Policy Status: This would introduce a direct funding relationship between the Federal government and service providers, by partially replacing the current model based on subsidising the parents' fees.
Minister: The Hon. Dan Tehan
This proposal is to establish a direct contract and partial funding between the Federal government and suppliers of early childhood services to ensure the supply of services meets access and location needs of families.
The current model replaced the earlier planning version by abolishing direct funding, which set conditions of location, fees and service mixes. This change to market-based supply has created affordability issues and maldistribution of services. The latter is seen in: oversupply in some areas; reduced profits, but not fees; and lack of services for under twos and children with additional needs, as service provision for these groups costs more.
Reinstating a direct contract with subsidy for approved services only, would set up the location, fees and service mixes needed, rather than leaving it almost entirely up to the market, as most places are now offered by profit driven commercial entities.
Returning to a contractual-based supply side model would ensure public funds are used for services at agreed locations and accessible costs.
The contract would be based on government paying a percentage of an approved budget, supplemented by parental fees. This direct contract reinstates the government’s power to ensure that the bulk of the $8 billion national funding per annum is directed to services that offer an appropriate supply of needed early education and care services.
It would also enable the government to require services pay early childhood educators and teachers wages commensurate with their skill and the value of their work.
This direct subsidy could be varied so some services could receive higher direct funding, where the mix of users and/or services may require lower parent contributions or more skilled staffing.
This system has worked for Indigenous services as part of the Budget Based Funding program which should be reinstated and expanded as it recognised the cultural and communal needs of Indigenous families.
Why these changes are needed
There is evidence that the market model is not responsive to needs for less profitable services, e.g. for children under 2 years old and children with additional needs.
The Productivity Commission inquiry into the education and care system, indicated that maldistributed services existed in many areas. Reintroducing and retaining capacity to contract could ensure children’s and family needs can be met more effectively than in the current demand model.
Recent business articles indicate that there are serious issues rising as oversupply cuts profits. Most comparable countries have supply side, government planned systems, which seem to work well.
Who benefits/gains from the policy proposal?
services are more likely to meet families and children's needs for access at the appropriate times, locations and fees;
better distribution of services will allow parents of infants to return to work within a parental leave time frame, and meet needs;
those services that are not primarily workforce, e.g. in remote areas or serving specialised needs, will be able to continue and expand their community service.
Who may lose from the policy proposal?
Large chains and other investors (especially multinational private equity fund investors) who want to continue to expand and increase their profit margins to reflects investor’s needs. Services that have been places in areas where there is little or no demand for services or oversupply.
Does the policy change have major party support?
Not yet, as both see the market models as reducing their capital responsibilities. But the waiting lists show community generally prefers the localised non-profit services.
Groups and categories of people supportive of your proposal?
Communities, most families, not-for-profit services and smaller commercial services which are locally oriented; and Indigenous and rural services where work-related demand is not effective.
Groups that would oppose it? Why?
Large chains and supporters of market models in Government and some neoliberal think tanks. The government claims that the current system is much simpler, cheaper to administer, does not need control, and adding other groups into negotiations would increase administrative costs.
Will extra costs will be incurred?
Some services will save by being better targeted to meet needs, and costs may be contained for users. However, administration costs will increase because while contracts and planning are more effective for meeting needs, they are more time consuming.
Timeline for the proposal to be implemented:
For this policy proposal to go forward there would need to be major changes to the administration and payment processes, and this process could take up to 15 months, similarly to the time frame for current proposed changes.
Contact: firstname.lastname@example.org 2018
Keywords: early education and care services funding; supply of education and care services; community funding models