November 1996

© Commonwealth of Australia

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1. Background

The Bill was introduced into the House of Representatives on 10 October 1996. On 17 October 1996 the Senate, on the recommendation of the Selection of Bills Committee, referred the provisions of the Bill to the Committee for report by 25 November (Selection of Bills Committee Report No.12 of 1996). The Senate agreed on 25 November 1996 to an extension of the reporting date to 26 November 1996.


The Committee received 383 submissions, and these are listed at Appendix 1. The Committee also received a large volume of other correspondence, including letters and petitions in relation to the Bill.


The Committee considered the Bill at four private meetings; a public hearing was held on 8 November 1996. Details of these meetings and the public hearing are at Appendix 2.


2. The Bill

The Bill proposes to implement the following Budget-related measures:

Currently, operational subsidy is paid under Section 11 of the Child Care Act 1972 for child care places provided by community based services, but not for places provided by the private sector. Some 70 per cent of all centres are privately operated, while 30 per cent are community based centres. The amendment will mean that from 1 July 1997 operational subsidy will no longer be paid to community based long day care centres.

The Government has stated that the removal of operational subsidy:

The Committee notes that operational subsidy will continue to be available for Family Day Care Schemes, Occasional Care, Outside School Hours Care, Multifunctional Children's Services and Multifunctional Aboriginal Children's Services. [3]


3. Issues

A number of issues were raised in submissions and at the public hearing in relation to the proposed legislation and these are discussed below.

Equity for families

The proposed cessation of operational subsidy for community based centres addresses the inequity in funding between families using private long day care centres and community centres. The Department of Health & Family Services (DHFS) stated that:

The Australian Federation of Child Care Associations (AFCCA), in stating that untargeted operational funding should no longer be paid to community based centres, argued that:

The operational subsidy is currently paid on a non-means tested basis to community centres which provide only around 30 per cent of all centre-based care and cater for 70 000 families. Operational subsidy has never been paid to private centres which provide 70 per cent of centre-based care, catering for more than 220 000 families. [6] That is considered inequitable and unfair.

Appendix 3 details the breakdown of places in both community and private centres. It shows how many more children are placed in the private centres in all categories.

In terms of equity, DHFS noted that the private sector provides services to a greater proportion of low income families than the community sector. Some 44 per cent of families in the private sector (96 000) are on maximum Childcare Assistance compared with 39 per cent in the community sector (27 000) see Appendix 3. [7]

The private sector also provides double the number of places for children of sole parents compared with the community sector. DHFS noted that for children of sole parents who are working, the private sector provides 20 500 places (10 900 in the community sector); for non-working sole parents the corresponding figures are 6 700 places in the private sector and 2 700 in the community sector. [8]

It is apparent from these figures that there is an artificial inequity in the quality and cost of services between private and community child care services. Accordingly, the Committee is therefore of the opinion that the current subsidy arrangements have had an extremely limited, if any, discernible impact on the reasons for families choosing child care facilities.

Further, the Department stated that providing an operational subsidy to one particular sector of an otherwise equally placed service industry is inequitable and unacceptable.

The Department also noted that all special services or high cost services provided by community centres are also provided by private centres and quality is assured in both sectors through State/Territory regulations and the Quality Improvement and Accreditation System (QIAS). [9]

The Committee believes that there is no justification for differential Government assistance to services either in the private or community sectors. The removal of untargeted operational subsidy from community centres removes a significant inequity in Government assistance directed to one particular sector of the child care industry.

Quality of care

The Committee believes that the withdrawal of the operational subsidy for community based services will not affect the quality of care. This was supported by the Department's statement that the provision of quality care will be maintained for all centre based long day care services through the Quality Improvement and Accreditation System (QIAS). QIAS focuses on outcomes for children in these centres, to ensure that centre-based long day care services provide stimulating programs that foster all aspects of a child's development. DHFS also noted that all long day care centres, both community and private centres, must comply with State/Territory Government regulations which prescribe key standards for long day care centres which impact on quality care, including staff qualifications, group sizes and child-staff ratios. [10]

Claims by the National Association of Community Based Children's Services (NACBCS) and other statements to the inquiry suggested that the removal of the subsidy would lead to a reduction in staffing levels and would have a consequent impact on the quality of care provided in centres. [11] The Committee does not believe that these claims have taken sufficient account of the measures already in place to guarantee quality care in all centres. Other evidence, for example, argued that the quality of care would not be compromised. The Australian Confederation of Child Care (ACCC) argued that these services `simply need to become efficient and learn to operate effectively and competently as efficient business units'. [12]

DHFS further noted that 85 per cent of private centres (and 91 per cent of community centres) that had completed the QIAS process by the end of August 1996 had achieved the standards set down for accreditation, thus indicating that `the vast majority of private centres are providing quality care without the benefit of the operational subsidy'. [13]

Restructuring options for community based centres

The Government will assist centres adjust to the loss of operational subsidy through the allocation of $8.3 million over two years to enable community centres to seek professional financial and management advice to restructure their businesses and to improve their efficiency and reduce costs so that they can operate as efficiently as the private centres. This negates claims which were made by NACBCS and other groups that the loss of operational subsidy would threaten the viability of community centres, in particular smaller services. [14]

The Commonwealth Government will make available grants of up to $3 000 for centres to engage advisers to undertake reviews of the centre's operating practices and procedures and report on the possible scope for improved efficiencies against a range of measures including management of child/staff ratios, staffing and salary, budgeting, fee setting and monitoring, debt management, records management, waiting list management, fund raising and special services. [15] DHFS advised the Committee that the restructuring grants will be available to services `within a couple of weeks'. DHFS added that:

DHFS advised the Committee that it is not expected that the cessation of operational subsidies will result `in a significant increase in fees for parents. Any increase in fees will depend on decisions taken by centre sponsors and/or management committees in consultation with parents, on measures to improve efficiencies and minimise the impact of the withdrawal of the operational subsidy'. [17] NACBCS claimed that the combined loss to services of the operational subsidy and child-care assistance will mean fees could increase by up to $35.80 per place per week . [18] The Department, in commenting on the figure, argued that it was `excessively high', and that `it assumes that no service will be able to restructure to implement any measure with respect to staffing or any changes in the service'. [19]

Children with special needs

A number of programs facilitate the access of children with special needs to child care services through targeted measures such as the Supplementary Services (SUPS) program and the new Special Needs Subsidy Scheme. Some claims made in submissions and other evidence to the Committee suggested that, with the removal of operational subsidies, children with special needs may be disadvantaged. [20] This claim is difficult to understand given that there are currently almost double the number of children needing special care in private centres as in community centres.

The Supplementary Services (SUPS) program was introduced in 1983 to assist children with low to moderate disabilities and other special needs children (Aboriginal and Torres Strait Islander children and children from non-English speaking backgrounds) to access community-based child care services. In 1991 access to SUPS support was extended to private and employer-sponsored services and more recently funding has been increased to accommodate growth and improve access to these services. [21]

In addition to the SUPS program, the 1996 Budget provides $10 million per year from 1 July 1997, to provide additional support for children with additional needs to assist them in their access to appropriate child care in both private and community services. This new Special Needs Subsidy Scheme will target children whose families might be precluded from entering the workforce because of the lack of suitable support for their children's additional needs. [22]

As a result of the additional funding and the current SUPS program initiatives, the Committee cannot accept the assertions of some groups that claimed that the removal of the operational subsidies would disadvantage children with special needs.

The Committee believes that through such measures as the SUPS program and the Special Needs Subsidy Scheme, there is no on-going need for the `untargeted' operational subsidy to support children with special needs in community centres. The Committee notes that the private sector now provides care for a substantial proportion of children with special needs 31 000 special needs children, compared with about 16 300 in community centres (see Appendix 3) . [23]

Disadvantaged areas/rural and remote locations

The Government will provide supplementary funding of $4.1 million a year to community centres in severely disadvantaged areas, particularly rural and remote locations, where no other child care is available, to ensure that families in these areas do not lose their access to existing child care services. Priority will be given to services where no private long day care services are available. This addresses claims made in evidence that families in disadvantaged areas and/or rural and remote locations may be disadvantaged with the withdrawal of operational subsidies. [24]

DHFS stated that:

DHFS also noted that at present there are twice as many private places as community centre places in rural and remote areas 20 500 private places compared with 9 100 community places (see Appendix 3). [26]

The Government is committed to addressing the needs of community centres located in low socio-economic areas where there are no alternative private centres. DHFS stated that these centres `are the subject of consideration for supplementary subsidies to ensure these disadvantaged areas do not lose access to child care'. [27] The Department noted that these services will need to complete a restructuring plan and demonstrate that their ongoing viability is dependent on the provision of a subsidy, and demonstrate that they cater for a significant proportion of low income working families attracting Childcare Assistance.

4. Recommendation

The Committee reports to the Senate that it has considered the Child Care Legislation Amendment Bill 1996 and RECOMMENDS that the Bill proceed.


Senator Sue Knowles


November 1996




Senator Belinda Neal (ALP)
Senator Kay Denman (ALP)
Senator Meg Lees (AD)
Senator John Faulkner (ALP)
Senator John Woodley (AD)
Senator Sue West (ALP)



Labor's response to this legislation, and indeed to all the measures announced in the 1996-97 Budget, is based on how the measures weigh up against three principles - does the measure betray a promise?, is it equitable? and does it contribute to national savings?

Similarly, the Democrats believe that all budget measures must be assessed for fairness and equity and seen in the light of the firm pre-election commitments given by the Coalition to low income and unemployed Australians - commitments upon which many gave their support to the Coalition.

The Coalition went to the last election promising that their government would protect the 'poor', the 'needy' and 'the most vulnerable in our community'. On 28 February - 3 days before the election - David Kemp, then Shadow Minister for Employment, Training and Family Services wrote to the Australian Early Childhood Association as follows:

In spite of the reassurances given to parents and child care providers before the election, the first Howard budget announced cuts to child care worth more than $0.5 billion over the next 4 years. Together, the abolition of operational subsidy for community-based long day care, cuts to childcare assistance, means-testing of the childcare cash rebate and withdrawal of funding for 5,500 new centre-based places scheduled to be built over the next few years, threaten the affordability and quality of child care, and restrict the choices parents might make about the care of their children.



The primary justification for the abolition of operational subsidy for community -based long day care is to `encourage services to become more efficient and cost-competitive with the private sector' [28]. This is the `level playing field' argument of the economic rationalists; the argument put by the report of the National Commission of Audit for the abolition of all operational subsidies for community-based services; and the principle underpinning the work of the Economic Planning Advisory Commission's Child Care Taskforce.

The bottom line is that children are not commodities to be traded for profit, and the dismantling of our social infrastructure which will arise from this proposal is too high a price to pay for 'efficiency' and 'cost competitiveness'. As one submission states, 'this is a time that requires a greater commitment to our next generation, not a lesser one [29]'.

The overwhelming view which emerges from submissions is that the abolition of operational subsidy will have a deleterious effect on both the quality of care, and the cost of care, in existing community-based centres. Of some 380 submissions to the Committee, only 5 argued in support of the abolition of the subsidy. There was, even in these submissions, a recognition of the need for longer transitional arrangement, and a recommendation that, alternatively, operational subsidy be extended to private sector centres to meet specific objectives [30].

The picture of community-based long day care post the abolition of operational subsidy which emerges from submissions is an unhappy one. There is no doubt in our minds that fees for child care in these centres will be higher (in the order of $25 a week per child) as a result of the measure, or that the quality of care provided by these centres will be reduced as a result of this measure, or both. Cost cutting options already being canvassed include:

It is also clear from submissions that parents perceive the abolition of operational subsidy as removing a choice for them. These parents have chosen community-based long day care for their children - for a variety of reasons, most eloquently put by one mother:

Parents are well aware too that higher child care costs - in cash or in kind - mean they may need to revisit the choices they have made about how practically to balance the different elements of their working and family lives. A government that will not support the family structure of today does not represent the people of this country [32]. The rhetoric of concern for the quality of family life hides a complete contempt for the quality of women's lives [33].



This measure is a clear broken promise. The abolition of operational subsidy for community-based long day care undermines, rather than strengthens, parents' right to choose the arrangements they want for the care of their children. The measure does nothing to ensure that all parents have fair and equitable access to affordable, flexible and high quality child care options. Having regard to all of these concerns we are of the view that the proposal should not proceed. We therefore recommend:


Recomendation 1:

That Schedule 1 be omitted from the Bill.


Senator Belinda Neal Senator John Faulkner (ALP, New South Wales) (ALP, New South Wales)

Senator Kay Denman Senator John Woodley (ALP, Tasmania) (AD, Queensland)

Senator Meg Lees Senator Sue West (AD, South Australia) (ALP, New South Wales)




[1] Child Care Legislation Amendment Bill 1996, Explanatory Memorandum.

[2] Child Care Legislation Amendment Bill 1996, Second Reading Speech.

[3] ibid.

[4] Transcript of Evidence, p.109 (DHFS).

[5] Transcript of Evidence, pp.102-4 (AFCCA).

[6] Submission No.312, p.5 (DHFS).

[7] See also Submission No.312, p.5 (DHFS). See also Submission No.240, pp.6-10 (AFCCA).

[8] Transcript of Evidence, p.114 (DHFS).

[9] Submission No.312, p.5 (DHFS).

[10] Submission No.312, p.4 (DHFS). See also Transcript of Evidence, pp.110-12 (DHFS).

[11] Submission No.265, p.4 (NACBCS); Transcript of Evidence, pp.97-98,100 (NACBCS). See also Transcript of Evidence, pp.107-8 (Ms Zita Pal); Submission No.127, p.1 (Association of Subsidised Child Care Centres in Victoria); Submission No.109, pp.3-4 (Community Child Care Co-operative - NSW); Submission No.141 (Victorian Subsidised Child Care Co-ordinator's Association); Submission No.187 (Municipal Association of Victoria); Submission No.212 (Australian Local Government Association); Submission No.237 (National Association of Community Children's Services - NSW Branch); Submission No.264 (Community Child Care Association of Victoria).

[12] Submission No.278, p.2 (ACCC).

[13] Submission No.312, p.4 (DHFS).

[14] Submission No. 265, p.1 (NACBCS); Submission No.109, pp.5-6 (Community Child Care Co-operative - NSW).

[15] Submission No.312, p.6 (DHFS); Transcript of Evidence, pp.113-18 (DHFS). See also DHFS, Adviser's Brief for the Provision of Financial and/or Management Advice to Community Based Long Day Care Centres, in Transcript of Evidence, pp.118-22 (DHFS).

[16] Transcript of Evidence, p.113 (DHFS).

[17] Submission No.312, p.6 (DHFS).

[18] Transcript of Evidence, p.98 (NACBCS); Submission No.265, p.6 (NACBCS). A revised page 6 to the NACBCS submission was tabled by the Association at the public hearing on 8 November 1996. See also Submission No.295 (Australian Early Childhood Association); Submission No.109 (Community Child Care Co-operative - NSW); Submission No.141 (Victorian Subsidised Child Care Co-ordinator's Association); Submission No.237 (National Association of Community Based Children's Services - NSW); Submission No.264 (Community Child Care Association of Victoria).

[19] Transcript of Evidence, p.114 (DHFS).

[20] Submission No.233 (Ethnic Child Care Development Unit); Submission No.235 (NSW Children's Services Forum); Submission No.255 (Brisbane Ethnic Child-Care Development Unit); Submission No.293 (Australian Greek Welfare Society).

[21] Submission No.312, p.5 (DHFS).

[22] Submission No.312, p.5 (DHFS).

[23] See also Submission No.312, p.5 (DHFS); Submission No.240, p.7 (AFCCA).

[24] Transcript of Evidence, pp.98-100 (NACBCS); Submission No.91 (Council of Single Mothers and Their Children); Submission No.109 (Community Child Care Co-operative -NSW); Submission No.187 (Municipal Association of Victoria); Submission No.212 (Australian Local Government Association); Submission No.316 (Rural City of Wangaratta); Submission No.366 (Country Children's Services Association of NSW).

[25] Transcript of Evidence, p.115 (DHFS).

[26] See also Transcript of Evidence, p.109 (DHFS).

[27] Submission No.312, p.6 (DHFS). See also Submission No.240, pp.8-9 (AFCCA).

[28] Portfolio Budget Statements, Department of Health and Family Services, Budget related paper 1.8, p 181

[29] Submission 241, Ms Anita Rottey

[30] Submission 240, Australian Federation of Child Care Associations

[31] Submission 294, Ms Liz Schroeder

[32] Submission 114, Mr John Schuh

[33] Submission 285, Ms Bev Thiele