Room for Public & Private Providers

Transparency and ending the ideological battle is the way forward.

Crucial to the future of the childcare industry is not the collapse of ABC Learning per se, but how the demise of the market giant has exposed gaping holes in both Labor's childcare plans and a widening ideological chasm between sectors of the childcare industry.

The Government has talked about the need for greater transparency (ABC's collapse has revealed a certain murkiness to the mechanisms within which the industry operates), but has steadfastly refused to make public the vacancy data they collect each week.

That's a big inconsistency. The childcare industry is crying out for some accurate data – to get a handle on exactly what and where demand is so they can better meet it. It's a simple thing. The Rudd Government collects these figures each week but has not made them public once. Why?

Perhaps it has something to do with the fact that they made an election commitment to build 260 childcare centres themselves.  Yes, 260 – that's more than the number currently in doubt and being propped up by the extra $34 million the Government provided last month.

At this point, the Government has budgeted taxpayers funds of $114.5 million over the next 4 years to build just 38 new centres – more than double what they've spent to address the ABC situation so far.  How much will the other 222 cost? It beggars belief that they are proceeding with this plan in the current climate where many centres (most purpose-built) are being closed down.

The Government's announcement that they would build "one stop shops" was a great headline grabber during the election campaign – but is it really good policy? Especially now?

Releasing the vacancy data and dropping their ridiculous plan to build 260 Centres are two very simple, common sense ways the Government can immediately help in the rebuilding of the childcare sector. There's a lot of merit in a national approach through COAG and in streamlining and simplifying both the reporting and the accreditation process – all of which were initiated by the former Government.  We'll see how far these progress and at what pace. 

There isn't space enough to go into the myriad of specific ways the Rudd Government has failed in it's handling of the ABC collapse. You can check out my media releases at www.liberal.org.au/Shadow%20Ministry/Sophie%20Mirabella/

Needless to say, the off-hand attitude of the Minister and the notable absence of the Parliamentary Secretary does not auger well for a Government-led approach to reforming and improving the childcare system.

And there are serious problems in a sector-led approach, not the least of which is its ideological divisions. The childcare sector is undoubtedly in the grip of a public vs private battle reminiscent of that which was had in the education and health sectors in the 80s and 90s (and is still being waged today by a few unions and ideologues). Driven by the increasingly popular argument that childcare is now something to which universal access is a right, like health and education, the not-for-profit and private sector appear waged in a bitter war that can only hinder the future development of the industry.

The collapse of ABC has been held up as proof positive that care and profits do not mix. As the undeniable success of both the private education and health sectors in Australia have proved, that's a nonsense argument. The fact is that just like in those 2 industries, the childcare sector needs businesses willing to put up the capital and provide the services or there simply wouldn't be the places to meet demand.

The sooner both sectors of the childcare industry get over the ideology and recognise that they are both vital to the future of childcare and, moreover, the presence of one will undoubtedly hold the other to greater account and higher standards, the better for all.

The question of whether the collapse of ABC Learning has created a crisis in childcare, or whether an asymptomatic crisis in childcare claimed the market giant is a good one, albeit largely academic.  

And I use the word "crisis" in the context of current public perception.  It's important to remember that ABC Learning owned approximately 25% of long day care centres in Australia.  They had a significant market share, and had employed an aggressive (and ultimately flawed) business model to acquire that share, but they were by no means a monopoly or even a majority stakeholder in the childcare stakes.

It's prudent to keep in mind that 75% of long day care providers, the bulk of which are small private businesses, are operating as usual outside the sphere of administrators or receivers. Indeed many are poised to assist in getting the industry through this "crisis", (If only the Government would talk with them).

Alongside these we also have a professional family day care system, after school hours care, vacation care, and a myriad of private arrangements for care. 

On that note, it's also worth remembering that the biggest deliverers of 9-5 childcare in Australia are still families. An analysis of the 2006 Childcare Census numbers and the Bureau of Statistics figures show that on any given day close to 55% of 3-5 year olds are being cared for in a private family arrangement (rather than government subsidised facilities), this figure rises to more than 70% for 1-2 year olds and close to 90% for babies under 1.

The Childcare Industry is extremely important – no two ways about it. But as we examine the future of how we care for our babies and children, we must be careful to include support, education and assistance to those who daily take on the job for the love of it and are biologically hard-wired to deliver nurturing, high quality care – parents.

Sophie Mirabella was appointed Federal Shadow Minister for Early Childhood Education, Childcare, Women & Youth by Opposition Leader Malcolm Turnbull in September 2008 – less than 3 months after giving birth to her first child Alexandra.  A Barrister by profession, Mrs Mirabella was elected to represent the rural north-eastern Victorian seat of Indi in 2001.

0 Comments

1. 

   Mandarin Falcon

   January 14, 2009 at 3:10 am

   Wow – a politician who makes sense!

   Very good blog Mrs Mirabella – paricularly the point you made re the govt's plan to spend our money building new centres while spending our money to close others.

   Mr Rudd promised a lot last year and it sounded quite appealing but the mess over childcare is very concerning.

    The point you make about parents being the best option suprised me – especially the line "it's also worth remembering that the biggest deliverers of 9-5 childcare in Australia are still families."  You'd think, listening to the media that this hardly ever happens anymore and that everyone was in childcare.

   You speak some commonsense and are seem very understanding of your area – not like Mrs McKew who I've not even see write anything about this issues!

   Well done.
2. 

   camelot72

   January 15, 2009 at 4:58 am

   One failure doesn’t mean corporate child care can’t be as simple

   Thanks Sophie for your contribution,

   Two years ago ABC Learning Centres seemed an unstoppable force as it grew to become the largest private child-care provider in the world.  It had a vigorous acquisitions strategy, purchasing child-care centres in the US, Britain and New Zealand, as well as smaller private and not-for-profit centres in Australia.

   Two years on, the company Eddy Groves built was to be placed in voluntary administration and receivership.

   While the full story of the rise and fall of ABC is still being played out as receivers pore over the accounts, it seems that a simple case of being unable to pay the bills left the company unstuck.

   Net debt increased from $110 million in June 2006 to $1.67 billion at December 31, 2007.  Net profit for the six months to the end of last year fell to $37 million, significantly less than market forecasts of up to $73 million.  This sparked a decline in ABC's share values.

   Despite subsequent efforts to draw down its debt, including an asset sell-off, the company was forced to call in the administrators.  The global meltdown in credit markets has not helped.

   What we have witnessed is the market rejection of the business model adopted by one company.  Not all companies within the child-care sector have adopted corporate strategies similar to that of ABC and those that remain are operating soundly.

   A group of academics, social activists, media commentators and prominent not-for-profit child-care representatives have used ABC's collapse to make a general claim that for-profit providers are unsuited to the provision of child-care.

   A long-time critic of corporate child care, Professor Deborah Brennan, recently referred to an alleged "incompatibility between the functioning of markets and children's need for high quality education and care".  She also claimed that "the pendulum has swung too far in favour of private interests".

   In reaction to the collapse of ABC, federal Education Minister Julia Gillard accused her political predecessors of "letting the market rip".  This is despite the previous child-centred funding policies and measures for a more even playing field among different types of providers largely remaining in place.

   The private sector has played an important role in expanding the supply of Australian child-care places, in response to the increasing workforce participation of women.  It is unlikely that not-for-profit centres, or governments, would have had the financial capacity to serve children already in corporate child-care centres.

   Government subsidies that follow the enrolment of a child into any centre that meets Commonwealth and state regulations have supported the growth of for-profit child care.  The notion that parents prefer not-for-profit providers is countered by the fact that the private sector had grown to cover 70 per cent of day-care services and that ABC, alone, served 120,000 children.  No survey can beat the revealed choice made by parents.

   Some of the critics simply appear to have a reflexive ideological reaction to the idea of private markets servicing the needs of children.

   The reality is that corporations are delivering innumerable benefits to young people every day.  Bakers bake their bread, builders build roofs over their heads, publishers produce textbooks and manufacturers make notepads, biros and laptops to aid learning.  The list seems endless.  So we must ask where and how exactly do the critics draw the line, and why?

   Ms Gillard has made it clear that the Government is "not in the business of buying and running child-care centres".  In almost the same breath, the Government throws $22 million to prop up ABC's operations, including those centres openly acknowledged as unprofitable.

   We see the throwing of good taxpayers' money after bad.  The question is: what happens next?

   It is possible alternative owners could be found.  After all, before ABC's consolidation phase, there were many smaller private child-care entities such as Hutchinson's Child Care, FutureOne and Peppercorn.  It is possible they could re-enter the market.

   There is some suggestion that a superannuation fund, or an American-based organisation, such as Knowledge Universe, could purchase some of the 1100 ABC centres across Australia.  New for-profit entrepreneurs could spring up, or existing not-for-profit operators could purchase centres.  Clearly, these are decisions for individual investors.

   One failing example should not obscure the fact that the private sector can be constructive in Australian child care.  It would be a backward step for working families across the country if (excuse the pun) a future government in its policy planning decided to throw the private sector baby out with the child-care market bathwater.
3. 

   Sara Landriault

   January 18, 2009 at 2:23 pm

   Rules can apply to

   Rules can apply to non-profit as well as private just as it does in any other business. Relating children in the for-profit industry can be done with applying strength in the focus on the children.

   The other issue most need to understand is parents need just as many equal rights as the daycare workers, and above all the children need to be individually respected.
4. 

   MikeM

   January 21, 2009 at 7:59 am

   Volunteers as part of the not-for-profit sector

   A study by the Australian Bureau of Statistics released last August reveals that at end June 2007 there were 41,000 not-for-profit organisations in Australia with 361,000 permanent full-time employees, 297,000 permanent part-time employees and 227,000 casual employees, constituting a $75 billion sector of the economy (or about 6%). It is clearly here to stay.

   A specific advantage that not-for-profit organisations often have over profit-oriented ones is volunteers.  The sector benefited from the efforts of 2.4 million volunteers during the 2006-07 year.

   What may be even more important than the value of volunteer labour is the engagement that it provides between the non-profit organisation and the community.  Imagine (not that it could ever happen) that the Salvation Army had sold all rights to its annual Red Shield Appeal to ABC Learning. Even if ABC Learning stated that it would apply the proceeds (less costs and profit margin) to the same objectives that the Salvation Army had done, does anyone believe that ABC would attract anything like the same number of volunteer collectors and similar generosity of donations?

   As Richard Wood noted in his comment, ABC Learning's failure does not prove that no commercial for-profit model can work for child care, any more than the failure of the Ansett airline in 2002 proved that a commercial for-profit model for an airline cannot work.

   However, like schools, sporting and social clubs, not-for-profit models may have advantages in the child care business which commercial enterprises – especially large corporations such as ABC Learning – may struggle to reproduce.

   MikeM is roadkill in the wake of the capitalist juggernaut but his voice continues to protest that he is not an individual.