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Provision of child care in Australia

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CHAIR —Welcome. Do you have any comments to make on the capacity in which you appear?

Mrs Ghosh —I am director and co-founder of WeeWunz.

Mrs Mills —I am also director and co-founder of WeeWunz.

CHAIR —Thank you both very much for appearing here today. We have a submission from WeeWunz; we thank you very much for that. We would like to invite you to start with an opening statement, if you wish to make one. We will then proceed to ask you some questions about your submission and your statement.

Mrs Ghosh —Nicole and I started in the whole area of child care and childcare solutions some eight years ago now, and that was driven by a passion for change in the market. Nicole has two children; I have four children. We both came from corporate backgrounds. At the time that our children were fairly small we could not get them into child care in New South Wales; they were on two-year waiting lists. That basically got us thinking that something seemed to be wrong with the system. Every single centre that we approached had such a massive waiting list that, by the time the children would get in, they would be at school anyway. As a result of that, we were economically challenged. We both had to knock back some quite important contracts.

So WeeWunz was developed and formed. Initially, eight years ago, we thought it would be a great idea for every corporate company to have its own childcare centre. After a month we realised this was quite sweet and naive and that every corporate company should not have its own childcare centre. We did the work on that and we realised how small the margins are and how hard it is actually to run a childcare centre. What remains, and will always remain, with us is the passion for change, which is why we are still in business.

We are a small consultancy and we base everything we do on high quality, integrity and transparency. We operate and work for our client and try and find the best solution for them. We have been asked for our opinion over the years as we have got to know various companies. The largest company we have worked for is Macquarie Bank and the smallest is a business of some 10 employees. We have been in the media and we have had a lot of involvement in a lot of different areas.

Our passion is still there, but it is sad to see that there is still a trauma in the market and the crisis has not gone away; in fact, it has been exacerbated. From an emotional point of view, the people that were beginning to trust and believe that ABC was providing something, maybe—and it certainly was not our position to judge them—are now needing almost hand holding. All this counselling needs to go on with several companies because they are saying: ‘Look, we’ve had our fingers burnt. We spent money. We are looking into this. We tried to do the right thing by our employees and it’s all gone horribly wrong.’

Senator CASH —Can I just ask for a point of clarification. You do not operate childcare centres as such—

Mrs Ghosh —No, we do not.

Senator CASH —You go into corporates.

Mrs Mills —We work with corporates but we also work with operators, so we have two arms to our business. Sheila and I are not childcare educated but we have people on our team who do have early childhood qualifications and who have run centres in the past. That is the two arms of the business: working with corporates to fulfil the care needs of their employees and working with operators and developers to set up and run centres.

Senator CASH —And is that any operator and developer?

Mrs Mills —Yes, we have worked with a lot of different operators and developers over the years.

Mrs Ghosh —And it is very important to understand that we are not partisan; we are not linked to anybody.

Mrs Mills —We are independent.

Mrs Ghosh —We make the point with everybody we work with. We have dealt with ABC, CFK, KU and smaller operators and, on the other hand, with Macquarie, Stockland, Mirvac—you name it—some of the banks and so forth. Looking across all of them, we have basically been trying to gain a confidence in the market and get people to understand that employees need support. That is ultimately where this has all come from. We noticed that the takeover of the corporate sector was becoming far more focused on, if you like, widgets—widgets not being children but being the suits who need to make money and get something out of centres. They were acquiring centres and it all became rather a rush and a bit of a greedfest. Our point of view was that our children—all of our children, for any of us who have children—are our most precious asset. That was being overlooked and not really cared for.

There is an urgent need to improve so many things in the market, from our point of view. We need to see better employment conditions, better incentives to be in child care and capping on conglomerates that are perhaps going to grow oversized and out of control. We actually wrote to the ACCC three years ago and officially put in not so much a complaint but a suggestion that we felt that one of the purchases that ABC was about to make would overmonopolise. Nothing happened. We did not even get feedback. And, of course, they bought what they wanted to buy. We were actually told by one person at the ACCC: ‘They won’t be able to buy up Hutchison’—I think that was who it was—‘until they sell something else.’ But that did not happen. It left you with rather a bitter taste in your mouth because you thought: ‘We’re trying to make a change here. We’re representing, in a sense, a lot of people.’

We were on the board of TOCC, the Taskforce on Care Costs. We were one of the founder members. There were six of us, including the Australian women’s law institute. It swelled to 350 companies, all with the same idea. We tried so hard to lobby, to get into the government’s ear, to get tax and legislative changes, which were great. But, on the other side, almost running parallel, was this massive dinosaur, this gargantuan behemoth, which was ABC Learning, which blew up and then just disappeared. What is left is people still with the same problem and now with psychological issues. Ultimately, the employees who made up the company still have the problem with placing children in care and the financial issues and stress issues that go with it. My sense—and I do not think I am the only one—and the feedback in the market is that the government supported the ABC thing because ultimately, on the face of it, it showed that Australia was successful in child care, when actually it was not. It was a bit of a smokescreen.

CHAIR —You do not want to make a statement as well, do you, Mrs Mills?

Mrs Mills —No. Sheila and I have, across the board, the same opinions. That is why we work so well together.

CHAIR —That sounds good. So you work with other bodies to facilitate the creation of childcare opportunities.

Mrs Ghosh —Yes.

CHAIR —Are they normally opportunities onsite in corporate settings or are they—

Mrs Mills —It could be either.

Mrs Ghosh —It could be anything. It could be onsite. It could be developments of centres for people or advice on policies and procedures. It could be compliance issues for people who are about to set up a centre, because DoCS, for the last five years, maybe, have not positioned themselves as advisory. They now just have the capacity to open or shut down a centre. So there have been a lot of operators saying: ‘What do we do? The rules are open to interpretation.’ We use the consultants that we have who have worked for DoCS to put their view in and do compliance issues. It is a bit of a mess out there, really.

CHAIR —So DoCS used to have the role of giving people advice on compliance issues—

Mrs Ghosh —Yes, they used to be an advisory—

Mrs Mills —That is what we have been told over time—that they will not advise you; they will do you licensing or your accreditation. When people are setting up a centre, finding a site or getting their plans done, that is obviously an expense that they have to go through. They have to see whether or not they can set up their centre. We work with them because people on our team have a good understanding of the regulations—and Sheila and I have gained a good understanding over the years—and can give them a level of confidence. Obviously there is still the final say from a DA and DoCS, who decide whether to licence them, but it gives them a better level of confidence, particularly individuals who want to set up centres and are not sure where to start. They can then have that confidence that they are meeting regulations the first time they go in there, rather than having to change things later and incur extra expense.

CHAIR —Is it possible in a couple of sentences to summarise the key ingredients for corporate involvement in child care? What are the elements that make it successful as opposed to unsuccessful?

Mrs Mills —Firstly, a lot of corporates are not getting involved in subsidising child care now because, obviously, the child care tax rebate has changed the situation where salary sacrificing and fringe benefits tax was an advantage to a lot of people. So the market is changing. Most companies need to be quite large, have a large staff base—it does not necessarily matter whether that is men or women; obviously, either can have children—to justify the cost of being involved in a centre. You would not open a childcare centre for 20 children. It would not be profitable. There is just such a low margin in running a centre. So, if a corporate were going to get financially involved, to set up a centre, they would need a large staff base or need to go into a joint arrangement with another corporate to get enough children, 30, 40 or 60—90 is the limit—to justify the cost of developing a centre and running it from an operational point of view.

Mrs Ghosh —There is no financial incentive for corporates to get involved. There is actually a psychological disincentive for a corporate to get involved.

Senator CASH —Should there be a financial incentive for corporates to get involved?

Mrs Ghosh —I think there should be.

Mrs Mills —Yes, definitely.

Mrs Ghosh —If you ask me how, I do not know. If I knew that, we would not be here today, possibly. I do not know how it would work; I just know that what has happened so far has not been working. We could look at models, perhaps, in the USA but, if you look at the population in the USA—

Mrs Mills —It is different.

Mrs Ghosh —It is massive compared to here. They have different set-ups, they can call on different bodies and so forth. You sense the corporates want to do something about it but are really restricted in what they can and will do. Certainly, that is so with the economic downturn.

Mrs Mills —That makes it more difficult.

Mrs Ghosh —It went from being HR and organisational development to remuneration and benefits and the CFO having the last word. Then you suddenly say, ‘Well, hang on, this has now gone beyond the care of the children to’—as I was saying earlier—‘the widget idea where these are now units that are costing us money.’

Senator CASH —Sorry, but if I can jump in there, Senate Humphries: can I ask you when that step actually takes place? When is it that you go from the point of view of caring for a child to actually taking that step where you are now just looking at a widget? You have mentioned it twice. I am trying to work out when you know that point has actually occurred.

Mrs Ghosh —The point is when the company are no longer focusing on care of the employee and they are focusing on the bottom line and whether they are number-crunching properly. Suddenly the care becomes less of an issue for the company but obviously it is still an issue for the parent. The company then starts to say, ‘What cost savings can we make? Where can we cut back? Where can we make redundancies?’ So old child care is not a priority. But you know what: it is still a priority for people and if you did not have the people you would not have a company. As you can probably feel from us talking, the passion is still there; the situation still exists. As I say, it is sad to see the demise of any company. No-one ever wants to see anybody go under. I do not know whether ABC began to believe their own hype or whatever and whether they facilitated what happened. There is some talk that they got what they did because of the CCB being brought in in 2000 and their benefiting from the benefits and so forth and that is how they actually swelled and gained and grew. That is great—fine—but the issue still remains. In fact, it is actually slightly worse because people began to trust in that and then it was popped like a balloon. But that is what was on offer. What else did we have? We did not have anything else.

Senator BILYK —Sorry, Senator Humphries, but if I could clarify something.

CHAIR —Yes, certainly.

Senator BILYK —You talk about corporate involvement. I want to be very clear that I am understanding this. Are you talking about corporate involvement so that they can provide some sort of care facility for employees in the interests of the broader company or are you talking about corporate involvement so there can be for-profit childcare centres?

Mrs Mills —There are two arms of corporate.

Senator BILYK —Okay, I just wanted to be clear in my mind about that.

Mrs Ghosh —There are two arms. There is one little arm, which is the corporate and profit side. The idea is for care for employees and it does not necessarily mean involvement in a centre or setting up a centre. Say we take it all the way back. Nicole and I will go in at a strategic level and look at their strategic plan and say, ‘What are we doing here? What do you want to do as a company? Let’s investigate the issues for you and let’s investigate the possibilities for you.’ It may be that they end up with the care provision that that company offers being possibly helped towards payment of a company locally for them or for flexible working or something. That is then their care provision policy that is in place. It does not always mean, and it probably should not always mean, that they should be involved in a centre.

Mrs Mills —But there should be ways to make corporates or companies, whether they are small ones or large ones, be able to assist their employees by, for example, subsidising care, but so they are not getting taxed for that. That would be a really good solution.

Senator BILYK —There are other forms of care as well.

Mrs Mills in —Exactly; some people want different forms of care. They want family day care, not a childcare centre, or they only want preschool or they want a nanny. There is another thing. Even though salary sacrificing and meeting the right requirements while you remain FBT exempt has worked for some companies, that is not a good solution.

Mrs Ghosh —That does not happen to the middle people.

Mrs Mills —That was not a good solution and it is not a good solution. It has not improved with the changes as to the tax rebates and the childcare benefits that people receive. But if companies felt they could, if they chose to, at least give their employees a subsidy towards their childcare fees and there were no tax implications—so as part of people’s salary package they could choose to have their childcare fees subsidised—those companies would be going to be more open to offering things like that if they knew there was not going to be an oncost for doing that. I think that is really important.

Mrs Ghosh —Another point which I think has got to be brought in is that Australia particularly has an ageing workforce. I have a broad spread of children. Some are older and one is quite little. When my parents were younger I was very lucky with the assistance and the help that I got from them—and I know a lot of other people were. Now you are finding that parents are, and are encouraged to be, in work longer if they want to be because they have got a lot to offer, which means they perhaps cannot actually support their own children who are having children. That is not getting any better.

Senator BILYK —But they might not want to.

Mrs Ghosh —Yes, they might not want to. What if you are 62 and you actually want to work until you are 70? Why shouldn’t you? You could go until 75 actually, with people living longer, and things are certainly changing.

Mrs Mills —Experience and knowledge!

Mrs Ghosh —Say the daughter says, ‘Mum, can you help?’ What if the reply is: ‘Actually, no; I don’t think so. I’ve actually got a business. I am thoroughly enjoying it. You’ll have to find someone else for the work.’ When we started this a few years ago, we would go into boardrooms and there would be a lot of people there looking at us and wondering what these women wanted. Genuinely and honestly, people would say to us, ‘Oh, my wife dealt with all of that. Why don’t people do the same?’ We would try not to be too aggressive back to them. We pushed gently and said, ‘Fair enough, but it doesn’t quite work like that now.’

Mrs Mills —I think those are the main points. Our workforce is very different. We have a lot of women who remain in the workforce or where both parents are working. We have an ageing workforce with people who have remained in the workforce. There are three reasons why people need their children cared for. The wives are not staying at home or the parents are not staying home and the grandparents cannot assist. We have had an issue as to child care whereby corporates, as in companies who have bought up child care or own childcare centres, have got control over a large number of centres and that has created a real issue in the market. From our point of view, we feel there are two sides, one where the government could be doing something that makes it easier for corporations who are helping their employees find care so they can remain in the workforce, and the other is regulating the childcare market so that something like this does not happen again so that one company cannot come in and own a large number of centres. But also there are things like this: is the particular centre needed in the area in which someone wants to put it? That is another issue.

Mrs Ghosh —Yes, prove the centre first.

Mrs Mills —You have got to prove that there is a demand there. I think that is so important.

Senator BILYK —The thing is that can change over a three-year period quite dramatically, so there needs to be some forward planning.

Mrs Mills —Yes, I think that is the problem we have.

Mrs Ghosh —They need to forward plan. It is rather like doing a conveyancing audit before you buy your properties, so it is about what is actually planned for the area and what are the projections, and it should be tougher to set up a centre. That sounds ironic. It sounds as though we are saying make it much tougher but what we are actually saying is: let us get the regulations right and get them in the right place and sort things out. One issue was that the Commonwealth was really under fire for not actually having the knowledge of where ABC was really situated and in what states and of what revenue was coming from where. It was really out of control. There needs to be so much more regulation and anybody who is scrupulous will adhere to that and say, ‘Yes, absolutely. I fully understand that I am capped at 30 centres unless and until I can prove otherwise.’ Then maybe you move to another level where you say, ‘I am providing this for the community and they are also getting that,’ and it is fully audited and properly worked on.

Senator CASH —So you have been in the business for eight years?

Mrs Mills —That is right.

Senator CASH —How do you define when you actually get to those levels? Say you go from ‘I have one centre and provide child care’ to ‘I now see a demand and I now provide 10 centres’ to ‘I now see a further demand and I provide 20’. What are the ingredients that then lead to someone saying, ‘Hold on! Stop! Now you are becoming an ABC’?

Mrs Ghosh —I think there are several things you could probably throw into that mix. I reckon that is a pretty hard question to answer and it is a hard issue to define, but I will give you a couple of examples. One is on a personal level. I had one of my children at an ABC centre which was actually taken over by ABC while he was there. Over a period of about five or six weeks it went downhill and a lot of staff left. In fact, it was understaffed and in effect it was operating illegally. So therefore there were staffing issues. Most people that commented would say that they were really abusing the economies of scale in the sense that there was a lack of everything in the centres. You would almost say they were spreading themselves too thinly. So you need to have some criteria.

Mrs Mills —Like the quality criteria.

Mrs Ghosh —You need quality control. You have key performance indicators by which you say, ‘Can you actually maintain this level of service?’ and ‘This is the standard that you have to have.’

Mrs Mills —That is really important.

Mrs Ghosh —You say, ‘Sure, you have proven it with one and that is great.’ If you can prove it with five that is great. Say you get to—I don’t know, maybe 30? That is an arbitrary number. Let us say that, but it should go up in component parts and you then say, if we get to 30, ‘Are these KPIs still being adhered to? Are we still happy with it all? Is it still transparent?’

Senator JACINTA COLLINS —I think in part the problem with ABC that we are trying to remedy is what I would describe as market gouging.

Mrs Mills —Yes.

Senator JACINTA COLLINS —So rather than necessarily setting arbitrary figures of 30 or something like that, if the correct planning mechanisms are introduced then would that not in itself prevent that market gouging from occurring?

Mrs Mills —I think so. If you prove there is demand for a centre in the area that you are in then that would definitely affect whether or not someone could be setting up more centres which are not required.

Mrs Ghosh —To be fair, if you look at somebody like KU Children’s Services, they are excellent. They have a lot of centres and they are very well run. It does sound as though we are damning ABC Learning. But I think gouging is an excellent description. I think you have hit the nail on the head. It really did feel as though it ripped the flesh out of so many people.

Senator BILYK —There are other issues we need to be concerned about. This is about not just the quantity of childcare and the demand being able to be met in a physical environment but also the staffing levels, the staff training and the way we view childcare in general

Mrs Ghosh —Yes, we need to incentivise staff.

Mrs Mills —Conditions are terrible really for what they are paid.

Senator BILYK —I know, I used to be one.

Mrs Mills —Exactly.

Mrs Ghosh —This sounds a terrible thing to say, but I am going to say it: I pay my cleaner more than a childcare worker gets paid.

Mrs Mills —And we are talking about the care of our children. it is an emotive thing.

Mrs Ghosh —It is shocking, isn’t it?

Mrs Mills —And these people are doing it because of their passion for children. A lot of them have lost that passion.

Senator BILYK —I just want to jump in there because a lot of them have not lost that passion. I really want to be very clear on the record that 98 per cent of childcare workers—and I was a childcare worker for over a decade and I dealt with them in another life after that for over another decade—give their all. They give a lot more than they are ever given credit for.

Mrs Mills —I think they get tired.

Senator BILYK —They certainly get tired.

Mrs Ghosh —They get dispirited because they get disillusioned.

Senator BILYK —They do. But I also run the argument that just because you love children does not necessarily make you a good childcare worker.

Mrs Mills —That is very true.

Mrs Ghosh —I agree with you.

Senator BILYK —So I am very much for training and qualifications.

Mrs Ghosh —There are stringent checks now in place—and there should be - such as the working with children checks and all the other things to make somebody who wants to be a childcare worker feel good. It means we have a qualified childcare worker—someone we want to care for our children. On the other side of the coin, there should be the same system in place for someone who is offering the facility to take care of children.

Senator CASH —So if we had to strip this right back to basics, what are three things that we could do to make the current system better?

Senator BILYK —Change the culture.

Mrs Mills —Incentives. I think we definitely need to improve the pay of childcare workers and their incentives.

Mrs Ghosh —Yes, because there are not enough of those.

Mrs Mills —I know that they have rosters and shifts but they do work really long hours. We need to consider the fact that they are carrying for human beings and it is hard work caring of children—it is hard work caring for two let alone if you are caring for five or 10. So I think their conditions definitely need to be reconsidered and their pay definitely has to.

Mrs Ghosh —There has to be a close monitoring of any centres.

Senator BILYK —Just to clarify, those things such as hours of work and pay levels do vary even within states according to what industrial instrument they are being paid under. They can vary quite dramatically within one state.

Mrs Mills —Definitely. I think we also need some form of regulatory body looking at operators—I think from that point of view of if somebody wants to set up a centre or buy a centre. I suppose it is harder in the case of buying a centre, but definitely if you are setting up a new centre then you have to ask: is there a demand for that centre? Sydney is a perfect example. If you look across Sydney then you could say there are enough childcare places for the number of people who need care, but it is not evenly distributed. You have to look at the individual areas—you have over demand in some and oversupply in others. Imagine if somebody was monitoring that even before you go and put in a DA.

One of the services we offer clients is looking at needs—is there a need for childcare in the area that you are considering? I think something like that needs to be done and put to a regulatory body saying ‘this is where I am planning to build a centre and I have proven there is a need now and for a period of time’. I think that was a very good suggestion. So it is about proving that need before you even go down the path of lodging a DA and setting up a centre. Then there probably needs to be some incentive that corporates can offer employees to assist them with childcare so that people can return to the workforce.

Mrs Ghosh —And help the community so that the placements are fairly evenly shared. One of the things that really got us going actually was looking right back at where ABC Learning had bought out some local centres and Westpac was involved. I think it was Westpac. They actually bought out a community centre and they kind of got rid of half the community kids to put the corporate people’s kids in there. We saw red then and thought, ‘This is ridiculous’. Some provision should be put in. These employees are no different to the people from the community. There should be some extra provision. It should not be a case of ‘you can go because the private sector has moved in here now—and so now all you guys can just wait’.

The other thing I want to say, just out of interest, is that my own view is I think there should be federal legislation rather than this being a state legislative thing because there are loopholes, changes and differences in childcare between different states, as you would know. ABC Learning, for example, was able to begin in Queensland, really develop in Victoria and then, when it had power, money and weight, was able to tackle New South Wales, which was harder to get into. Why not have it all the same so that people cannot move and capitalise over different states and so on.

Senator HANSON» - «YOUNG» —I have a few questions. Firstly, I was interested about the corporates you have worked with successfully. Have they tended to be organisations that have implemented their own paid parental leave schemes as well? Is there some kind of linkage there?

Mrs Ghosh —Most of the people we have worked with would certainly have had their employees care on their radar.

Mrs Mills —Paid parental leave has not been a huge thing that we have seen implemented.

Mrs Ghosh —No, that has come in more recently and there was a lot of push back on that because people were nervous—they still could not get over the fact that they might employ someone who had just got married and was about to go off and have a baby; and all these hideous issues that one is not allowed to talk about in an interview and so forth or which are whispered about behind closed doors. They still have an issue with that but they know that they need to get on the agenda care for employees. The people who we have dealt with, in the main, who have successfully completed a care provision certainly had it on their radar and were open to it. Let me tell you that there were quite a few that did not.

Mrs Mills —Paid parental leave as one particular thing has not been something that companies tend to do—it is more about flexible working policies and assistance finding care or providing care. They are usually the areas that they assist with.

Senator «HANSON» - «YOUNG» —In terms of the idea of having an independent national regulator or some kind of authority, how would you see that they work with government? Specifically, if we are talking about trying to federalise and nationalise the standards and the quality control, how would that body work with the federal government?

Mrs Ghosh —I would see it as a bit of a buffer, almost like a shock absorber, between the not-for-profits, the private individuals and the government legislation and what is deemed to be right. It is almost like a filter system. How that actually would operate I do not know but that is the ideal in my head.

Mrs Mills —I would have thought that they would be linked to the government. I cannot see why it would not be part of—

Mrs Ghosh —It would definitely have to be linked to the government, but it would have to be almost like a think tank that was almost like a fail-safe or a safety guard if you like. It could be a think tank that was an advisory body. Because you see you have DOCS, DHS and all these others that have their own certain rules. There are so many little areas that things can fall through the loopholes. I think we need a blanket approach.

Mrs Mills —All of them are actually reporting under the same act so I cannot see why it would not be a government body—but it would be a national one rather than having individual—

Mrs Ghosh —If you had a federal government body that actually had implemented systems that understood everything then you would not have the issue where the Commonwealth could not publish data on what was going on in the back of Queensland versus in Victoria and so forth. It would have been more a case of, ‘We’ve actually got this. We know exactly where we stand—and if we don’t then why not.’

Senator «HANSON» - «YOUNG» —Yes, even down to the fact that with today’s data the federal government cannot tell you how many centres are owned by companies that are floated on the share market and how many are community run, for example. That is basic data.

Mrs Ghosh —It is just ridiculous when you think that they have to go through a process to actually get to that point. So why isn’t that actually collected.

Mrs Mills —Australia is a small country really in the scheme of things for something like that. It just does not make sense that we need something for each state when it could be the one body. Childcare benefits and tax rebates are federal so why isn’t the whole system and the whole regulation around childcare done federally.

Mr Barlow —At least the train track gauges are now standardised.

Senator BILYK —No, they are not fully.

Mrs Ghosh —Doesn’t that tell us that we need to change. It would make it much stronger as a force and as a body.

Senator «HANSON» - «YOUNG» —In terms of the corporates that you have worked with, some of them that you have named are obviously not just Australian based. I am wondering about where the Australian context sits. In your submission you referred a bit to the international context. Obviously the UN ranked us second last in our provision of child care.

Mrs Mills —A lot of other countries incentivise corporates to help their employees. In the UK there is the voucher system, along the lines of what we were saying about the subsidy, where they can purchase vouchers and give those to their employees to pay for their care. They can be used for any form of care, whether you are at a preschool or long day care. In the States, work based child care and assistance with provision of child care is really big. That is probably where we have noticed it with international companies. We have noticed over the last four or five years that they have started getting a push pack. They would have someone transferred to the Australian office who would assume that they would be provided with child care because that had been done for them in the States, and they were told: ‘Actually, that’s something you have to go and work out for yourself.’

Mrs Ghosh —We are mortified to find that.

Mrs Mills —In that respect, we are very different to other countries.

Senator «HANSON» - «YOUNG» —Yes.

Senator BILYK —Have you looked at European countries?

Mrs Ghosh —We have researched the data. Scandinavians come out on top.

Mrs Mills —They are amazing.

Mrs Ghosh —They are amazing—I do not know how they do it.

Mrs Mills —Forty-seven weeks paid parental leave.

Senator «HANSON» - «YOUNG» —How do they do it?

Mrs Ghosh —They are really at the top end of the scale. That is not necessarily the ideal—I am not going into the whole cost of it—but the point is that we could do so much better.

Senator «HANSON» - «YOUNG» —And I think you are in a unique situation working with companies that have several global bases.

Mrs Mills —Absolutely.

Senator «HANSON» - «YOUNG» —The employees see the comparison, don’t they?

Mrs Ghosh —It does not take much really, in a sense. Someone who is now a CEO has come in from Chicago for one of the big four accountancy firms—I will not name them; I do not think it is necessary. They had three children and were supported by the firm over there but came to Sydney—and they were absolutely delighted to come to Sydney—and the Sydney office said, ‘Care factor zero. That doesn’t exist. You need to find that yourself.’

Senator «HANSON» - «YOUNG» —Going back to a number of the witnesses that we heard from yesterday and to other submissions, that line seems to be less about whether it is a community based or non-profit or private independent operator. From a number of submissions, the line seems to be when the company, in the case of ABC, floats on the share market—

Mrs Mills —It is about the bottom line.

Senator «HANSON» - «YOUNG» —and then all of a sudden you have board directors who are meant to be delivering dividends and they are not necessarily the same people that connected with—

Mrs Mills —Their focus has gone.

Senator «HANSON» - «YOUNG» —Exactly.

Mrs Mills —Their focus has changed completely, and that it is where it is hard to give a number. But you have someone come in who is running 30 centres because their choice is to run 30 centres, compared to, as you say, worrying about the bottom line and dividends and how they are performing. Obviously you are always going to worry about how you are performing, because it is a business, but there is a line between performing and being profitable that is still about quality and care for children compared to being purely about your financials and how you are performing on the share market.

Mrs Ghosh —It is quite sad to think of your own child as one part of that small thing that is actually making that company that—

Mrs Mills —They do. They pull back in areas. I know there are regulations, and you meet those regulations—but they are less likely to offer above quality, and then they are going to do things like inflate fees and meet what they need.

Senator «HANSON» - «YOUNG» —Do you think that the 50 per cent rebate on the CCB has contributed to an inflation of fees in some of those centres?

Mrs Mills —In those sorts of centres, definitely, but not in centres where people are running them for the right reasons, no. For someone who owns a large number of centres and is worried about whether or not they are making the right returns, then that probably has.

Mrs Ghosh —The 50 per cent CCB actually helped people who would not really benefit from the FBT salary sacrificing. Ironically, normally those were people who were earning over a certain amount and obviously, the way the tax went, the more they earned the more they would get, which was really the wrong way to look at it. There was an imbalance. So that was good for them, but we knew when that came out that certain people would suffer from it.

Mrs Mills —I know it is hard to say, but another point that we raised was that maybe there should be some sort of cap on fees. It is another hard thing to regulate, but maybe that would stop things happening.

Mrs Ghosh —Again, back to federalisation—

Senator «HANSON» - «YOUNG» —If you had the consistent set quality standards in terms of workers and conditions and your pay rates and all those things it would be easier to do something like that.

Mrs Ghosh —Presumably doctors and nurses, for example, would have the same legal, ethical and moral requirements in New South Wales as in Victoria and Queensland. I do not see that that should be any different for childcare workers and the professions and the people that operate and work with them.

Senator «HANSON» - «YOUNG» —Obviously with the ABC collapse, it has put the issue on the front page of the paper, and parents who have been interviewed—for example, through the media—and our own constituents have seemed quite staggered that child care has been allowed to become a commodity as opposed to simply part of the essential services of the education system. People continue to use the example of: ‘This wouldn’t happen in primary schools.’ Even a private school is not floated on the share market. All the money that is raised is put back into facilities, back into teaching and back into—

Mrs Mills —I think that was part of the problem. It was not being put back into running the centres and improving the quality and the type of care and education that they were offering. It was going elsewhere.

—It was a new idea that got through and now people are starting to say, ‘Whoa! That’s not going to happen again.’ We should learn from it. I think that would be the one thing I would say today. If there were one overriding comment I would leave you with it is that we should really learn from what has happened and move forward and not make the same mistakes again.

Senator JACINTA COLLINS —I would like to go back to this quandary you indirectly raised. If we go back to the period of salary sacrifice and, as you pointed out, it was available to one end of the market but not more generally, and we now have the 50 per cent tax rebate for approved care, which is more generally available. But the counter effect of that is what you are saying to us now: that there are not particular subsidy arrangements that employers can use. How do you think you can get that balance right?

Mrs Ghosh —That is a difficult one.

Mrs Mills —I do not see any reason that the tax rebate and the childcare benefit need to go. I think the FBT rules around salary sacrificing need to change. Even before the tax rebate came in, when there was just the childcare benefit, if a company got involved in a childcare centre and was meeting the requirements whereby an employee could salary sacrifice and remain FBT exempt, it was still down to the employee, from their own personal financial situation, whether they chose to do that or whether they just paid for their care and claimed it—

Senator JACINTA COLLINS —But it was far more advantageous before the tax rebate.

Mrs Mills —Far more advantageous.

Mrs Ghosh —It certainly was.

Mrs Mills —Depending what tax bracket you fell in.

Mrs Ghosh —Yes.

Mrs Mills —Then the CCTR was brought in, and I think what people choose to do has definitely become a greater divide. But it is more so that the people in the high tax brackets would stick with salary sacrificing because of the FBT exemption. The problem is that it is really difficult for companies, particularly in the CBD—because, if you wanted to do a work based childcare centre, it has to be considered your business premises.

Mrs Ghosh —However you work that.

Mrs Mills —There is just not the space in the CBD in Sydney, Brisbane or Melbourne to find the right spaces to set those centres up to even offer those scenarios. If you had a scenario where people could be assisted to salary sacrifice their cost of care or subsidise their cost of care and they could use a centre of their choice, then you are meeting both sides of that. I think you would find that people could then choose whether they did that or whether they claimed their childcare benefit in their tax return.

Mrs Ghosh —And they would not be stuck in one area; they could be more fluid but still with some—

Mrs Mills —You would have a better use of demand there too.

Senator JACINTA COLLINS —The other aspect of that quandary from a government point of view is allocating scarce resources in a way which offers best support. The criticism about salary sacrifice arrangements was precisely the point that you made: it was generally only available for a small and high-income end of the market.

Mrs Mills —Absolutely.

Senator JACINTA COLLINS —The tax rebate is across the market.

Mrs Mills —Yes.

Senator JACINTA COLLINS —If we go back to looking at targeting subsidies in an employer directed way, they are more likely again to be focusing and targeting on the high end of the market, unless we look at measures that will facilitate them being more broadly spread. How do you think that could be better achieved?

Mrs Mills —That is where I would talk about the UK voucher system. You still have the problem that a company will always choose who they are going to be offering their benefits to. That is always going to be a problem.

Senator JACINTA COLLINS —But the difference here is whether they are government funded benefits.

Mrs Mills —That is true.

Senator JACINTA COLLINS —If it is a tax based benefit, ultimately it is the government funding it. If it is an employer choosing to distribute their salary arrangements, that is a slightly different issue.

Mrs Mills —Maybe if the companies or the corporates were not taxed for offering that assistance to their employees, as in the fringe benefit tax. Obviously that falls back to the employee as well. Removing those taxes so it is not being judged on what level you are or whether you should be receiving it makes a big defence.

Senator JACINTA COLLINS —It sure affects revenues though.

Mrs Ghosh —It does, and that is the problem, isn’t it? It all comes back to the revenue and to the profit. Then again, you could have a huge think tank to look at how that could actually work and apply it. Ultimately, going back again from the numbers to the touchy-feely side of the corporates, there still needs to be a way to offer people who work in companies provision for their care in the most effective way.

Mrs Mills —It is improving our workforce.

Mrs Ghosh —I know, but improving the workforce and supporting the workforce—

Mrs Mills —Who can come into the workforce and who can remain in the workforce.

Mrs Ghosh —and an ageing workforce. You are right, how do we look at that? It is not something that anybody has yet really come up with. I think the 50 per cent benefit did help a lot more people, which was great to see. So many companies could not actually get involved in the FBT, so many people were losing out. At least from our point of view more people are actually gaining. It is now melding the two, if that is possible.

Senator JACINTA COLLINS —I understand.

CHAIR —Obviously a number of witnesses are attracted to your idea of a national regulator which would be able to operate over and above the state and local governments. I come from the ACT and the problem with mal-distribution of centres in the ACT tends to be because of the difficulty of obtaining planning permission for centres in the inner part of the city where people want to drop their kids off on their way to work and pick them up on their way home. Wouldn’t a national regulator actually exacerbate that problem because you would have somebody in Canberra saying, ‘We should have the centres there,’ and the local governments who make planning decisions saying: ‘It just does not work for us. Sorry, we are not having centres there. It is not going to operate on that basis’? Are we pushing it up to a level where we are getting away from the area where we need to be making the most appropriate decisions about placement?

Mrs Ghosh —I do not necessarily agree.

Mrs Mills —There still obviously has to be local planning. You obviously have to go through that process, but before someone does that they need to prove that there is need for care in that area. Maybe it does not need to go to a national regulator. There needs to be an additional step. When you set up a centre you have to find the right space, meet the building and DOCS regulations and get council approval for the development application. Before people even do that there needs to be consideration of whether that centre is even needed in that area.

We need to not have different regulations in each state. If we are coming back to the children’s services regulations, why do we then have individual regulatory bodies in each state? There could be a change also around the staff, their conditions and their wages. If all of that is national, you have more of a chance of getting quality of care across Australia that is regulated and similar—it will not be so different in different states.

Mrs Ghosh —I think you are right. The local council has to represent the local people and one size will not fit all. The creche regulations in Queensland are different to the regulations in New South Wales in terms of care provision and everything else. You might find, for example, that someone can build up a centre and have enough collateral behind them to then go into New South Wales, which is more expensive. That is exactly how ABC did it. That area needs to be cleared out. We need to be able to say: ‘Across the board these are the regulations for this. Individual councils, what are your needs?’ And you can take that up locally, but generally we would all know then that wherever we went to live the ratios were the same. There are different requirements from DHS, for example, to DOCS in so many areas. That could be completely standardised.

CHAIR —You mentioned before about having the same rules applying in every state. Again that is attractive but I wonder how moving to that would actually work in practice. In Queensland yesterday we heard that the maximum size of a centre is 75 kids. I take it it is 90 in New South Wales. I think they can have a maximum of 16 babies in a centre in Queensland.

Mrs Ghosh —I have seen 120 in Victoria at one centre. It is like a battery farm. It is horrible.

CHAIR —I am sure it is. And there are different ratios of carers to children in different states. If you try to make that all standard, you are either going to rise to the best standard from each state, in which case you are going to substantially increase costs in those states which have not reached those standards yet, or you are going to go to the lowest common denominator, in which case you lose quality in a number of states which have higher standards than that. That represents a huge problem.

Mrs Mills —It is not something that would happen overnight.

Mrs Ghosh —You could work out the logistics of taking the middle line and seeing how much of a general loss was faced by someone making a gain, like ABC—one could work out the whole thing. I hear what you are saying, but I think that the fact that it seems hard does not mean that it should not be tried.

Mrs Mills —Something like that would have to happen over time and you would also have to have guidelines for all those existing centres, which obviously could not be expected to change overnight. In some areas they may have to change. In some cases, if they were established before a certain time then they would be allowed to operate under the regulations that the centre was established under. That is only fair and sensible, but I think that, moving forward, from this point on any new centre or any new operator taking on an existing centre should need to change to meet the new regulations.

CHAIR —We spoke a lot about the problems of ABC Learning and the lessons that we need to learn from that, as you rightly say. Some of the submissions to the inquiry have suggested that any role for for-profit providers in child care is necessarily inappropriate. Some have argued that community care is better than for-profit care and therefore there should be no for-profit care. Some have suggested phasing it out. Is that an overreaction to the problem of ABC Learning?

Mrs Mills —I think so. Definitely.

Mrs Ghosh —I think so. It is difficult to bring in politics, but I think it is a very left-wing or a very socialist approach, because I do not know that it would necessarily work. This is again hypothetical, but say you had a conglomerate of several banks that wanted to pay for a really top-notch centre that, for instance, even did the laundry for the kids and so on. That should be allowed to happen, if it could prove that there was a position for it and it would be open-booked. Why couldn’t that happen so long as the child care was foremost—the care for the children was the best it could be? I think to ban anything like that is wrong just as to let anything go is wrong.

Senator CASH —As we talked about before, it is finding that point where it tips over.

Mrs Ghosh —It is about moderation and balance.

Mrs Mills —Competition may be the wrong word to use, but if there are for-profit operators, they may only own one or two centres and be doing very well—and the communities definitely do an amazing job. They are also pushing each other to make sure that everybody is offering the right kind of care. If there is demand in an area and a for-profit centre and a community centre, they both need to keep their quality and fees and all those things similar if they want to keep their occupancy at the right level. That just gives the operators another reason to offer good care. So I do not think you should be getting rid of one particular type of operator—I do not think that is right.

CHAIR —We are out of time. I think we could have kept going for another half an hour at least. It has been very good evidence, so thank you very much.

Mrs Mills —Thank you.

Mrs Ghosh —Thanks for seeing us.

[9.59 am]