The Changes Early Childhood Education Needs Rather Than Tax Rebates

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By Linda Mitchell, a professor in early childhood education at the University of Waikato.

Removing the planned extension of 20 hours of free early childhood education for 2-year-olds and paying parent “users” through tax rebates is a deeply flawed policy approach that is inequitable, inefficient and disregards children’s best interests. Here are the reasons why.

Tax rebates may lower costs – but only for selected families in paid employment. Families with no or low tax liabilities receive little or no rebate; those children who are from very low-income families miss out.

New Zealand has a significant number of for-profit corporate providers who see money-making opportunities in the business of early childhood education. Government funding and parent fees are lucrative sources of income for making business profits. There is nothing to stop these for-profit providers from raising fees in response to parents receiving tax rebates with no actual effect on costs to families.

This will be made easier by the minister’s retrograde decision to reverse planned accountability requirements that services must set fees by the hour, publish their fee schedules and submit these to the Ministry of Education. By contrast, in many European countries, the government sets a cap on what can be charged for early childhood education.

Nor is there anything to stop for-profit providers from using government funding and parent fees (paid through tax subsidies) for the benefit of business owners, foreign investors and shareholders, while skimping on staffing and other features that impact the quality of early childhood provision.

A recent study by researchers from University College London and the University of East London found that the for-profit sector spent substantively less on staff costs than the non-profit sector and reinvested little of their money back into early childhood education.

Over the last decades, several international businesses have acquired early childhood centres in New Zealand. The main reason these companies would invest in the New Zealand early childhood “market” is that a significant return can be made.

Busy Bees is the most recent and the third-largest provider, after buying 75 centres in New Zealand in October 2021. Busy Bees is the UK’s largest early childhood education provider and operates 222 settings across Australia and New Zealand, 417 settings in Europe, 127 in North America and 83 in Asia.

In 2021, the financial practices of for-profit providers in Australia, explicitly including Busy Bees, were exposed as paying exorbitant salaries to owners and executives and avoiding tax by paying the parent company offshore and registering a debt.

If the government is concerned with efficiency and value for money, it would do well to close the loopholes that have allowed corporate companies to avoid paying taxes and set up an investigation into the receipt and use of public funds by private/corporate providers.

The OECD’s 2006 review of early childhood education in 20 countries shows that direct public funding of services brings “more effective control, advantages of scale, better national quality, more effective training for educators and a higher degree of equity in access and participation than consumer subsidy models”.

My longitudinal evaluation of early childhood education policy in New Zealand, commissioned by the Ministry of Education, showed that the 20 hours of free early childhood education for 3 and 4-year-olds paid directly to services dispelled difficulties for families in affording early childhood education.

In the first month of 20 hours of free ECE, costs to parents fell by 34% nationwide and even influenced a drop in the consumer price index. This universal policy diminished inequalities in access and enabled more children, irrespective of their family circumstances, to participate.

What cuts would pay for tax subsidies? Already the Government has dropped the planned extension of 20 hours ECE to 2-year-olds. Its axing of fair pay agreements will disproportionately affect the lowest-paid teachers in the early childhood sector and exacerbate recruitment difficulties. This erosion of policies in favour of tax subsidies will take the early childhood sector backwards.

Tax rebates put the interests of adults and early childhood service providers before those of children. They reinforce the idea that the purpose of early childhood education is mainly to provide care of children for families in paid employment.

At the heart of the matter is the vision held for early childhood education. Is it a private commodity, accountable to shareholders and business owners? Or is it a democratic, public, universal, education-based system that benefits all children and families?

We know that what matters for children’s learning and wellbeing is that the early childhood service is of good quality. Much research has shown that conditions to support quality are a qualified, well-remunerated and professionally supported workforce, high adult-child ratios, small group sizes and engaging resources and environment.

Rather than offering tax rebates for a limited group, government funding needs to support these features and ensure early childhood education is accessible to all families.

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