Save Search

Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Wednesday, 1 June 2011
Page: 5517


Mr TUDGE (Aston) (12:27): I rise also to speak on the Family Assistance Legislation Amendment (Child Care Financial Viability) Bill 2011. This bill seeks to amend the A New Tax System (Family Assistance) Act 1999 to provide for the assessment and ongoing monitoring of the financial viability of large long day care centre operators of approved childcare services. This is a case where the intent of the bill is fine but I have some serious reservations about the practical implementation of the bill.

With this government it is not enough just to look at the intent of what their actions are. You need to go into the details of what they are proposing in order to implement their intent. We know that they have had fine intent in other matters that have ended in disaster. They had the intent of helping households out with home insulation, and we know the result of that. They had the intent of supposedly being more compassionate to illegal entrants to this country, and we know the result of the practical implementation of that, also. So it is very important to look at what is actually going to be delivered rather than just the fine rhetoric about trying to save private providers from collapsing.

The intent of this bill is that it seeks to prevent the collapse of large childcare operators, such as occurred with ABC Learning in 2008, and that is an admirable intent. No-one wants to see the collapse of a single childcare centre in Australia let alone many childcare centres as occurred in 2008 when ABC Learning went into voluntary administration. At that particular time, 55 of its 1,000 premises were closed down immediately and a further 26 were subsequently closed down before it was sold. That had a large repercussion for thousands of families across Australia. I understand that. I have young children myself. My children have been in childcare centres in the past. I personally know the importance of childcare centres and what they do and how they facilitate parents being able to work. So the intention to put measures in place to prevent a childcare centre from ever going into voluntary or involuntary liquidation is a particularly good one. But, as with a lot of things, how the intent is enacted is the problem with this particular bill. My concern is that this bill will contribute little towards implementing the fine intent of preventing any childcare centre from collapsing in the future but will have some considerable downsides.

What does the bill actually impose? It requires the largest childcare operators to submit a financial viability assessment each year when they reapply for childcare benefit approval. The explanatory memorandum provides a list of the types of financial proof that will have to be submitted. It is quite a lengthy list. It includes a statement of comprehensive income, a statement of financial position—that is, the balance sheet—a statement of cash flows, notes to the accounts, material changes to the financial situation over the reporting period, breaches of debt covenants, ownership structures et cetera.

The childcare operators—and six will be affected by this piece of legislation—have to provide this information to the government. What will then happen to that information? That we do not know. We do know that $1.9 million is set aside to facilitate this—$1.9 million over four years. That equates to just a little under half a million dollars per year for the government to assess the financial viability of six childcare providers. Half a million dollars can buy you quite a few public servants—maybe five or six in this particular instance. So this bill will actually deliver six additional public servants in Canberra to assess the financial viability of six childcare providers. Each childcare provider will have one public servant all of its own to assess the financial viability of its operations. That public servant will have the whole year to assess that. At the end of that year the childcare provider will get a new set of accounts, and the public servant will have a whole further year to assess the financial viability of that one particular childcare operator. It sounds a bit like the Sydney Harbour Bridge. You just finish painting the Harbour Bridge and then you have to start all over again. Is this what is going to occur with this particular bill?

What are the public servants going to be doing when they get this financial information from the childcare operators? Presumably they will look at some financial ratios, at debt to equity, at some of the forecasts, at whether the balance sheet is sufficiently strong to enable the operator to grow according to its forecasts, and at some of its revenue projections. I was a financial analyst myself in a previous career. I went to one of the top business schools in the world. I know the type of financial analysis that would have to be done to make any reasonable assessments of the financial viability of an organisation. It does not take a year, I can tell you that, but it does take a certain amount of skill. I mean no disrespect to anybody working in Canberra, but I question whether a public servant in DEEWR is going to be able to do a better financial viability assessment than what financial analysts are already able to do or indeed what internal financial analysts in these companies are already doing.

So I seriously question whether this is going to have an impact. These companies already have to abide by the corporations law. They already have certain obligations: they cannot trade when insolvent, and the directors have certain duties to act in the best interests of the shareholders, as you know. There is a governance framework already in place. I seriously question whether this will actually deliver on the good intent of this bill. My further concern is that we are not only expending more money for arguably little intent but are adding a further layer of regulation upon private businesses.

This government have talked a lot about deregulation. They changed the name of their minister. It is the minister for 'deregulation' now rather than 'regulation'. They have very good rhetoric in relation to deregulation across the economy. Indeed, one of the government's election promises was that whenever they introduced a new regulation they would remove a regulation. It was their one-in one-out policy. It sounded like a pretty good idea. But what do the government do in practice? They regulate and they regulate and they provide more regulations and they provide more regulations. Since 2007 there have been an extra 20,000 members of the Commonwealth Public Service to develop and administer those regulations. Let me tell the Labor government something: you cannot regulate a business to succeed. Yes, you can put in place a good governance structure—absolutely. And by and large we have good corporate governance structures in place. You can put other laws in place which require directors to act in the best interests of their companies, and they are already in place. You can put insolvency laws in place, and they are already in place. You can put other good corporate governance laws in place, which can make a difference. But you cannot regulate a business to succeed. It is something that this government does not quite understand, possibly because so few of its members have ever worked in either a managerial position or owned their own business. If they did, they would understand that it is not regulation that actually causes business to succeed. Good corporate governance can assist that, but it has to be the good operation of the particular business in place.

If this government were fair dinkum about their rhetoric on regulation then they would support the amendment which we have put forward. There are several parts to the amendment, and let me highlight a couple:

(c) the growing burden of red tape and regulation imposed on small businesses, not-for-profit organisations and industry by the Gillard Government; and

(d) that the increasing regulatory burden represents a broken election promise whereby the Labor Government said that it would only introduce a new regulation after repealing an earlier regulation: a “one in, one out” rule; and

(2) calls on the Gillard Government to immediately adopt the Coalition’s red-tape reduction policy which will seek to reduce the cost of the Commonwealth’s regulatory burden by at least $1 billion per year.

It is a good and worthwhile amendment that is indeed in keeping with the rhetoric of the government in relation to deregulation, so I would hope that the government would indeed support the amendment put forward by the shadow minister.

We do not need a further six bureaucrats in Canberra for this particular measure. The six companies in question do not need their own dedicated public servant looking over their shoulder year in, year out. The taxpayers do not need to spend a further $1.9 million for very little impact. We know that this government has already spent billions of dollars for very little impact on all number of things. It does not need to spend a further $1.9 million for very little impact. I reiterate that the intent is right. Of course we never want to see any private business collapse. We particularly do not want to see private businesses, private organisations and non-profit organisations—which provide such important services in our community, such as childcare—collapse. Of course we do not. But I am not convinced this particular bill will actually make any difference in relation to that fine intent.

The government should accept our amendments. It should deliver on its own promises and on its own rhetoric and it should let the childcare centres get on with doing their job.