Government Response

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Government response to the Senate Community Affairs References Committee Report on Child Care Funding

March 2001

View the report as a single document - (PDF 138KB)

Introduction

The Government welcomes the opportunity to respond to the Senate Community Affairs References Committee Report on Child Care Funding. In its examination of key child care issues, the report supports many of the Government’s important child care reforms.

There have been significant developments in the area of child care funding since the Committee commenced its Inquiry. The proposed merging of the two existing child care payments into a single, simpler and more generous Child Care Benefit, as announced in the Government’s Tax Reform Package, will address many of the Committee’s major concerns.

The Child Care Benefit (CCB) to be introduced in July 2000 provides for significant increases in assistance for many families, particularly low income families, and greatly simplifies arrangements for claiming assistance. As part of the overall CCB package the Government has also announced the introduction of a multiple child rate across all service types (excluding occasional child care), and a 10 per cent loading for part-time care in long day care centres. The 10 per cent loading will be particularly beneficial to those families who pay a higher fee for part-time usage.

The Department of Family and Community Services is also addressing the Committee’s concerns regarding data that is available on child care. The Australian Bureau of Statistics was commissioned to review the data needs of the Children’s Services Program and the most effective methods for collecting the data. A Commonwealth/State Working Group has been established to produce a minimum data set for Children’s Services across all jurisdictions, and ensure deficiencies in current data are overcome and that consistent, timely data are available for all users. In addition, a Census of Child Care Services, covering all service types, was conducted in May 1999. Preliminary data is currently available for internal Departmental analysis. It is expected that publicly available data will be provided in February 2000.

This response addresses each of the recommendations made by the Committee and comments on both the minority report submitted by Government members of the Committee and the dissenting report submitted by the Australian Democrats.

Recommendation 1:

The Committee recommends that the Department of Family and Community Services, in conjunction with the other major collectors of data on children’s services, adopt a more coordinated approach to data collection to ensure that overlap and deficiencies in the current data collection are overcome.

AND

Recommendation 2:

The Committee recommends that the Department of Family and Community Services expedite the processing of results from future surveys and census collections so that up-to-date information is available for policy development and planning purposes.

The need to adopt a more coordinated approach to the collection of data in the area of community services is widely recognised. In October 1997, the Standing Committee of Community Services and Income Security Administrators (SCCSISA) proposed the improvement of community services data as a high priority, and commissioned the National Community Services Information Management Group (NCSIMG) to carry out this task.

The work of the NCSIMG covers a broad spectrum of community services including child care, aged care, disability services, family support services, child welfare, and emergency relief and crisis services. The NCSIMG is focusing on the development of consistent national community services information so that there is improved access to quality information for the community, governments, service providers, consumers of services and non-government organisations. The NCSIMG is expected to report in late 1999.

To focus on the data needs in the area of child care, a sub-committee, the NCSIMG Children’s Services Data Working Group, has been established. The NCSIMG Children’s Services Data Working Group constitutes representatives from Commonwealth and State/Territory governments and agencies involved in the collection and use of child care data. Membership includes the Department of Family and Community Services, State Government Departments, the Australian Bureau of Statistics and the Australian Institute of Health and Welfare. A key role of the NCSIMG Children’s Services Data Working Group is to produce a National Minimum Data Set for Children’s Services to ensure overlap and deficiencies in current data collections are overcome, and consistent, timely data are available for all users.

In addition, the Department of Family and Community Services commissioned the Australian Bureau of Statistics to review the data needs of the Children’s Services Program. The ABS reported in December 1998 and there are now several mechanisms in place to address the concerns outlined in Recommendation 1:

- The Census of Child Care Services is being conducted in 1999 and on a biennial basis in the following years. The Census of Child Care Services is the major data collection mechanism for the Program and has been conducted regularly since 1986. The Census provides accurate information on services, children and staff. Information provided by the Census is used extensively for policy analysis, planning and administration of the Children’s Services Program. Each time the Census is conducted, users of child care data are consulted for their data needs and the forms are tested extensively to ensure accurate results are obtained.

National Office will continue to work with the State Offices in the Department of Family and Community Services to determine a core set of data items to be collected for future Planning Advisory Committee (PAC) meetings. This will ensure national comparability in core data collected.

- The feasibility of introducing a Data Warehouse Model will be investigated in 1999. Such a model would overcome problems of overlap or deficiency in current data collections through providing an output-oriented, one-stop, ‘statistical data shop’ for the Commonwealth Children’s Services Program.

The latest Census of Child Care Services was conducted in May 1999 to allow access to selected preliminary data for internal Departmental analysis by July/August, and comprehensive data for the 2000-01 Budget cycle.

Strategies are in place to reduce the processing time for Census results, including the use of an electronic form, which will enable services to directly download data from their computer systems. Other possibilities of expediting the processing and release of Census results are currently being examined and assessed by the Department.

The introduction of the new Child Care Benefit in July 2000 will necessitate the development of a new computer system. This provides a welcome opportunity to address the limitations in currently available administrative data and system design features.

Recommendation3:

The Committee recommends that the Government support the ‘mixed economy’ model, whereby both community-based and private-for-profit services play a valuable role in the provision of child care, by encouraging both services and especially ensuring that community-based services continue as viable service providers.

AND

Recommendation 4:

The Committee recommends that to ensure the continuing viability of community-based services:

- a one-off grant be provided to community-based centres in recognition of the additional costs associated with supporting committees of management and the need to upgrade management facilities to improve efficiency;

- consideration should be given to expanding funding for restructuring within the community-based sector; and

- funding be provided to develop innovative models of child care based on the community development approach.

The Government is committed to the continuation of both community based and private-for-profit services. However, the Government is satisfied that the level of assistance provided to help community based services adjust to the funding change has been sufficient and does not believe further assistance for this purpose is warranted. Account also needs to be taken of the Government’s objective of providing a level playing field for both the community and private sectors.

Since the election of the Coalition Government in 1996, the changes to child care funding have removed inequities which existed between the two service types with the view of establishing a more competitive mixed economy model.

In relation to the Commonwealth’s largest child care funding program, Childcare Assistance, both community based and private-for-profit centres now have the same conditions applying to their accessing of these funds on behalf of families using their services.

Significant assistance has been made available to assist community based services to adjust to the funding change and to help ensure their ongoing viability. The 1996 Budget provided $8.3m over two years for centres to obtain financial and management advice. Services were also eligible to apply for funding to undertake minor capital upgrading which would assist them to develop more efficient operating arrangements.

Ninety three percent of services (1022 of approximately 1100 centres) took up the offer to obtain financial and management advice at a total cost of $3.6m and a total of $3.4m was provided for minor capital and equipment.

The Commonwealth also funds capital upgrade grant programs. Ongoing programs for established community based services include the Minor Capital Upgrading Program at $1.5m per year and the Capital Replacement and Upgrade Program at $1.9m per year for centres 15 years old or older.

A range of one off grants is available to all new, Commonwealth funded, community based long day care centres:

- set up grants, currently paid at $35 per approved place, assist with expenses such as phones and insurance;

- establishment grants are paid six weeks prior to the centre opening for the employment of a director (for a maximum of six weeks salary); and

- equipment grants are available for the one-off purchase of toys and is paid as a component of the per place capital grant for long day care centres.

The Government also funds a range of support mechanisms to services such as Field Staff Resources Pool workers, in-service training and support from the Resource and Advisory Agencies to ensure support is targeted at services’ needs:

- the Field Staff Resources Pool (FSRP) funds are used to employ fieldworkers on a short term basis to assist with the establishment of new child care places and community based or non-profit services;

- in-service training funds cover the support offered to staff and management committees of Commonwealth funded children's services by means of workshops, seminars, train-the-trainer programs, on-the-job training and through State based conferences; and

- the Resource and Advisory Agencies are funded to provide support, advice and in-service training to workers and managers in children's services. Their objective is to support and improve the management and quality of care of these services.

The Government recognises that the community sector has a particularly important role to play in the provision of child care in rural and remote areas where mainstream services, including private sector participation, are not sustainable.

In rural and remote areas, access to mainstream child care services is supported through a range of measures:

$6.8m per year in Disadvantaged Areas Subsidy (DAS) for long day care community centres in areas where no alternative centre-based care is available;

$4.4m per year in DAS for rural/remote and isolated urban fringe Outside School Hours Care services; and

- $12m per year provided for multifunctional children's services which deliver a mix of centre-based and family day care, occasional care and outside school hours care. Of these, 14 services provide access for the general community, and 28 cater specifically for indigenous children.

In addition, 30 mobile services deliver child care in the form of playgroups and occasional care in remote areas. They also provide toy libraries and broader information and support for parents.

The development and establishment of new services in such areas involves community development activities to ensure that services meet the particular needs of specific communities and that they are viable in the longer term. This work is currently being supported by Departmental staff and options for improving its scope and effectiveness are being considered.

Recommendation 5

The committee recommends that the review of the centres’ charging practices referred to the Child Care Advisory Council be conducted as a matter of priority.

The Council reported to the Minister for Family and Community Services on 30 April 1999.

In its review the Council considered a number of alternative approaches to the payment of Childcare Assistance and assessed the impact of these options using a computer model it had commissioned.

The Council has advised the Minister that there would be risks to service viability if changes were made to funding and charging practices at this time. The Council proposes to revisit the funding and charging issue when it can take account of its examination of the regulatory environment and the new Child Care Benefit and payment arrangements.

Government reforms appear to be having the effect of reducing the gap between hours of care paid by families and care actually used by families. Between 1995 and 1997, the gap between hours paid and used fell by 15% and thereby provided a reduction in the cost to the taxpayer of services charging for unused care.

Recommendation 6:

The Committee recommends that the 20 hour limit continue, providing that the current provisions to exempt families in crisis situations and families with a child who has a disability from the limit remain in place.

This recommendation reflects current Government policy and is noted.

Recommendation 7:

That:

- the Commonwealth provide stand alone OSHC services with a payment to cover the costs of increased administration at the beginning of each school year;

- where OSHC services amalgamate or are established in a school central to an area to ensure future viability, funding for travel between school and services be provided if suitable transport arrangements already exists. If no suitable travel arrangements are available, capital grants be made available so that OSHC services may operate their own transport;

- the Commonwealth seek the assistance of the States and Territories to ensure that OSHC services maintain access to school premises free of charge or at a low or nominal fee; and

- the Department of Family and Community Services address the apparent anomaly whereby Childcare Assistance is provided on a different basis for families using more than one type of care.

All Outside School Hours Care (OSHC) services (including Vacation Care services) have been offered a range of assistance during the transition to the new funding arrangements introduced in April 1998.

This support included training of services; business and marketing advice; equipment grants; telephone support (OSHC Helpline); transitional grants; personal visits (individual assistance); and one-off funding for services facing closures.

This assistance provided services with the opportunity to purchase equipment such as computers and software; and training to assist with the peaks and troughs of administration workloads (e.g. increase in administration at the beginning of the school year). All services that engaged an adviser were provided with a written report that outlined areas for improvements in business practices.

Individual support visits continue to be offered to all services to assist with setting up of administrative procedures and to answer questions about the new Childcare Assistance arrangements. Feedback indicates that services are very positive about the assistance received.

Most elements of support concluded on 30 June 1999. However, the OSHC Helpline, personal visits (individual assistance), and one-off funding for services facing closures have been extended until 31 December 1999.

From 1 July 1999, private operators can take over sponsorship of existing Commonwealth funded (stand alone) OSHC services.

As mentioned in response to Recommendation 4, the Government also funds a range of support mechanisms to services such as Field Staff Resources Pool workers, in-service training and support from the Resource and Advisory Agencies to ensure support is targeted at services’ needs.

The Department regularly reviews these programs to ensure service needs are being met. Such reviews are also informed by pilots in various States and Territories trialling different forms of administrative support services.

Providing transport to and from a service is primarily the responsibility of the family. There is no funding allocated to services solely for transport. However, under the Restructuring Assistance - Minor Capital Upgrading initiative (up to $7,000 on a competitive basis), services could submit a joint application with other services in order to pool funds to purchase more expensive items such as minibuses. Some services (individually) received grants for a contribution towards buses.

The cost of hiring school premises varies significantly between and within each State and Territory. Some services are currently charged little or no fee, some may contribute to the school fund for electricity etc. while other services are required to contribute more fully for the use of the premises.

Most State/Territory Departments of Education have devolved school funding issues to the local level e.g. school councils or Principals and each outside school hours care service/sponsor needs to negotiate with the school council/principal to determine the rate/fee for the use of the building.

A multiple child rate is currently in place, with families with multiple children in one type of service, receiving the higher multiple child Childcare Assistance rate. This system treats long day care (ie. centres and family day care) and outside school hours care as different service types. The Government is aware that both families and services view this arrangement as unsatisfactory and a multiple child rate across all sectors has been included in A New Tax System (Family Assistance) Act 1999 on

31 March 1999. The introduction of the multiple child rate will coincide with the introduction of the new Child Care Benefit in July 2000.

It should be noted, however, that as a result of the recent reforms to school age care, 93,000 families (as at May 1999) have registered with Centrelink for Childcare Assistance. Many families previously ineligible are now able to claim financial support from the Commonwealth Government for the first time.

Recommendation 8:

The Committee recommends that given the important role played by Family Day Care (FDC) in providing alternative care options for families, the current arrangements for the provision of an operational subsidy for FDC should continue.

The Government notes the Committee’s recommendation.

The Government recognises that Family Day Care plays an important role in the delivery of flexible, affordable and quality child care options for families. In particular, flexible care arrangements allow FDC services to meet a wide range of families’ needs including long day care, part-time care, occasional care, emergency care, and care outside standard hours. FDC is also well suited to provide baby places, and is a basis for the development of flexible service models in high need rural and remote areas where mainstream services are not sustainable.

Operational subsidies have continued for Family Day Care, and assist with the cost of running co-ordination units which perform a range of functions essential in efficient the operations of the current model of FDC. Around $60m annually is available for FDC operational subsidies.

The Government is committed to a policy framework which would enable FDC services to continue in their current role. A two stage process is underway to work closely with service providers and families to develop and implement quality measures for Family Day Care.

Stage 1 of the Project to develop and implement a quality improvement and accreditation system for Family Day Care has been completed. Two project teams including family day care experts and the Department of Family and Community Services have prepared proposals for a FDC quality assurance implementation model and quality measures.

These reports are being considered as part of Stage 2. The Department has engaged independent consultants to review the proposals and to undertake a cost-effectiveness study of various quality assurance implementation models.

Recommendation 9:

The Committee recommends that urgent action be taken to better target child care assistance to low income families, particularly those with more than one child, by the introduction of a ‘top up’ or ‘supplement’ to the current rate of Childcare Assistance.

This recommendation has been addressed as part of the Government’s Tax Reform package which, with the introduction of the Child Care Benefit (CCB), is expected to provide an increase of up to $7.50 per week for a low income family paying average fees for one child in full time centre based care. Additional weekly benefits will be available where two or more children are in care.

Affordability is influenced by a range of factors including the fees that child care services set. These fees are not controlled by Government and over recent years have increased at a rate much higher than economic indicators such as the Consumer Price Index and Average Weekly Earnings. It is a welcome fact, however, that the rate of fee increases for centres has halved under this Government (4% per annum) compared with the average increase between 1991 and 1996 (8.5% per annum).

In making decisions about child care funding, the Government must weigh up the formal child care needs of families with the broader demand for Government spending on the range of services provided for people at the various stages in their life cycle. The Child Care Program demonstrates the Government's significant ongoing commitment to assisting families to access high quality care within a framework of efficient processes, effective targeting and overall fiscal responsibility .

From 1 July 2000, it is anticipated that families with one child in full-time care, who are eligible for the maximum rate of Child Care Benefit, will receive $120 per week ($2.40 per hour) in Government assistance. The exact amount of assistance payable at that time will depend on a number of factors such as indexation between now and the implementation date of 1 July 2000. Maximum assistance will be available for families with incomes under $28,200 a year, tapering down to a minimum rate of assistance when income reaches $81,000 a year for families with one child in care.

The CCB will also continue to provide additional rates of assistance for families with more than one child in care, that is, a family with two or more children in care will receive a higher per child rate of Government assistance than a family with only one child in care.

The CCB will further address child care affordability by providing a 10 per cent loaded rate of assistance to families utilising centre based part-time care. The loaded rate is in recognition of the higher fee many families using part-time centre based care have to pay.

These new arrangements provide generous assistance for low-income families using formal child care. For example, a low-income family with two children in formal care would receive a government subsidy of up to $251 per week, or over $13,000 per year.

To accompany the introduction of the CCB the Government has also announced a range of changes to the personal income tax system and family payments. This integrated package of reforms will provide significantly more assistance to families in recognition of the costs incurred by families, substantially improve work incentives for low and middle income families and greatly simplify the complex array of assistance currently provided to families.

Recommendation 10:

The Committee also recommends that the Department of Family and Community Services conduct research to establish criteria to judge affordability levels for families accessing child care as a matter of priority.

This recommendation is noted. As noted under Recommendation 9, the Government provides generous assistance to families using formal care.

For low income families (for example a sole parent earning around $30,000 per year) with two children in full time care, Government assistance covers around 75%

of the average fee in centres ($12,400 in annual assistance), and around 80% of the average fee in Family Day Care ($11,500 in annual assistance).

- for a middle income family (earning around $45,000 per year) Government assistance would be around 60% of the average fee in centres ($10,000 in annual assistance) and 65% in Family Day Care ($9,000 in annual assistance).

Regular research is undertaken to enable the Government to monitor the affordability of child care for families. This analysis of data, monitoring of child care expenditure and its impact on families, will continue to be a high priority with the introduction of the new Child Care Benefit (CCB).

Current data sources include a regular census of child care services and ongoing analysis of Department of Family and Community Services administrative data.

Recommendation 11

The Committee recommends that the review of the Quality Improvement and Accreditation System being undertaken by the Child Care Advisory Council be completed as a matter of priority.

The Commonwealth Child Care Advisory Council has made substantial progress on its review of the Quality Improvement and Accreditation System (QIAS).

Following a comprehensive review process, the Council has now prepared two papers for consultation with the sector. The first proposes a revised set of Principles of quality care and the second is an issues paper outlining the Council's proposed approach to improving the QIAS process. The aim is to streamline and simplify the QIAS’s administrative requirements and make a clearer distinction between the accreditation and quality improvement components of the System.

Consultations on these two papers are scheduled to continue until November 1999. The Council will then finalise its recommendations and submit its final report to the Minister in February 2000.

Recommendation 12:

The Committee recommends that additional funding be provided to centres which cater for very high needs families in socially or economically disadvantaged urban areas.

The Government is committed to providing support to disadvantaged families. Initiatives announced in the Tax Package, including the new Child Care Benefit and improved and simplified benefits for families, will provide an integrated approach to assisting families who are socially or economically disadvantaged. This builds on the current system of Childcare Assistance which targets maximum benefits to low income families.

Issues relating to disadvantaged families are complex, and go beyond child care and child care funding mechanisms (for example, the Committee refers to crime prevention, family support and child protection). The Government recognises these complexities. Indeed, the establishment of the new Department of Family and Community Services is evidence of the Government’s commitment to the comprehensive examination of issues facing families, disadvantaged families in particular.

Funding available through the Children’s Services Program such as Disadvantaged Areas Subsidies (which focus on rural and remote areas) and special recurrent grants for Aboriginal services aim to support the supply of child care services in areas where no alternatives exist, to ensure that families continue to have access to appropriate child care.

Extension of similar support to urban disadvantaged areas is not considered to be warranted at this stage as there is no evidence that there is a correlation between under-supply of child care services and such areas. Furthermore, families often use child care in locations other than where they live (for example, close to where they work, study, or in transport corridors).

Child care planning processes have been significantly strengthened under the National Planning System for Child Care. Planning Advisory Committees in each State and Territory continue to meet regularly to assess local needs and assist Government in determining where to allocate new child care places. The future priority of the National Planning System will be to ensure that new places are only targeted to areas with an identified need and that growth is contained in areas of over supply.

The Department of Family and Community Services has analysed and will continue to monitor closures in areas of social disadvantage. Recent analysis refutes the claim that service closures have had a disproportionate impact on disadvantaged areas. For the three year period from July 1996 to June 1999, 51% of service closures were in advantaged areas, 37% in disadvantaged areas, and 12% in highly disadvantaged areas.

Recommendation 13:

The Committee recommends that the costs required to implement any proposal to introduce universal child care payments to all families with young children be investigated to ascertain whether such a proposal could be at all viable.

This recommendation is noted.

The Government, as part of its Tax Reform Package, has recently announced a simplification of twelve different types of assistance for families into three payments. This simplification is designed to provide an integrated package of payments to families, that better meet their needs and will be implemented from 1 July 2000.

Once the new system is in place this type of investigation could be undertaken to examine whether further simplification is viable.

MINORITY AND DISSENTING REPORTS

Minority report

The Government has noted the Minority Report tabled by Government members of the Inquiry.

Dissenting report

A dissenting report was tabled by the Australian Democrats focussing on the viability of the formal sector and the growth of unregulated “backyard” care. Its recommendations included:

increasing the Childcare Assistance ceiling;
increasing the 20 hour and 50 hour limits;
removing Childcare Rebate eligibility for informal, unregulated “backyard” care; and
maintaining the operational subsidy for Family Day Care.

The Government has announced its intention to significantly increase Childcare Assistance with the introduction of the Child Care Benefit from July 2000.

From 1 July 2000, it is anticipated that families with one child in full-time care, who are eligible for the maximum rate of Child Care Benefit, will receive $120 per week ($2.40 per hour) in Government subsidy. The exact amount of assistance payable at that time will depend on a number of factors such as indexation between now and the implementation date of 1 July 2000. Maximum assistance will be available for families with incomes under $28,000 a year, tapering down to a minimum rate of assistance when income reaches $81,000 a year for families with one child in care.

The Government does not support the recommendations to increase the 20 hour and 50 hour limits and notes the exemptions that are available to meet special circumstances, as well as the support for these limits by the Majority Report.

In relation to eligibility for the Childcare Rebate for informal care, the Government believes that it is important that families are able to choose between different types of care and notes that by far the majority of informal care is provided by relatives. In addition, concerns about families moving to informal care are not supported by data available on the Childcare Rebate from the Health Insurance Commission.

In 1995-96, around 92% of families receiving the Childcare Rebate were using formal care, 4% were using informal care and 4% were using both types of care.

In 1997-98, the formal sector had increased its share to 94%, while 2.7% of families were using informal care, and 3.3% of families were using both.

In 1998-99, the formal sector again increased its share to 94.9%, while 2.2% of families were using informal care, and 2.9% of families were using both.

In relation to the operation of Family Day Care services, the Government is committed to a policy framework which would allow these services to continue to provide quality alternative child care to long day care centres.

A two stage process is underway to work closely with service providers and families to develop and implement quality measures for Family Day Care.