mobile families and some of the difficulties of loneliness and disability support need community services, not time sales based services that we have no say in. We undervalue the voluntary contributions users and neighbours may contribute. These local informal supports are needed more than ever. The online shifts in jobs, the arrival of robots to replace humans online will create social inequities. Social links will be increasingly needed!

One possible starting solution I have raised is to control the funding by paying it directly to the organisation delivering the services and ensuring that the money goes to services and staff pay so they are appropriately funded to encourage quality care. Ban the decisions that create or increase profits.

Similar problems, visible in Aged and Disability Care, can again be addressed by making funding use limited to the user needs. Again, ban profits and ensure community services are seen as a valued part of local resources for wellbeing. Profit-making from government funded community services should not be a commercially based support service!!

So, this is an appeal to ALP Governments in Canberra and state Governments! Can we restore the importance of community/social services? The above article outlines some of the errors of childcare as an example of bad policy models of services. Funding should be targeted to fix fees and fair wages as well as learning social skills and meeting social needs? Where is the fair go for all?

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