CHILD CARE LEGISLATION AMENDMENT BILL 1996
© Commonwealth of Australia
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MEMBERSHIP OF THE COMMITTEE
Senator Sue Knowles, Chairman LP, Western Australia
Senator Meg Lees, Deputy Chair AD, South Australia
Senator Helen Coonan LP, New South Wales
Senator Kay Denman ALP, Tasmania
Senator Alan Eggleston LP, Western Australia
Senator Belinda Neal ALP, New South Wales
Senator Eric Abetz LP, Tasmania
Senator Lyn Allison AD, Victoria
Senator Bob Brown Greens, Tasmania
Senator the Hon Bob Collins ALP, Northern Territory
Senator Mal Colston Ind, Queensland
Senator Barney Cooney ALP, Victoria
Senator the Hon Rosemary Crowley ALP, South Australia
Senator Chris Evans ALP, Western Australia
Senator the Hon John Faulkner ALP, New South Wales
Senator Brenda Gibbs ALP, Queensland
Senator Brian Harradine Ind., Tasmania
Senator Sue Mackay ALP, Tasmania
Senator Dee Margetts GWA, Western Australia
Senator Kay Patterson LP, Victoria
Senator the Hon Margaret Reynolds ALP, Queensland
Senator Sue West ALP, New South Wales
Senator John Woodley AD, Queensland
CHILD CARE LEGISLATION AMENDMENT BILL 1996
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:
discontinue the operational subsidy to community based long day
care centres, to take effect from 1 July 1997 (Schedule 1); and
amend the Childcare Rebate Act 1993 to reduce the Childcare
Cash Rebate from 30 per cent to 20 per cent for families with taxable
income in the current year lower than the family cut-offs for Part A
of the Family Tax Initiative which is currently $70 000 per annum
for a family with one child (Schedule 2). Families on higher incomes
will receive a reduced rate of entitlement to the Childcare Cash Rebate,
while the current rate for families on lower incomes will be retained.
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:
...addresses the inequities in Government funding between families
using private long day care centres and community centres. The removal
of operational subsidy will place community based long day care centres
and private long day care centres on an equal footing. It will also
encourage greater competition and efficiency. 
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
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 Government decision on the removal of operational subsidy
is really all about equity... It is equity in terms of government assistance
for parents that is, 70 per cent of parents who are currently using
private, employer sponsored or non-profit child-care services which
do not receive operational subsidy; and the 30 per cent of parents who
use community services which do benefit from the operational subsidy.
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:
Funding needs to be targeted to provide care equitably for all
those who need it...Access for children under two years, access for
children from low income families and single parent families and those
in rural and remote areas is vital. Un-targeted operational funding
has not ensured equitable access to those needs on a national basis.
The community sector is not distinct in its provision of these services
and should not be funded on the assumption that it is. 
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. 
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. 
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. 
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
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). 
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. 
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. 
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'. 
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'. 
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. 
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.  DHFS advised
the Committee that the restructuring grants will be available to services
`within a couple of weeks'. DHFS added that:
The operational subsidy is not removed until 1 July next year.
They [the centres] will have time...to put the proposals that come forward
in restructuring exercises to their parents and let them make decisions
about whether they want to continue to pay the higher cost or whether
they want to see their services restructured in some way to reduce the
cost impact on their fees. 
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'. 
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 .  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'. 
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.  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. 
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. 
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) . 
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. 
DHFS stated that:
In those rural and remote areas where there is no alternative
service and the community based service is the only service in that
location, and if as a result of doing [the] restructuring exercise the
tender document brief and the financial advice it is demonstrated that
those services cannot survive without some continuation of an ongoing
subsidy, then they will be eligible for...a disadvantaged area subsidy.
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). 
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'.  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.
|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
CHILD CARE LEGISLATION AMENDMENT BILL 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:
the [Coalition] policy also states our continuing support for
the community-based long day care sector, and we regard the operational
subsidy as one of the key supports of that sector. The Coalition has
no plans whatever to change the operational subsidy.
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' .
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 '.
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 .
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
- employing fewer staff or taking on more children, so that staff :
child ratios are lower
- employing younger, less experienced and less highly qualified staff
- restricting staff training and development opportunities
- requiring staff and/or parents to take on responsibility for cleaning
- deferring replacing or buying equipment (toys, books)
- no longer providing educational program enhancements like music classes,
- no longer providing hot meals and instead asking parents to provide
meals from home
- no longer providing a nappy service and instead asking parents to
provide disposable nappies
- providing fewer places for babies
- providing fewer places for children with special needs
- amalgamating with other centres
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:
I knew little about what I was investigating, however I quickly
found there was a significant difference between community-based and
other centres - detectable in the way the centre was run, the involvement
of parents, the structure of the programmes being run, the experience,
age and skill levels of the staff, the times parents have access to
the centres, and even in the children themselves. 
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 .
The rhetoric of concern for the quality of family life hides a complete
contempt for the quality of women's lives .
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:
|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
Appendix 2: DETAILS OF MEETINGS
Committee Members in attendance
Senator Sue Knowles (Chairman)
Senator Helen Coonan
Senator Kay Denman
Senator Kate Lundy
Senator Sue Mackay
Senator John Woodley
National Association of Community Based Children's Services
Ms Lynne Wannan, National Convenor
Ms Celia Haddock, Secretary
Mrs Monica Dowd, Tasmanian Delegate
Mrs Susan Nolan, Tasmanian Delegate
Ms Rosaleen Andersen, Queensland Delegate
Australian Federation of Child Care Associations
Mrs Evelyn Callaghan, National President
Mrs Elizabeth Lester, National Chief Executive Officer
Ms Zita Pal, parent, representing Carewest (Western
Australia) and International Child Care Centre, Beaconsfield, WA
Department of Health and Family Services
Mr Barry Wight, First Assistant Secretary, Family & Children's
Ms Sue Kerr, Assistant Secretary, Family & Children's Services
Ms Margaret Carmody, Acting Assistant Secretary, Policy Analysis
& Planning Branch
 Child Care Legislation Amendment Bill 1996,
 Child Care Legislation Amendment Bill 1996,
Second Reading Speech.
 Transcript of Evidence, p.109 (DHFS).
 Transcript of Evidence, pp.102-4
 Submission No.312, p.5 (DHFS).
 See also Submission No.312, p.5 (DHFS).
See also Submission No.240, pp.6-10 (AFCCA).
 Transcript of Evidence, p.114 (DHFS).
 Submission No.312, p.5 (DHFS).
 Submission No.312, p.4 (DHFS). See also
Transcript of Evidence, pp.110-12 (DHFS).
 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
 Submission No.278, p.2 (ACCC).
 Submission No.312, p.4 (DHFS).
 Submission No. 265, p.1 (NACBCS); Submission
No.109, pp.5-6 (Community Child Care Co-operative - NSW).
 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
 Transcript of Evidence, p.113 (DHFS).
 Submission No.312, p.6 (DHFS).
 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).
 Transcript of Evidence, p.114 (DHFS).
 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).
 Submission No.312, p.5 (DHFS).
 Submission No.312, p.5 (DHFS).
 See also Submission No.312, p.5 (DHFS);
Submission No.240, p.7 (AFCCA).
 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).
 Transcript of Evidence, p.115 (DHFS).
 See also Transcript of Evidence,
 Submission No.312, p.6 (DHFS). See also
Submission No.240, pp.8-9 (AFCCA).
 Portfolio Budget Statements, Department
of Health and Family Services, Budget related paper 1.8, p 181
 Submission 241, Ms Anita Rottey
 Submission 240, Australian Federation
of Child Care Associations
 Submission 294, Ms Liz Schroeder
 Submission 114, Mr John Schuh
 Submission 285, Ms Bev Thiele