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Making families stronger: putting child care back on the agenda. Speech to the Australian Confederation of Child Care, Post Budget Annual National Conference, 20 May 1999, South Molle Island, Whitsundays, Queensland



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Making Families Stronger

Putting Child Care Back on the Agenda

 

A Speech by

 

WAYNE SWAN

Shadow Minister for Family and Community Services

 

TO THE AUSTRALIAN CONFEDERATION OF CHILD CARE

Post Budget Annual National Conference

 

20 May 1999

 

South Molle Island, Whitsundays, Queensland

 

INTRODUCTION

 

A fundamental feature of any decent and caring society is that it is affordable for families to bring up children.  In the 1990s, families are stretched to the limit coping with longer working hours and the rising costs of raising children.  For the first time, our society has become a place where more and more couples are deciding not to have children, because they are concerned they will be unable to provide the opportunities every child should be entitled to.

 

As Professor Peter McDonald recently observed, the agenda of the Howard government has worked against families, not for them:

 

“What’s been happening is there has been cutbacks to family service, the rolling back of family funding and supporting people who have children. We are giving the message that if you have children it is your responsibility, instead of saying that children are a social good and are our future therefore our community should be supporting children.”

 

This has to change.

 

But it will on ly change when governments acknowledge the problem and put in place policies that place families back into the heart of society and government. Until that happens, more and more parents will have trouble just keeping their heads above water.  In the end, unemployment, family dislocation, and rising social ills such as substance abuse, drug addiction, alienation, and crime will continue to destroy a growing number of families

 

If we continue in this vein we run the risk of developing two nations. There is now a growing gulf between the living standards of couple families with children and single parent families. As it is the growing gap between poor and the rich is startling.  For instance, just 442 people in the Federal electorate of Oxley in Brisbane have an income greater than $78,000 per year.  This compares to 9856 people in the Federal electorate of North Sydney.  In Longman, just 470 people earn over $78,000 compared to 9430 in Bradfield.

 

Already we have a polarisation among households.  800,000 children now live in families where neither parent has a job - the size of the entire population of Adelaide.  The number of children living in sole parent families is growing and we know these families are amongst the poorest in the community.  If governments do not provide the right kind of support to these families - the kind of support that helps them move up and out of poverty - then we as a nation will have accepted these children can simply be forgotten - left behind.  Well I, and Labor, will not accept that.

 

Comparatively Australia is a small country, and if we want to succeed into the future, with all its uncertainties, we must capitalise on our most important resource - the next generation of Australians.  If couples cannot afford to have children, and families are struggling to give their children decent opportunities, then Australia has no future.  If we can’t give our children a shot at a decent future we will pay the price down the track with massive pressures on health welfare and policing.

 

Governments are heading in the wrong direction.  Politicians have not been listening.  We have not been up to the task of providing resources at the critical early stages of life, particularly in the first three years, where families need the most help and where we can make the most difference.

 

Governments have been applying band-aids rather than attacking the root causes.  And when it comes to supporting families in the workforce, this current government has completely undermined child care to the point where many parents are either choosing inferior care, or withdrawing from the workforce because they cannot afford to work.

 

 

CURRENT GOVERNMENT POLICY IS ANTI-FAMILY

 

You may well ask how has this occurred and how have we got here.  The current government, for all of its rhetoric, has not delivered for families.

The Government has created a massive social deficit by cutting funding and services to families in the areas of health, education, social security and childcare.  All of these cuts have placed extra burdens and responsibilities on struggling families.

 

Th e budget brought down last week does virtually nothing to restore that loss.

 

Turning to the government’s tax reform agenda we see at its centrepiece the anti-family GST.  It doesn’t take an economist to see the GST is a tax on consumption.  Families, by their nature consume the most and it will come as no surprise that the GST will hit them hardest.

 

The tax package shifts more of the tax burden onto low and middle-income earners and families.  The GST puts extra pressure on families with the cost of raising kids set to rise.  The tax cuts offered are not targeted to low and middle income families - they’re tilted to high-income earners without kids. High-income earners will gain most under the GST.

 

The GST is a fundamentally unfair tax that hits just about all the fundamentals of life.  Parents will be paying the GST on not just food,  but, clothes, school books, bus fares, electricity bills, phone bills, over the counter medicines, private tuition and much more.  Clearly just exempting food from the GST will not make it fair for families.

 

Make no mistake if the GST comes in it will be a bitter blow for thousands of families who are already on the edge.

 

The GST is part of the individualistic, every-man-for-himself philosophy the conservatives stand for. This philosophy undermines ‘traditional values’ like responsibility, sharing, sacrifice, family and community. Their approach leads to the disintegration of society and the destruction of any sense of family or community.

 

Despite all the family friendly rhetoric, the government’s policies,  are about weakening families not strengthening them.  Their policies are making it harder for families to get ahead and provide opportunities for their children to have a decent future. 

 

The elites, for their part, have not had the concerns of families top on their list of priorities.  I’m glad to see they are coming around with some commentators seeing sense in Labor’s opposition and now Senator Harradine’s decision last week not to support the anti-family GST.  Let’s hope they can all go a step further and put, at the heart of our economic policy, strengthening families.

 

Across the board the elites have been out of touch and it is high time future policy directions take into account the perspective from the kitchen table as well as the boardroom table. Policy development has been from the top down rather than from the bottom up.  In an economy where all we care about is jumping higher and running faster we have forgotten about the fundamentals.  We must realise the pressures on today’s workers and their families are undermining the cohesiveness of society that underpin our capacity to sustain and better our performance in a modern economy.

 

 

LABOR’S NEW DIRECTIONS FOR FAMILY POLICY

 

I recently made a speech signalling some important new directions for Labor’s family policy.  That speech argued that governments needed to develop a life-cycle approach to the development of family policy, recognising what families with very young children need is very different from what families with adult teenagers need.  I argued for more flexibility in the social security system so that one parent can remain at home when children are young.  I argued for national parenting programs, linked to social security payments.  I argued that Labor’s tax credit was exactly what working families needed to take some of the financial pressure off and to help pay for costs like childcare.

 

Senator Newman of late has been talking about early intervention, but what she and the government offer is nothing short of tokenistic.  There is no truly national approach or provision of resources.  They spend just $2 million per year on the Good Beginnings Program.  That’s 0.00036% of what they spend on Parenting Payment. 

 

Experience and commonsense tell us children who experience problems at home have a tough time making a future for themselves. They are less likely to finish school and get a job; they are disproportionately involved in crime; their own marriages suffer and the cycle of neglect and abuse is likely to continue with their own children.

 

We need to break the cycle, and we need to break it early. It’s not just commonsense - research proves it.

 

Early intervention programs have a proven track record around the world. Based on overseas experience every dollar spent on supporting young famili es now will save the community substantially more down the track in health, welfare and policing.

 

The Rand Corporation in the US further quantified the effects of early intervention programs in reducing crime rates. They found an investment of one million dollars in parenting programs could prevent 160 serious crimes. That’s at least 160 fewer victims, less pressure on the police and prisons and a greater life chance for hundreds of children. By contrast, every million spent on prisons will prevent only 60 serious crimes.

 

This government needs to devote some real resources to early intervention, not its band-aid approach.  If the government was really serious about early intervention it would take Labor’s lead and commit itself to a truly national approach rather than the token programs they are currently offering.

 

But our early intervention parenting programs are just part of the picture.  We should also be focusing on making sure families have incentives move off welfare and into work.

 

To this end Labor’s tax credits and work bonus for the long-term unemployed is part of Labor’s new policy artillery to get people off welfare and into jobs.

 

To date, tax credits have been underestimated, but now we are seeing broad support from economists, welfare groups and industry.  There is increasing awareness that tax credits are about much more than just tax cuts. 

Tax credits also help reduce unemployment.  They encourage movement from welfare to work by increasing the gap between welfare payments and after tax wages, and they take pressure off wages by increasing family incomes. Tax credits provide real incentives for parents to earn that little bit extra by offering tangible gains for extra work.

For families Labor’s Tax Credits beats the government’s GST package hands down.

 

•  Firstly, the Tax Credit delivers greater financial benefits to families who need it - without a GST .  For instance, a single income family on $40,000 with 2 children will be $3,300 per year or $63 per week better off with Labor’s Tax Credits.  Under the government’s GST proposal the same family would only be $1,820 per year or $35 per week better off.  What’s more, the government’s figures are based on the now discredited inflationary impact and compensation payments.

 

•  Secondly, the Tax Credit delivers higher effective tax-free thresholds - without a GST .  The Treasurer made much of his claim that the GST package delivers an effective tax-free threshold of $13,000 per year for a single income family on $30,000 with one child under 5.  The tax credits by comparison blow the government’s claim away offering the same family an effective $20,400 per year tax-free threshold.

 

•  Thirdly, Labor’s Tax Credit lessens work disincentives by delivering lower Effective Marginal Tax Rates (EMTR’s) -  without a GST.   For a single income family earning below $20,000 with one child Labor reduced EMTR’s by 10c in the dollar, in comparison to the government’s GST package which reduces EMTR’s by only 3c in the dollar.

 

•  Finally, Labor’s Tax Credit delivers lower average tax rates to families than the government’s much talked about tax cuts in the GST package. For example, the average tax rate for a family earning $30,000 under Labor’s tax credit is 12.2% compared to 18% under the Coalition.

 

Clearly Labor’s p lan out-guns the governments GST proposal without taxing families more with a GST and without blowing out welfare spending and attacking the budget surplus to compensate for an unfair tax.

 

Another benefit of the tax credit is that it gives working families some much needed financial help to pay for the costs of child care.  But this alone will not be enough.  

 

 

CHILDCARE

 

Child care has been one of the major casualties of the Howard Government. After $851 million worth of cuts we have a system that is just a shadow of its former self.  It is almost as if the current government doesn’t really understand the value of childcare. It is one of the key services supporting higher living standards for families.  For many families, the cost of childcare is as important as lower mortgage interest rates but this government has only focused on the latter and has nothing to say about the former.

 

One of the major problems with child care is its affordability, and this is where future Labor policy development will focus.

 

Affordability

 

The Senate Inquiry into child care funding received 929 submissions - and virtually nobody agreed with the government that affordability had not declined since 1996.

 

Of course the government doesn’t want to admit that there is an affordability problem - because they created the problem to begin with by cutting the Budget so deeply.

 

Official confirmation for these cuts is in the Productivity Commission’s’ Report on Government Services 1999.   They found that between 1995-96 and 1997-98, Long Day Care spending per hour, per child had fallen in every State except Tasmania, the ACT and NT.  In the five States where spending fell, the average reduction was 24 cents per hour: from an average of $2.23 to $1.99 per hour.  This represents a cut of approx 10%.  In Queensland, the funding fell from $2.47 to $2.19 per hour.

 

And understandably fees have risen - by an average of $20 a week.

 

The most the government can do is to say that developing a ‘benchmark for affordability’ was something they were looking at.  This is the very least we can do, and Labor calls upon the government to do it. It is time for such indicators to be put into place: to do some research on affordability and to make it public.

 

The new emphasis in the Budget’s accrual framework on performance indicators makes this transparency more appropriate than ever.

 

Once established, the government should measure its latest policy on child care - the $7.50 a week increase which is currently in the balance in the Senate - against this benchmark.

 

And beyond that, they should immediately hold an inquiry into the effects of lack of affordability on women’s workforce participation.  We hear so many stories of women reducing their hours or giving up entirely.  This is not in anybody’s interests and certainly not in the government’s.

 

The GST

 

The GST if implemented will also compromise child care affordability.  Although services are GST free and inputs are credited, many centres gave evidence to the Senate saying they would have to pay more for cars they leased up front and would have to pass the cost on to avoid cash flow problems.

 

At the very least, centres will need to employ a tax accountant just to manage the books under a GST.

 

And I haven’t even mentioned the decline in demand for places once families have to cover the cost of the GST on the essentials for their children.

 

Professor Peter McDonald told the GST Inq uiry the government had grossly underestimated the cost of the GST on children - just 30 cents a week - and as a result underestimated the benefits required to compensate families.

 

Early Education

 

But aside from the cost issues, I also want to address the links between child care centres and education for under 5 year olds.

 

Throughout Australia, state and federal schools are moving towards a greater provision of education for under-five year olds.  Many private schools require parents who wish their children to enrol for higher grades at the school to take part in the under-five program.  This trend is a major source of competition for some child care centres, and I am aware many providers regard the competition as unfair, because the schools have lower costs as they are not required to match the low staff-child ratios that apply to long day care centres.

 

It appears the distinction between child care and early childhood education is becoming blurred.  Schools are beginning to ‘teach’ children who have traditionally been regarded as too young for school.  At the same time, long day care services are funded by the Commonwealth on the grounds that their programs, designed to foster children’s social, physical and language development, comprise a form of education.

 

The development of under-five schooling may require some rethinking of childcare and education policy.  Labor is interested in seeking the industry’s views on how the Commonwealth should respond to this trend.

 

In terms of Labor’s broader agenda to improve the education of our children, it is very important that our children have access to early education so that they get the right head start.

 

Evaluations of early education programs around the world are very positive in terms of the later achievement of children.

 

Labor’s Approach

 

Labor believes that the affordability issues, and other challenges, need to be tackled by:

 

•  Reducing the costs of child care for working families;

• fostering a mixed economy of child care providing diverse services;

• providing for stability to allow the industry to recover; and

• encouraging the further development of quality standards.

 

Tax credits are a start, but we also need to look at the way in which childcare subsidies are structured.

 

Labor will be supporting the Bills before the Senate on childcare. The bill provides a $7.50 per week rise in the maximum assistance for one child in care, but no one will see any money until July next year.  It is also not enough to offset the cuts to assistance since 1996.  Furthermore, as this Bill is part of the GST package, its passage must now be regarded as doubtful.

 

The government has not used its Family Assistance Bill to introduce the radical change of paying child care fee relief directly to parents.  Parents can only claim the new Child Care Benefit themselves if they claim once a year and in arrears.  Presumably this option would only be taken up by high income earners entitled to the Rebate only. 

 

The government has also backed away from its plan to pay child care benefit in arrears, which would have caused severe cash flow problems for child care centres.  It appears they tacitly recognise the industry is in no condition to absorb any more drastic shocks to its system. It is disappointing to see however, that payment in arrears is still on the agenda and not ruled out in the bill currently before the parliament.

 

Despite the new Bill and the small increase in assistance, Labor remains concerned those families on low and middle incomes where both parents work will still experience affordability problems.

 

We want the government to conduct a thorough assessment of the impact of affordability problems and to make this evaluation public.

 

Labor promised at the last election to work with the industry to develop a plan to strengthen child care.  We would still like to develop this plan as an Opposition. 

 

 

 

 

Labor believes that the plan should look at:

 

•  Managing change

 

There will always be closures.  We are concerned about the disruption they cause, however, and would like to see fewer closures.  Assistance with fee relief can help, and the planned allocation of new places to high need areas should continue.  When c entres do have to close, there is a role for the government in offering advice, and in some circumstances, financial assistance, to minimise the disruption experienced by operators, families, children and workers.

 

•  Improving affordability for low and middle income earners

 

Options include providing a Child Care Assistance (or Benefit) supplement for low-income earners.   The program is already targeted to low income earners, but there is a case for increase for raising assistance for those families who ha ve the greatest difficulty affording child care.  

 

We will also investigate ways of paying additional assistance to families with more than one child in care.

 

Although the government denies this, it is apparent that centres are tending to close in lower income areas, where parents can least afford the fees.  Another option we are considering is additional funding for centres in low-income areas.  This would be available whether the centres are community-based or privately owned.

 

•  Developing quality

 

We see the education and training of child care workers as one of the keys to improving quality.  Labor is considering ways in which the Commonwealth could provide further support for staff development.

 

Labor also believes that both community-based and privately owned centres should thrive.  The old rivalry between community-based and private centres has been harmful to the industry.  It is time to drop this animosity and move on to finding ways for the two sectors to co-operate in the interests of quality long day care.   Both sectors have an important role to play. 

 

 

CONCLUSION

 

Improving the affordability of child care for working families is a central goal of Labor’s new family policy.

 

We recognise that child care - more than any other government funded service - underwrites a family’s living standards.

 

Without it, too many families cannot earn the incomes they need to give their children every opportunity in life.

 

The current government either does not understand the role of childcare in a modern society where it is more usual for both parents to work than just one, or is ideologically opposed to supporting two income families.

 

The design of their tax package and the very generous benefits to high earning single income families rather than double income families on modest wages is plainly unfair.

 

Labor rejects a notion that families whatever their structure should be any less deserving because they require childcare assistance. Governments should not be making value judgements about family needs - they should be supporting families.

 

It is a measure of how low expectations of child care policy have fallen under this government, that a budget with no cuts but no beneficial measures can be greeted with relief.

 

Labor wishes to lift again the profile of child care and put it at the heart of family policy, alongside early intervention, tax credits, and flexibility in the delivery of social security benefits for working families.

 

 

 

jy  1999-05-21  16:59