Family Assistance Legislation Amendment (Child Care Budget Measures) Bill
2010 [provisions]
Reference
1.1
On 26 May 2010, the Family Assistance Legislation Amendment (Child Care
Budget Measures) Bill 2010 (the bill) was introduced into the House of Representatives.[1]
The Senate immediately referred the provisions of the bill to the Senate
Standing Legislation Committee on Education, Employment and Workplace Relations
for report by 15 June 2010. This was pursuant to a 13 May 2010 resolution of
the Senate referring for inquiry the provisions of all bills introduced into
the House of Representatives after 13 May 2010 and before 3 June 2010 and
containing provisions commencing on or before 1 July 2010.[2]
Conduct of the inquiry
1.2
Notice of the inquiry was posted on the committee's website and
advertised in The Australian newspaper, calling for submissions by 4
June 2010. The committee also directly contacted a number of interested
parties, organisations and individuals to notify them of the inquiry and to
invite submissions. Six submissions were received, as listed in Appendix 1.
1.3
Given the relatively short time frame for the inquiry, the committee
decided to prepare its report on the basis of the submissions received without
holding any public hearings. The committee thanks those who assisted by making
submissions to the inquiry.
Purpose of the bill
1.4
Schedule 1 of the bill amends the A New Tax System (Family
Assistance) Act 1999 to cap the annual child care rebate at $7500 for
four income years starting from 1 July 2010, with no indexation to occur
until 1 July 2014. This amendment will generate net savings of $86.3 million
over four years.[3]
Background to the bill
1.5
Child care rebate is paid to eligible families to assist them in meeting
the cost of fees for care provided by an approved child care service.[4]
The payment assists families who are using child care while undertaking work,
training or study, providing them with up to 50 per cent of their out-of-pocket
child care costs up to an annual cap.[5]
1.6
Previously the annual cap has been subject to annual indexation. The
most recent indexation took place on 1 July 2009, increasing the child care
rebate limit for the 2009-10 income year to $7778.[6]
1.7
The savings made by reducing the cap to $7500 from 2010-11 and pausing indexation
until 1 July 2014 will in part fund the Australian Government's new
National Quality Framework (NQF) for early childhood education and care (ECEC).
The NQF, which has been agreed in partnership with the state and territory
governments, will for the first time establish a national quality standard for
all ECEC providers.[7]
All providers will be required to implement better staff-to-child ratios and
ensure that staff have improved qualifications.[8]
1.8
The Women's Budget Statement for 2010-11 notes that boosting the quality
of child care and early childhood education is intended to make it easier for
parents, particularly women, to engage in paid work while being confident that
their children are receiving quality care.[9]
1.9
According to the Minister for Early Childhood Education, Child Care and
Youth, only three per cent of families eligible to receive the child care
rebate will be affected by the amendment:
It is important to note that under the adjustment to the childcare
rebate featured in this bill, the vast majority of Australian families will not
be affected by this change.
In fact only about three per cent of families currently
receiving the rebate will be affected. The vast majority of families will not
be affected.
In order to reach the cap most families would need to be
placing their child in care for 10 to 12 hours a day for more than four days a
week, at average fee levels.
In fact, the average use of child care in Australia is much
lower with most parents using around 2½ days a week, with the average childcare
rebate claim last year being less than $2,000—well below the cap of $7,500.
Overall less than one per cent, 0.67 per cent, of families
using child care who earn less than $100,000 a year will be impacted by this
change in 2010-11.[10]
1.10
The Minister also highlighted other changes made to the child care
rebate under the Rudd government:
In July 2008, we delivered on our election commitment to
increase the childcare rebate from 30 to 50 per cent of parents’ out-of-pocket
expenses. This extra support goes directly to parents to help them with the cost
of their child care. We also met our election commitment to lift the maximum
that families could claim from $4,354, as it was under the previous government,
to $7,500 per child per year—a substantial increase of $3,146 a year, or some
72 per cent.[11]
1.11
Kirsten Livermore MP, speaking in support of the bill, commented that
one of the changes that the government had made to the Child Care Rebate was to
make payments available to families more frequently than had previously been
the case:
In our first budget in 2008 we honoured our election
commitment to increase the childcare rebate and also made it possible for
families to receive the rebate payment quarterly rather than annually as it had
been under the previous government.[12]
1.12
Ms Livermore went on to remark upon the wider industry and budgetary
context of the bill:
The change in this bill needs to be understood in the context
of our overall approach to the budget this year. This measure to keep the
childcare rebate annual cap at $7,500 for the next four years delivers $86.3
million in savings...[which] will go towards some important new initiatives also
announced in the budget. First of all, there is $59.4 million to improve the
quality of 142 budget based funded early childhood services in rural and remote
Australia. This funding will help those centres to improve infrastructure and
staff qualifications and will benefit some of our most isolated and
disadvantaged children... In addition we have announced $81.9 million to
implement the new national quality standards. This includes the first national
ratings system for child care and early education services so parents have the
information they need to make those important decisions about the best care for
their child. There is also $1.9 million to support new regulatory measures to
help achieve ongoing stability in the childcare sector in the wake of the ABC
Learning crisis. This includes developing measures that require large childcare
providers in the market to prove their financial viability— something that
no-one would argue against after we saw what happened with ABC Learning not so
long ago. Since taking government we have taken steps to improve the
affordability of child care through assistance to families. Now we also need to
continue our work with the sector on standards and quality. These three budget
initiatives progress that quality agenda.[13]
Issues raised during the inquiry
Reduction in the rebate cap
1.13
Most submitters accepted that the reduction in the child care rebate cap
and the pause in indexation were necessary measures to help improve the quality
of child care in Australia. For example, the National Foundation of Australian
Women (NFAW) and National Investment for the Early Years (NIFTeY) remarked in
their jointly signed submission:
We note that the Bill is a savings measure, will bring the
Child Care Rebate cap back to the level promised in the previous election
campaign, and that the savings are stated in the Budget papers to be
transferred to assist Government in meeting the costs of enhancements of child
care standards...[14]
1.14
The Liquor, Hospitality and Miscellaneous Workers' Union (LHMU) were
supportive of the bill, noting in relation to the proposed changes that:
...Government funding to the early childhood education and care
(ECEC) sector remains at historically high levels and...the Bill does not result
in a net decrease of funding to the sector.[15]
1.15
The Endeavour Forum expressed some qualified support for the proposed
changes:
In general we support the indexation of
government payments, but as the Child Care Rebate is quite unjustly only
available to mothers in the paid workforce, we support the capping of it in
this instance.[16]
1.16
The Child Care National Association (CCNA) was
the only submitter which opposed the proposed changes, arguing among other
things that the sector is already vulnerable following the collapse of ABC Learning
and the global financial crisis, and that capping the level of support
available:
...will further reduce utilisation at a time
when [child care] services are financially very vulnerable.[17]
Committee view
1.17
The committee notes that the global financial crisis of 2008-09
materially altered the economic circumstances in which the government is
operating. The ongoing effects of that crisis are still being felt around the
world. Australia remains in a strong position compared to many advanced
economies (assisted by the Australian's government's swift and effective
implementation of the Nation Building Economic Stimulus Plan), and the
government has now adopted a strict fiscal strategy in order to work towards
its goal of returning the budget to surplus within three years.[18]
This savings measure is consistent with that strategy.
1.18
The committee also notes that the percentage of out-of-pocket child care
expenses for which parents are entitled to a rebate remains at 50 per cent,
substantially higher than the 30 per cent available to them under the previous
government. Furthermore, only a small number of families will be affected by
the cap reduction:
...97 per cent of Australian families receiving CCR [child care
rebate] will not reach this cap [$7500] in 2010-2011 and consequently are not
expected to be affected by this adjustment.[19]
1.19
The savings generated by the slight reduction in the child care rebate
cap (and the temporary pause on indexation) will be invested in raising
standards in the early childhood education and child care sector, to the
benefit of all Australian children and families who access this care. The
committee is of the view that this budget measure is a responsible way in which
to generate the funds needed to support important improvements in the quality
of Australian child care services.
Likely increases in child care fees
1.20
NFAW and NIFTeY jointly pointed out that this policy change will result
in increased costs for some parents:
We draw to attention that this will inevitably mean that out
of pocket expenses for some parents will rise, providing a further disincentive
for women with dependent children to return to the workforce or to remain
work-force attached.[20]
1.21
The likelihood of fee increases has also been acknowledged in the Council
of Australian Governments Regulation Impact Statement for these sectoral
reforms.[21]
1.22
The LHMU commented that, whilst consumer subsidies such as the child
care rebate and the child care benefit have had the desired effect of
attracting 'significant private investment into childcare' and 'driving an
overall expansion in supply', one other consequence has been inflationary
pressure on costs.[22]
1.23
The LHMU further remarked in its submission that whilst:
...the immediate effects on the of the Bill on parental
affordability will be negligible...it must be recognised that without alternative
allocation of funding, the proportion of affected families will certainly increase
over the subsequent years.[23]
1.24
The CCNA also commented that increased child care costs could have an
adverse impact on the participation of women in the workforce over the long
term.[24]
Committee view
1.25
The committee notes that the bill currently before the committee for
inquiry relates only to the cap adjustment, not to the potential impact of the
NQF on fees in the sector. Accordingly, the committee will largely confine its
comments to the matter directly at hand.
1.26
However, the committee does note that the government has already planned
for increased expenditure on the child care rebate over the next four years,
due to the introduction of mandated improvements in child care standards. As
stated in Budget Measures: Budget Paper No. 2: 2010-11:
The Government will provide $130.4 million over four years to
help support parents with the introduction of new national standards in child
care. The new minimum standards will improve child-to-carer ratios and staff
qualifications in early childhood education and care services as set out in the
National Partnership for the National Quality Agenda for Early Childhood
Education and Care.
The introduction of new national standards, which include
improving child care ratios, will lead to increased Government assistance
through the Child Care Rebate.[25]
Other funding models for child care
1.27
The NFAW and NIFTeY submitted that there is a fundamental flaw in the
rebate-based approach:
In our view the Government should reconsider its commitment
to the principle of funding child care services through tax subsidies, which
are essentially a tool which provides demand rather than supply side subsidies.
Inevitably, demand driven subsidies, providing what is in
effect a user voucher, drive growth of costs to the Budget through untrammelled
expansion of supply by entrepreneurial private providers, which in turn causes
Governments to decrease the value of the voucher over time.[26]
1.28
The NFAW and NIFTeY went on to propose that alternative child care
funding models should be considered, including the possibility of providing
reimbursement-based subsidies to providers or directly funding providers for a
given number of children or places.[27]
1.29
Australian Community Children's Services stated in its submission that
it has:
...always argued that the CCR [child care rebate] is a flawed
mechanism and calls on the Government to abandon the rebate and roll the funds
into increasing CCB [child care benefit] fee subsidies for low and middle
income families...[child care benefit] is a progressive system of support for
families...[child care rebate] undoes all the good work of CCB.[28]
Committee view
1.30
The committee notes these opinions here for completeness of the record
but reiterates that the current inquiry before the committee is only into the
provisions of the bill, not into broader policy around child care funding. For
this reason, these proposals will not be addressed further in this report.
Conclusion
1.31
The proposed adjustment to the annual cap for the child care rebate,
which in 2010-11 will impact only three per cent of Australian families
receiving this rebate, will generate savings that will assist with the
establishment of a National Quality Framework to ensure that all children in
child care receive high quality care and education.[29]
The committee believes this to be an extremely worthwhile initiative and
recommends that the Senate pass the bill.
Recommendation 1
1.32
The committee recommends that the Senate pass the bill.
Senator Gavin Marshall
Chair
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