Interview: Goodstart’s John Cherry talks the long road to the CCS launch

The Sector Founder Jason Roberts recently sat down with Goodstart Advocacy Manager John Cherry to discuss CCS package, its long and at times tenuous journey to implementation and the impact that it has had on Goodstart centres and families.

 

Interviewee: John Cherry – Advocacy Manager

Organisation: Goodstart Early Learning

Date: 31 Aug 2018

Topic: CCS Transition

 

Jason: Good morning, John. Thank you for joining us today. We are here to talk about the Child Care Subsidy (CCS) transition from the perspective of Goodstart Early Learning. So let’s go back to the beginning shall we.

 

John: OK. I like to think of the CCS by reference to when my daughter was born.

 

Jason: How old is she now?

 

John: She’s turning six in two weeks, and roughly about the day she was born Tony Abbott announced he would make affordability of childcare an issue for the election, and he announced that there would be a productivity inquiry into the childcare sector. That was in September 2012. We were involved at Goodstart in trying to influence the terms of reference for that because at that time Tony was mostly talking about flexibility and extending the Child Care Rebate (CCR) to nannies, and of course we as an organisation felt the scope should have been much broader. We then managed to have some meetings with Susan Ley when she was the Shadow spokesperson to influence the terms of reference for the productivity commission inquiry which was helpful. So what the Liberals then took to the 2013 election was the full Productivity Commission inquiry terms of reference that we had been working on.

 

Jason: I see.

 

John: The terms of reference was broadly agreed and then sent to the Productivity Commission. That inquiry then had its hearings and its reports during most of 2014. In the meantime, Tony Abbott, as Prime Minister, was trying to implement his paid parental leave scheme which was a massive $5 billion scheme, to give every woman in Australia six months of paid parental leave. After the 2014 budget, Abbott’s polling was in the doldrums, women had deserted the party in droves notwithstanding the paid parental leave scheme. So, in December 2014 he did a reshuffle of his ministry, brought Scott Morrison in as Minister for Social Services, and announced he was dumping his parental leave scheme and that he would put the money into childcare instead. 

 

Jason: So that is where the current CCS originally came from.

 

John: Yes, that’s right. At the same time, the Productivity Commission published its report with a recommendation to move to a single means-tested model, which is actually based, would you believe, on a report that Deb Brennan had written which we jointly the commissioned with Early Childhood Australia a year before.

 

Jason: I see.

 

John: So, in terms of being engaged in the process, we go right back to 2012. By the first six months of 2015 we were heavily involved with Scott Morrison who was a marvellous minister, who really listened, developing the Government’s model. It followed loosely the model that the Productivity Commission had already developed. Things like the benchmark fee, the single payment, the 85 per cent subsidy down to 20 per cent, all came from the Productivity Commission and a whole range of other things too. So, that process was the first stage. Scott Morrison was determined to have some things added into it, for example, they changed the benchmark fee rate. Originally, it was going to be marked at the 50th percentile of current fees and with some strong lobbying, from us and the rest of the sector, it was pushed up to the 85th percentile.

 

Jason: Yeah, right.

 

John: We lobbied, we negotiated very hard. He also decided that the hours would be tied much more closely to activity. And a lot more money was to go in. It was much more generous than the Productivity Commission had recommended. So, all those changes were made at that early stage. The one thing which he was really tough on though was the base entitlement.

 

Jason: I see. So originally there was no base entitlement?

 

John:  The new system was to be all about workforce participation. But after heavy lobbying from the sector,  he finally agreed to provide 12 hours at least to low-income families, but that was less than the 24 hours that was received under the old model. Big family groups that missed out on that were single-income couple families. So, for example tradies who worked with a stay-at-home mum, they’re the ones who were the biggest losers.

 

Jason: They get zero right?

 

John: Yes. They’ve previously got a little bit of a child care benefit. It wasn’t a lot but they got something.

 

Jason: That’s interesting. So, Mr Morrison would have understood this, he would have run the numbers. Why do you think he elected to carve out those families with stay-at-home mums?

 

John: My sense is that the package was really geared to those families in the $120,000 and $180,000 group. So, it’s two-income families that I think the Government felt the sweet spot was. So, you can see the abolition of the CCR cap, there’s a slight increase in the percentage of assistance at that level. Those middle-income families just happen to be the swing voters in lots of severely marginal seats. So, that was a group the Government is always after. And single-income couple families lost out because Morrison’s view was that parents have to work in order to qualify. So, while the sector broadly supported the reform, we always said we wanted a better base entitlement, that the CCS should have two objectives. We should have the objective of workforce participation that can make childcare more affordable, and we should have the objective of improving access to early learning.

 

Jason: I see. So that position was quite rightly made very clear from the start.

 

John: Yes. So, from day one we never accepted that element of it. And in hindsight, the frustration was we’re talking about a $10 billion subsidy which was basically an increase of $1.3 billion, and to get to a base entitlement position the increase in spending would have only been $150 million. So in the grand scheme of things it wasn’t a huge cost, but it would have had a huge long-term benefit for children’s access to learning.

 

 

“The frustration was we’re talking about a $10 billion subsidy which was basically an increase of $1.3 billion and to get to a base entitlement position the increase in spending would have only been $150 million. So in the grand scheme of things it wasn’t a huge cost, but it would have had a huge long-term benefit for children’s access to learning.”

 

Jason: So, therefore we can only conclude that if the decision wasn’t about money it was about principle?

 

John: It was an ideological decision about workforce participation. There was a safety net. And the funding for the safety, to give Mr Morrison credit, was not insignificant. For example, inclusion support got an extra $40 million which looked much, much better than it did before, much more flexible for children with additional needs. There was the safety net for those earning under $65,000. They were going to get 85 per cent of fees paid compared to CCB paid at just $4.72 an hour, but for only half the hours.

 

Jason: Does the Additional CCS (ACCS) come under the safety net that was crafted? 

 

John: Yes, it did. I don’t believe the ACCS is any more generous compared to what we had. How it has played out is that the ACCS for financial hardship is much harder to get. The ACCS for at-risk children – child wellbeing – is a little bit tighter in terms of the process, but the definition of ‘at risk’ has broadened. So, potentially it could pick up more children.

 

Jason: I see.

 

John: Overall the ACCS is about the same. That being said we disputed their need for the shorter six-week initial period of support and the requirement to refer a family to a state agency in order for the child to receive the ACCS – then inform state child protection agencies about the family before applying for more.

 

Jason: That’s the limit of the amount of time care can be offered without the centre manager referring the case to a state government agency before getting the next 13 weeks of care? 

 

John: Yes. We were really nervous about that all the way through because we believe that we will lose a lot of families in that process. So, there was extra money in the safety net. There was more money for the community childcare fund which was for smaller providers. There was more money in the inclusion support area. The ACCS was similar to what we had and there was the 12 hours per week which was more generous for those who could get it, if they only wanted 12 hours, but less generous overall for pretty much everybody else. The sector lobbied really hard to try to get that 12 hours increased.

 

Jason: Yes, I recall. Wasn’t the targeted number 15 per week?

 

John: Yes, and we were criticised for that by a lot of people in the sector but our view was we were dealing with the minister in a government that had originally suggested zero. Our lobbying has got us to 12 hours, we felt that in those circumstances we weren’t going to get them to 18 or 24. We suggested 15 because 15 was what had already been agreed by all governments in Australia with all parties for preschool, the year before school. The research showed 15 hours was a minimum dose needed to make a difference to a child’s early learning outcomes.

 

Jason: I see.

 

John: And many people in the sector said, ‘No it should be 24’, or ‘should be 18’ or whatever. We opted to go for 15 because we thought in the context of a conservative government that could be achievable. 

 

The thing about the 12 hours per week which many people don’t quite appreciate is, it was only CCB, it wasn’t CCR. So, if you failed the activity test, because there always was an activity test for CCR in the previous system, you would get only CCB. The activity test was not new in the new system, it was already there. So, there are a hundred thousand families in Australia who only got CCB, and if you think about it CCB was roughly $4.80 per hour with the part-time loading and that’s all they got. Under the CCS they were going to get 85 per cent of fee which is up to $10 per hour. So, in dollar terms, 12 hours of CCS is actually worth slightly more than 24 hours of CCB which is the thing some in the sector couldn’t quite accept that there was actually was more. The argument opponents run is that you can’t break the nexus between subsidy and billed hours – services will bill for 12 hours not 24, and so families won’t book the second day if it is not covered by subsidy. It’s one thing we have considered at Goodstart with our pricing. 

Jason: I see.

 

John: We argued that if we got to 15 hours that would be actually getting 25 per cent more than they got under the old model and that even though it looked like a cut in hours that’s a pretty large increase in dollar terms. And a provider really should have been able to make that work because their families would be significantly better off compared to the two days they got before. They would then say that we were mixing gap fees with billed hours and I said we were doing that anyway. 

 

Jason: Interesting. Ok, so, in terms of the chronology, where are we now? 

 

John: Yeah, we are at the 2015 budget when the government announced their new childcare package the week before the budget, and then the following day they announced that they were going to also cut paid parental leave. So, whatever political benefit they were going to get from mums for introducing the childcare package, they just wiped it out because they announced they were going to actually cut paid parental leave and make it a top-up scheme. So, from day one the government never got the political bang out of it that I think they should have got.

 

Jason: I see.

 

John: Anyway, the budget was announced. A huge package of $3.5 billion over four years. At that stage probably 80 per cent of families would have been better off and 20 per cent would have been worse off so overall from Goodstart’s perspective we thought the package was, on balance, worth doing. But we made it clear to the minister that we would continue to lobby hard to get the base entitlement fixed through the senate. We always thought we would succeed there, but we didn’t succeed. The sector wasn’t able to convert them. In September 2015, the Prime Minister changed and the minister changed. And so, we have a new minister and a package that has been announced in the budget by the previous Prime Minister and the question was whether the new Prime Minister would actually follow through or not.

 

Jason: I see. So, he would have discretion as to whether it would stay or not.

 

John: Absolutely, that was a massive risk for the sector. So, we engaged very heavily with [then Federal Minister for Education] Simon Birmingham very early on. And it became pretty clear that the Government was committed to the package which was great. But Simon being a senator instantly started thinking about how he was going to get it through the upper house. Because by this stage the sector was very concerned about the base entitlement to early learning, and lobbying Labor and the Crossbench very hard over the issue. So, Simon was trying to think of how it was going to get it through the upper house. And then the other thing they did in the 2015 budget which really made it hard for us is they made it clear that the package was tied to cuts to Family Payments for low-income families to ‘pay’ for the package.

 

Jason: Yes, that’s right.  

 

John: And  Birmingham was told that he would not get his package unless he also got the Senate to vote for the cuts to Family Payments. In the middle of all that, Nick Xenophon then dropped a thought bubble into the political discourse because he couldn’t justify taking money off low-income families via family payments and giving it to high income families as childcare assistance. So, Birmingham responded to that at the end of 2015 by cutting CCS payments for families above $250,000 which reduced the package by around $150 million a year.

 

Jason: So, to be clear all families would have received 50 per cent regardless of income?

 

John: Not quite. All families received a minimum of the 50 per cent CCR regardless of income and there was a cap of $10,000 for families earning above $185,000. They then hived $150 million a year out of the package by saying that the CCS rate would reduce from 50 per cent to 20 per cent at $340,000. This was all in direct response to a thought bubble from Nick Xenophon. They also announced at the same time a massive crackdown on family day care which was the first of four. What’s interesting to note here is that by the time we got to the end of the package, the savings on family day care now exceed the cost of the childcare package. So, the government now will actually be spending less on childcare now than it did three years ago. So, that was happening as well.

 

Jason: I see.

 

John: And all the way through our concern was we felt the package was politically very vulnerable. It was tied to the family payments package so strongly. We didn’t seem to have a real friendly advocate in Parliament. The crossbench couldn’t be relied upon.

 

Jason:I see. So how did you respond to that?

 

John: Well, in early 2016 we had a roundtable which the Minister attended that was organised by the Australian Childcare Alliance Queensland branch committee member Gwynn Bridge in Canberra. I recall we asked Minister Birmingham “So, are you open to actually changing the base entitlement?” and he said if the sector comes  up with a proposal that actually fixes the problem without adding to the cost of the package, he’ll consider it.

 

Jason: I see.

 

John: So, we started trying to put it together and goodness that was hard. Imagine trying to work cost offsets within a package notwithstanding the massive cost offsets coming from Family Day Care compliance that the government wouldn’t let us count. I mean, just to give you a flavour the package, this year will add about $600 million to the budget, and the savings from family day care this year will be over $1 billion. Anyway, we did it, working with the Department, we actually came up with cost offsets that would have paid for the 15 hour base entitlement. And so we actually had a package. We put that to Mr Birmingham and he said he would put it into his back pocket for negotiation with the Senate crossbench. So, then it became a question of a lobbying  the cross bench, particularly the Nick Xenophon Team, through negotiation to ask for the increase in the base entitlement to claim it as a win.  So it was all set up, but the Xenophon Team failed to deliver.

 

Jason: So what happened?

 

John: We don’t really know why. The cross bench said they asked but the government pushed back and the government said they never asked. So we ended up with a 12 hour base despite having a fully costed proposal which the government had all but agreed to and all the crossbench had to do was ask for it and it was waiting for them. But in the end the negotiating between the Government and Xenophon ended up being all about framing the family payments cuts allegedly needed to ‘pay’ for the package, a linkage we never accepted in the first place.

 

Jason:Yeah, I remember that dominating the news cycle.

 

John: And we were lost in the narrative. But anyway, we didn’t get there. I don’t feel we were treated particularly well in that process. We did everything we could but we didn’t quite get there. And in the middle of all that Derryn Hinch, who had refused to meet with any representatives from the sector, moved an amendment to remove CCS completely for families over $350,000 which was another $60 million shaved off the package. That will harm the long-term career prospects of a lot of professional women denied access to childcare assistance, but that didn’t seem to worry anyone.

 

Jason: And that got through, that was enough to push it through. 

 

John:  And of course in the 2016 Budget, the package was pushed back a year to start in July 2018. Now, in hindsight, the department had no chance of being ready for 1 July 2017 which was the argument they used. That was challenging for the sector. The 2016 election happened in the middle of all of that. We had hoped that Labor might fix the flaws in the package, but their election policy ended up being to patch the old system and then have another review reallocating the costings for the CCS – they would reallocate it in Government.  So, what they announced is that their election policy was an increase in the CCR cap and an increase in the CCB rate which was certainly positive.

 

Jason:And then the coalition won the election.

 

John: By one seat. And the package remained vulnerable. I don’t think the sector ever realises how vulnerable the package was because it was still tied to the family payment cuts. In the end, Xenophon negotiated a freeze in some payments which delivered the savings to pay for the package, but the package kept shrinking as well. It had been shrunk once by the fees. And it was  tightened further. And then there was, in the middle of all of it, a major change to their Budget forecasting model which actually reduced the outlays on childcare assistance by a massive amount – around $2.8 billion over four years – which also shrank the package accordingly as well. This was announced in the Mid Year Budget review at the end of 2016 and helped to pay for cost overruns in other parts of the budget. Again, none of that was retained to fix the flaws in the child care package.

 

Jason: They hadn’t considered the seasonality aspect of the enrollment cycle?

 

John: Yes. So, the forward estimates of the childcare package reduced by $2 billion when the package and the cost of package reduced considerably as well. So, what was worth $1.3 billion a year back in 2015 by the time it was implemented in 2018 had shrunk to $600-800 million a year.

 

Jason: That must grate looking back now. 

 

John: Yes, that’s right. Anyway, it got passed by the Parliament with the support of the crossbench without the base entitlement being fixed. And then we entered a new phase moving into negotiation with the Department and Minister. That was about regulations and rules and I must say Minister Birmingham was very good to to deal with on issue that he could fix within his remit.

 

Jason: I see.

 

John: He genuinely was committed, in my view, to doing whatever he could within the rules to look after children’s access to early learning and particularly the most disadvantaged children. And it’s been a consistent thing from his office all the way through. The department rapidly discovered the implementation was much bigger, more complicated than it had predicted in the Regulation Impact Statement (RIS) and then they proceeded to make it much, much more complicated by adding into their compliance model a whole bunch of things which were not foreshadowed in the RIS, which were ‘fit and proper persons’ in terms of both employees and management was added in, along with the PRODA sign-in system. The complying written agreement provisions were another big piece in the new legislation. So, what became the scope for the IT system was huge. And, we were very concerned that they wanted to do that they weren’t going to get it ready on time. Behind the scenes we worked with the Department and with our CCMS provider closely all the way through. And we kept lobbying them to say reduce the scope or stage it because we really didn’t think it was fair to put the sector under so much pressure unless something was really required by the legislation and was absolutely necessary.

 

Jason: And was that successful?

 

John: Half successful.

 

Jason: And the decision to put those additional add-ons over and above what was in the legislation, there must have been an agenda behind that.

 

John: Of course, it’s all about compliance.

 

Jason: And that’s safeguarding the taxpayer’s dollar.

 

John: That’s right, that’s the theory but in practice it is too much. The bottom line was that the Department felt that the level of trust that was implicit in the old childcare system could not come across to the new one because there were regular auditor general reports in this period that estimated that there was as much as $600 million of childcare assistance being paid out to people who weren’t entitled to it. That’s a big number and impossible for them to ignore.

 

Jason:I see.

 

John: And in the middle of all this the rorts kept spilling out of the family day care sector and a lot of what ended up in the compliance pieces that they created was about family day care but was applied to the long day care sector where frankly the risk profile was fundamentally different but we got caught up with it anyway.

 

Jason:I see. Ok, so back to the chronology, where are we now?

 

John: We are working through 2017. The ministerial rules which is the next level down of regulation were released at the end of 2017. We got some wins in those.

 

Jason: I see. For example?

 

John: We fought very hard for an activity test exemption for preschool, which wasn’t in the legislation, and ended up in them in the ministerial rules at the end of the year. This was a 36-hour activity test exemption for children attending centre-based early learning programs in the year before school. That was included in the rules and as far as we were concerned was a great outcome.

 

Jason: Yes, I see. That being said the implementation of this exemption was fraught with difficulty post ‘go live’ wasn’t it?

 

John: Yes, it was and it really should not have been. This should have been a good news story. This exemption would make preschool in long day care programs much, much more affordable for low income families. It should have been a good news story and it wasn’t simply due to poor implementation.

 

Jason: Right, good.

 

John: From then on it was mostly about the IT system and the additional guidance in the Handbook. Once the rules were established, it was about how they were going to be rolled out. The IT team in the Department were magnificent people but I can’t say it was entirely smooth. The specs for the IT system were constantly changing and evolving. The IT providers were never provided with any financial assistance with a massive, massive body of work that needed to be done. And to be perfectly frank quite a few of them failed to get over the line by June 30. Qikkids I can’t speak too highly of them. They were our provider, and all the way through we worked really close with their team. They went over and above trying to deliver it. Some of the other providers like Hubworks and Harmony in particular were not ready by 1 July 2018. And the people who relied on those had a terrible transition. 

 

Jason: Yes, yes. Good.

 

John: There was an IT working group going all the way through. There was also a comms working group and a policy working group. So there’s a whole series of things going on. We’re negotiating the handbook which will be the actual operational guide. We were negotiating the comms and negotiating with the IT. A string of work streams and they were big bodies of work. That was with the department, just with the department. And you know, I got to say I mean, full credit to the department. They’re really professional people who worked really hard. A lot of people in the department didn’t have a  day off for months. Yeah, full credits for them.

 

Jason: Yeah, fantastic, good. Alright, so that’s the department. What about families? How did you manage the families?

 

John: Well, having said there was a communication working group I was on it for a while. The department had $13 million to spend on communications. We made it clear we wanted to be involved with the design of that. It was made abundantly clear we wouldn’t be. This was because it was a government communications program which was Cabinet approved and they wouldn’t be consulting with the sector on the content of their comms strategy in any great detail. That being said we did made it abundantly clear that the government needed to supply clear fact sheets that we would use to work with families. So, the communications working group ended up discussing lower level departmental communications rather than the full communications program which in the end we feel wasn’t targeted as well as it could have been. But, over 90 per cent of families responded to the call to action by 30 June so the campaign was successful. The Department recognised the relationship between the providers and their families who was a core piece of their comms strategy from day one. That would be fundamental. But for us, I don’t know how other providers manage this, we have always been nervous about providing advice which involved Centrelink and families because you can get legal liabilities type issues which can be problematic.

 

Jason: I see. Of course.

 

John: But as we got into it we realized we would be expected to provide  a lot of advice to our families and we needed the train directors to anticipate the support families would need. So within Goodstart, we were developing tools and  running a series of training programs for our centre directors to get them up the speed.

 

 

Jason: Got it.

 

John: And we would use the fact sheets produced as part of the Government communications strategy in that training.

 

Jason: And that material would be used for centre director to sit down with family one and talk it through. 

 

John: Yes.

 

Jason: In preparation of ‘go ive’. So that would be a May-June conversation. 

 

John: That’s right. But as we moved into 2018 we as an organisation through our weight behind the transition. So, the CEO and the COO, and the CFO, and the CIO convened a very high working group which ran our CCS project and it was the top priority project for 6 months from January through to June. It took priority over all other work. We did all the modelling work developing our sessions product which is quite a radical departure from how we have done business in the past. Our pricing product which was also coming out at the same time was part of that because we do our price reviews every July. We were also having to redo our whole back office to fit into the new IT systems and a whole massive IT piece which was going on within Goodstart itself and a massive training piece for our centre directors because we knew they would be interfacing with the families. In the middle all that my team built our own CCS estimator which became very popular. We put on our website and we promoted it through Facebook advertising and other things which was are you better off or worse off. We really wanted to pick up some data. So we run it from not long after from the package went through February 2017. There were about 22,000 families filled out the estimator initially. And we got an incredibly rich dataset out of that in terms of families likely to be better off and worse. And then we decided to take that to another level. We reconfigured the estimator so that our families could use it and work out the best options under the CCS that suited them more broadly. And to have functionality that would allow families to ask “if it did increase my activity what would that look like? If I did end up, an $100 a week better off and took another day what would that look like?” So we built this more complicated estimator internally, in house, and we put that on our website and advertised quite heavily. By June 30, 200,000 people have used that estimator. And a third of them were our families.

 

Jason: Wow.  

 

John: So over 200,000 families filled out our estimator and every one of our centre directors went to a training session on how the new system would work, how families could interact with the new system and what we expected the families to know and then they were sent out with an objective of having a conversation with every single family in the service using the estimator and our session tools. We also developed a volunteer program because we were really worried about families at the bottom end and wanted to help those who could to meet the activity test.

 

Jason: And that would be very much focused on the stay-at-home mum who had no activity.

 

John: Yes, that’s right. It was very much about the families with stay-at-home mums. Our research on families that were on CCB only found that most either already met the activity test, or thought they would be able to, and around a quarter thought that they simply couldn’t.

 

Jason: Right. So that was another initiative where standard operating procedure would be adjusted to support families who are worse off. I guess sessional care was also part of that plan?

 

John: Yes. So our sessional offers is now on the public record. Our standard day became a 10-hour day. We would offer a 9-hour day or the longer 11-12-hour day as well. And families could pick and choose between those. They would use the estimator tool to work out which one’s suited them best.

 

Jason: Ok. Is the cost per hour of care the same no matter what session one elected to have?

 

John: The prices vary a little bit, reflecting our assessment of fixed and variable costs. Sessions are about trying to help families to optimise their outcomes under the CCS and that would be different for each family and depend on  what their capped CCS entitlement is. So, if they’re in an 18-hour cap, or a 36-hour cap, or 72-hour cap, or a 100-hour cap, there are options to help make sure their care comes within their cap.

 

Jason: Got it. And of course, the centre managers are primed to work with them and encourage them to engage and optimise.

 

John: Yes, that’s right but there is definitely one big change here for centre managers because the nature of sessional care means that there are many more fee points for each room. That is a big change from the old regime where everybody knew their fees instantly.

 

Jason: Yes, of course. I understand. I understand. So we are in week one. I suspect people are holding their breath, if it’s going to work.

 

John: Well, that’s right. That’s right. And again, our third-party software provider Quick Kids were magnificent. Our centre managers were really really outstanding. Our CCS project team went over and above what was required. And the Department was incredibly responsive. We were tracking pretty closely how many of our families have signed up, how many were in the Centrelink system and how many of them were yet to do anything. What we found pretty rapidly was that a lot of people thought they had signed up but hadn’t. That was really a function of how complicated the system actually was. They basically hadn’t received their confirmation.

 

Jason: I understand.

 

John: So, I think going in to 1 July, we had done everything we could. That being said, I think some had not done their final confirmations, some had a dispute somewhere at Centrelink and some haven’t done anything. But the vast majority had fully registered and transitioned while quite a few didn’t get CCS paid on July 1.

 

Jason: I see.

 

John: And the preschool exemption emerged as a huge headache at the very last minute thanks to some poor system design by Centrelink. So the preschool exemption is supposed to offer an 36 hour a fortnight activity test exemption for a child in an early learning program that is centre-based in the year before school. Pretty simple.

 

Jason: Got it.

 

John: How the government designed that was a family applies for their entitlement, through Centrelink a family with no activity gets a CCS hours result of  0 or 24 hrs depending on whether their income is above or below $66,000. Then when their provider then logs that the child attended a centre-based early learning program for 18 hours in the year before school they will retrospectively get their subsidy paid.

 

Jason: I see.

 

John: So suddenly, all these families who were told they would qualify actually got zero or 24 hours, not the 36 hours they thought they were entitled to.

 

Jason: I understand.

 

John: The Government then decided to write to every family two days before we go live and say they were entitled to the preschool exemption. So, when we went live and nobody got it the families were of course straight onto the phone. It was very challenging. And then, of course nobody got paid in the first fortnight. We of course didn’t charge them recognising it would be paid eventually but we were caught a bit off guard because the Government then decided to put the back-paid amount into the families’ accounts rather than to the provider.

 

Jason: So, you would then look to get that payment off the families.

 

John: It was all a bit messy. And in the middle of all that, another issue was that the Queensland government provides a fee subsidy for health card concession families who attend preschool programs in long day care centres  of about $1,200 a year, which effectively makes preschool programs in day care centres in Queensland free or close to free for many low-income families. The Department started insisting that the fee subsidy would have to be applied before your CCS was calculated. So the $30 a week you got from the Queensland Government, the government then said we want 85 per cent of that back.

 

Jason: I see. Was this Queensland only?

 

John: South Australia offers fee subsidies as well. But the numbers in South Australia aren’t like the numbers in Queensland. 8,000 children were affected in Queensland and about 500 in South Australia. We started lobbying with the Australian Childcare Alliance both the Queensland Government and the Feds, and to his credit, Minister Birmingham intervened and asked the Department to look at the issue again, which they are still doing. . And then of course, we got to 1 July. We got through the first fortnight. Most of the payments got paid. Many didn’t get paid. Obviously, because they were caught up with disputes at Centrelink and we had to hold their hands through that. So, there is an enormous amount of credit for our centre mangers and our family assistance team that helped the families through all of that. It was huge.

 

Jason: Wow.

 

John: The other thing I should mention which we did was specifically aimed at those families earning less than $65,000 who were entitled to 12 hours a week.

 

Jason: Ok, please go on.

 

John: We had a long think about what to do with those low-income families families with only a 24-hour entitlement so we decided we’d offer them two times 6-hour sessions for them. But because 6 hours is a lot less than 9 hours, the fee will not cover the cost of the service. So, we essentially decided to accept a loss on those spots in the interest of supposed the most disadvantaged children. That will end up being quite costly for Goodstart but, you know, we thought that it was the right thing to do.

 

Jason: I see.

 

John: Unsurprisingly, not a lot of providers have implemented the 6-hour sessions basically because they are loss making. We at Goodstart can cross-subsidise but smaller operators will find it very hard. So it will be interesting to see when the evaluation comes through what happened to those families.

“Unsurprisingly, not a lot of providers have implemented the 6- hour sessions basically because they are loss making. We at Goodstart can cross-subsidise but smaller operators will find it very hard. So it will be interesting to see when the evaluation comes through what happened to those families.”

 

Jason: Yes, agreed.

 

John: There was a fix nearly every night from the department or Quik Kids in IT in those first few days. It was a huge week.

 

Jason: So how do you feel today? Two months in.

 

John: Overall, for Goodstart, it’s worked out the way we thought it would in terms of how our families respond. We have lost some families. There’s no question about that. We haven’t yet done the analysis what happens to our families but some of those that are worse off have pulled out of care. Many across the sector are reporting that. But certainly, we’ve lost but we have picked up families, as well. Significantly, a lot of our continuing families have booked extra days. So, overall I think our attendance numbers is are up.

 

Jason: I see.

 

John: But it was bumpy. We always expected it would be bumpy but you know, we’re on the other side now and we are pretty happy with where we have landed.

 

Jason: That’s fantastic. 

 

John: But there will now be an evaluation of the whole thing. The government commissioned the Australian Institute of Family Studies to do that. That is a great opportunity to track what’s happened to families who have dropped out and access for disadvantaged children more broadly.

 

Jason: Yes.

 

John: And the base entitlement issue that was entirely predictable has come back to bite the government. Did the government get a political bang out of it? That’s another really good question. I don’t think they got the bang out of it they thought they would and it was entirely predictable when after a reform like this one in four families are worse off, it is the losers who become the story. It’s not that three in four are better off. It’s the one in 4four who are worse off. The media is always looking for bad news stories and this reform has generated plenty of them.

 

Jason: Yeah.

 

John: We think what we’ve done at Goodstart in terms of our sessional offers, we managed to give many more of our families options to improve their CCS outcome, a lot more I suspect will be better off as a result. But there’s not much we could do for families who didn’t meet the activity test earning above $66,000, or who lose subsidy completely above $350,000. There’ s limitations on what a provider can do but we’d like to think we’ve done everything we can to give our families the best possible shot at being better off. 

 

Jason:  Thank you very much for your time and insight John. It’s much appreciated.

 

John: My pleasure Jason.

 

[ENDS]