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20 free hours policy will result in closures

26 January 2006

20 free hours policy, in current form, will force best early childhood centres to close

Labour's '20 hours a week free' policy, unless modified, will force New Zealand's best early childhood centres to either slash quality or close, says research released today (26 January).

The research assesses Labour's election promise of free early childhood education for three and four years olds at teacher-led centres.

It concludes that if Government subsidises all centres at the same rate, low-cost centres will make 'windfall profits'.

But high-cost centres will 'either go out of business (or) reduce service levels'.

Commissioned by the Early Childhood Council (ECC) and undertaken by the NZIER, the report says problems arise because the subsidy would be for the first 20 hours a child attends, but centres would not be allowed to charge additional fees for those hours.

ECC chief executive Sue Thorne describes the plan as 'well-intentioned but misguided'.

'The Government would impose a single hourly rate on a sector in which hourly fees vary between $2 and $15.

'It would be as if they suddenly legislated that all cars must be the same price.

'The owners of low-cost centres would receive sudden windfall profits. They would be dancing in the streets. But high-quality/high-cost centres would be forced to either slash and burn or close down.

'The Government would have, in a single stroke, undermined its own policy of improving quality. And the consequences for thousands of children would be disastrous.'

The NZIER report says damage would be especially bad in northern and urban parts of New Zealand where costs are higher than in southern and rural locations.

It recommends, as a minimum, that: ß Centres be permitted to charge top up fees if their costs exceed the subsidy; ß Parents be given the choice to either pay these fees or find a centre with none; and ß The subsidy not be based on national average costs as currently intended, but be paid at a lower rate in low-cost regions and a higher rate in high-cost regions.

Its policy of preference, however, is to target the most disadvantaged children by increasing the existing Work and Income childcare subsidy to fund 20 free hours, and 'actively seeking out and recruiting' children not yet participating in early childhood education.

The Government announced, as part of its 2004 Budget, the policy of free early childhood education for three and four year olds at teacher-led centres. The policy was intended originally for community-owned centres only, but extended to commercial centres in the run up to last year's General Election. Scheduled for introduction in 2007, the total cost of the policy is estimated to be $105 million a year.

ECC is the largest representative body of licensed early childhood centres in New Zealand. Our 860 member centres are both community-owned and commercially-owned, employ more than 5000 staff, and care for more than 45,000 children.


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