Child care choice: Will voters want a sugar hit or a more lasting solution?

Labor’s long-awaited response to the government’s proposals on childcare reveals a ‘quicker fix’ approach that raises doubts about its sustainability.

There are some similarities with what the government has proposed. The extra funding going into the system is the same: $3 billion. So too is the general commitment to ‘help low- and middle-income families’. Labor’s policy is to increase the means-tested Child Care Benefit by 15%, whereas the Coalition’s sliding scale combined subsidy would cover 85% of fees for low-income families, plus an Additional Child Care Subsidy for children at risk and experiencing other hardship.

As far as the politics are concerned, there is only one difference that matters between the two policies —Labor’s policy would kick in 18 months ahead of the Coalition’s scheduled start date of July 2018.

The reason for this is simple. By increasing the dollar figure of Child Care Benefit and the value of the Child Care Rebate — increasing the annual cap to $10,000 per child —no significant redesign of the system is required.

In all the commentary from the childcare sector, stakeholders and policy observers, the universally-praised part of the government’s reforms was the combination of the Child Care Benefit, Child Care Rebate and Jobs Education Training Child Care Fee Assistance into one single subsidy, paid as a percentage of fees.

On this matter alone, the policy proposals from Labor are a temporary solution to an ongoing problem. The earlier start date amounts to a simple sugar hit for family budgets, without the benefits of structural change or a proper solution to the problem of skyrocketing fees.

The government’s proposals are largely based on the Productivity Commission’s expert recommendations. Aside from the design of the subsidies, the government also followed their recommendation to impose fee ‘caps’. These caps would not be price controls on fees, but rather a ‘cap’ on the amount the Child Care Subsidy can be put towards. This will put a soft limit on what centres will charge, and ensure taxpayers aren’t subsidising premium care.

Labor’s alternative to these cost controls is a new reporting mechanism that would require every centre to report to the government with its fee structure, as well giving the Australian Competition and Consumer Commission extra powers. It is unclear how this would serve to keep a lid on fees without the government mandating price controls, and how much extra in compliance costs this would generate for centres.

The other major difference between the two policies is that Labor has no plans to alter the activity test for accessing childcare subsidies. Under the status quo, families can access 24 hours a week of subsidised childcare without demonstrating any work, training or study activity. The Coalition’s policy is to reduce this guarantee to 12 hours a week and create incentives to work by linking additional hours’ eligibility to more activity.

Stakeholders oppose the Coalition policy on the grounds that it is harmful for child development, but this ignores the benefits to children that arise from encouraging parents to work and build their skills when their kids are young.

The final difference is that the Coalition’s extra spending ($12 billion a year by the end of the budget period) is ‘fully funded’, in that it is being paid for by cuts to other family payments. By contrast, Labor has pointed to a range of revenue measures. Seen in the context of other election spending promises worth billions, a great deal of uncertainty remains about how the policy will be funded without adding to the budget deficit.

There is another similarity between the two policy packages: neither has addressed the need to increase the supply of childcare places for young children. The government has come up with a couple of ideas, such as shorter sessions of care to enable families to ‘share’ one full-time equivalent childcare place, but other than extra support for budget-based funded services in regional and remote locations, there is nothing from Labor.

One silver lining is that before- and after-school care places are back on the agenda with Labor’s policy to expand the supply of these places. Whether $50,000 grants to community groups are the best and most cost-effective way to achieve this worthy goal is another issue.

Childcare is being referred to as this election’s ‘sleeper’ issue. Now that both parties are facing the public with concrete policies, it’s up to the voters to decide what they want: a sugar hit, or something more enduring?

Trisha Jha is a policy analyst at the Centre for Independent Studies and author of Regulating for Quality in Childcare: The Evidence Base