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The collapse of ABC Learning is an opportunity for the Rudd Government to rethink the fundamentals of Australian early education and care.
ABC, which cares for 120,000 children and employs 16,000 staff, went into receivership last week, and although individual centres may keep operating, the complex accounts of this company will take teams of accountants and lawyers several years to untangle.
ABC is also under investigation by the Australian Securities and Investments Commission and faces a class action by shareholders. Preliminary analysis suggests that up to 40% of its 1200 centres may be unprofitable, at least under its current business model.
How did we get into this mess? Deputy Prime Minister Julia Gillard has blamed John Howard for "letting the market rip", but it was the Hawke government, in 1991, that introduced market forces into the sector. It did this by extending child-care assistance to the users of for-profit care and then by changing the structure of Commonwealth funding to encourage private provision and marginalise the community sector.
Labor promised that the market would lead to greater choice and lower fees. It decreed that private businesses, not governments, should determine the location of services, even though huge public subsidies were involved. Under Labor's system, there was no cap on the number of long day care centres that private operators could set up.
The Howard government intensified Labor's market focus, ending operational subsidies to community-based care in 1997 and then in 2000 introducing the Child Care Benefit (a more generous version of Labor's child-care assistance scheme).
ABC Learning and several other companies listed on the stock exchange shortly after this. Under chief executive Eddy Groves, ABC grew quickly, snapping up small independent providers and community based centres around the country, but particularly in Victoria and Queensland.
As ABC increased its share of the market, the "choices" in many communities diminished. From holding a few dozen centres at the time of listing in 2001, ABC grew to own more than 1200 at its peak. (The next largest corporate chain owns less than 3% of this number of centres.) Meanwhile, the costs of care grew far more quickly than general consumer prices &emdash; fuelled by the Commonwealth child-care benefit and child-care tax rebate.
What lessons can we learn from this episode? What should the Government do now that ABC is in the hands of the receivers?
First, we need to recognise that there are limits to the role of markets in early childhood care. The Commonwealth Government distributes close to $2 billion in child-care subsidies each year. It is time for the Government, in partnership with providers, unions, educators and other stakeholders, to resume responsibility for the planned provision of services that meet community needs. The current system that places all power in the hands of entrepreneurs, while sending the bill back to taxpayers, has to end.
Second, we need to think more sensibly and creatively about the division of responsibility between the Commonwealth and the states. In most parts of Australia, services are split into "education" (state-funded) and "care" (Commonwealth-funded). "Educational" services such as kindergartens employ degree-qualified teachers, but their hours of operation do not suit most working parents and they do not cater for babies and toddlers at all.
Running in parallel, we have a system of child-care services intended to meet the needs of working parents. These generally do not employ teachers, and their working conditions are more onerous than those of preschools. While staff in both systems do a wonderful job, this is an old-fashioned system that does not reflect contemporary thinking about children's development. These days we know that high quality care and education are inseparable. And the division into separate service types certainly does not reflect the reality of busy parents' lives.
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Third, there is a great opportunity to bring the skills and talents of the non-profit sector back into child-care policymaking. The headlong rush to the market and to private profits that has characterised the past 10½ years marginalised this sector, but there are signs that this short-sighted approach may be about to end.
Julia Gillard has called for private businesses and not-for-profit organisations to register their interest in buying or managing ABC centres. This is a welcome development, which suggests the Government is considering an enhanced role for community-based providers.
Since Labor came to office, a lot of quiet work has been happening behind the scenes. Early childhood educators, unions, providers and public servants are working on a variety of projects that will strengthen regulations and accreditation in the early childhood sector, introduce a national "early learning" framework, and improve the qualifications of the early childhood workforce. The ABC story is important, but it is not the only game in town.
- reprinted from The Age