Home-based childcare services under threat from Govt’s $1.2b free hours policy

Home-based childcare, which makes up roughly 10 per cent of New Zealand’s early childhood education sector, will quickly become unsustainable if the Government implements its policy to provide 20 hours free for 2-year-olds.

That’s according to the founder of one of New Zealand’s largest home-based childcare service providers and href="https://nzherald.co.nz/nz/politics/explainer-why-offering-free-2-year-old-childcare-is-sending-the-education-sector-into-a-tailspin/QBMTUDTTNVBF7KHREHH4MXPJNE/" target="_blank">adds to the stark concerns raised by most of the sector that the Government’s flagship $1.2b Budget 2023 policy will degrade the quality of childcare, limit the stock of educators and increase the hundreds of services shutting up shop in recent years.

Associate Education Minister Jo Luxton, who is responsible for early childhood education (ECE), is having several meetings over the coming days with a variety of sector leaders. Last week, providers representing about 75 per cent of the sector penned a letter to Luxton and Education Minister Jan Tinetti to request a meeting to discuss their concerns.

Home-based childcare was distinct from the centre-based model - educators could only have up to four children at a time and acted as contractors by signing agreements with parents and providers.

Associate Education Minister Jo Luxton answers during Question Time in Parliament today. Photo / Mark Mitchell

The funding model was also different. For enrolments of children 3 years old and older who had been eligible for 20 hours free childcare per week since 2007, educators were paid roughly $5-$6 per hour, per child, as part of the Government funding for the policy and then sometimes educators asked for donations from parents or have optional charges to make up their costs.

A recent survey of 300 home-based educators found 63 per cent had an hourly rate of more than $7 per hour, per child - some charged more than $15.

The Government’s policy extended 20 hours free to 2-year-olds, but appeared to indicate asking for donations would be prohibited.

This meant educators would be forced to accept the Government’s funding rate without the donations from parents, unless the service provider they were contracted to was able to make up the difference.

Erin Maloney, founder of Tiny Nation, which managed 15 home-based services across the country, told the Herald the policy was the latest blow to home-based providers who had been closing down in a “sharp decline” as sector issues made their business model less viable.

“I think educators are feeling very threatened right now,” she said.

“If [the ability to request donations] is removed as an option as a part of the review of 20-hours conditions, delivering home-based services will no longer be viable for some educators.”

Early Childhood Education provider Tiny Nation founder Erin Maloney.

If changes weren’t made to the policy, Maloney feared educators would have to reduce their hours to minimise costs, leave the profession or opt out of providing 20 hours free altogether - meaning childcare will be more expensive for parents.

“The policy supports families to access childcare but if it’s not supporting services to deliver on that promise then we’re going to have a supply vs demand issue.

“While the policy has the best of intentions, it shows a real lack of understanding of what service providers have had to work to over the past few years as [the Government has] been increasing compliance requirements.”

Maloney said home-based childcare played a crucial role within the sector, offering a more personalised and localised form of childcare that was very attractive to some parents, but it was likely those smaller providers would suffer the most through the new policy.

Not-for-profit childcare provider Barnardos general manager Heather Taylor said her organisation, which oversaw both centre and home-based services, would be forced to make up the difference between the Government funding rate and what educators charged - something that would require cuts in other areas.

“It leaves me out of pocket quite significantly. The ramifications will be enormous.”

While she welcomed additional funding, Taylor said it was crucial it was done in a way that supported providers.

“You can’t keep tweaking the dials and making a more complex system because you aren’t brave enough to fix the whole system.”

Barnardos  Early Learning general manager Heather Taylor.

The Herald last week reported how the funding provided by the Government for 20 free hours was for a teacher-to-child ratio of 1:10 - much lower than the generally accepted ratio of 1:8 and below. Better ratios of between 1:4 and 1:6 were often used for children under 2 as they had greater needs.

A lower ratio was also a Ministry of Education goal.

Taylor added her voice to calls from a variety of providers for an independent review of the sector’s funding model.

When the Herald put Maloney and Taylor’s concerns to Luxton, she said it was “the first I’ve heard of it” and referred to the several meetings she had planned with sector leaders.

“I’m looking forward to having those conversations with anyone in the sector that wants to reach out.”

Luxton, a former ECE provider, said it was up to individual providers to work out what business model suited them and she was confident there was enough time between now and March next year, when the expansion to the 20-hours-free policy came into force, to find a solution.

She also wouldn’t rule out a review of the sector’s funding model but said it would not happen before the October election.

“The funding model, without a doubt, is confusing and there are lots of things that we can look at within the funding model, should we become the Government in the future.”