Budget 2023: Early childhood sector says plan to extend subsidy is unworkable

By John Gerritsen for RNZ

The early childhood sector has united against the government's plan to extend its 20 hours subsidy to two-year-olds.

Just a week after welcoming the announcement in last week's Budget, a coalition of groups now says the policy is unworkable and needs a rethink. The groups blame new rules that will accompany the extension of the 20 hours scheme.

The scheme pays higher subsidies for the first 20 hours of attendance at services that agree not to charge fees for that period.

But the government says some ECE centres are using "workarounds" to charge fees those hours, and they should not be.

Organisations representing most of the 4579 early childhood services said the new rules meant they could not ask for copayments for things like food and nappies. They also could not require enrolment for more than 20 hours a week.

"This effectively means the government are asking centres to run at a loss," the groups said.

In a letter to Education Minister Jan Tinetti, the groups said their excitement about last week's Budget announcement was short-lived.

"We cannot begin to tell you how disappointed we are. If the sector are correctly interpreting the as yet unpublished conditions attached to the 20 hours free funding, there is a potential that services won't be able to provide meals, staff at better than the regulated minimum ratios or operate for longer hours."

The letter said the groups had no confidence the Ministry of Education would work with them to get the rules right.

Signatories to the letter included the Early Childhood Council, Te Rito Maioha Early Childhood New Zealand and New Zealand Kindergartens.

Te Rito Maihoa chief executive Kathy Wolfe told RNZ services could not afford to provide 20 hours of early education entirely free because they had to pay for things like food and nappies.

She said they also could not afford to operate if many children enrolled for only 20 hours a week.

"The way the policy will be implemented is probably going to have some quite serious consequences in terms of financial viability," she said.

"The fine print is stating quite clearly that copayments and additional hours are no longer permitted, and that's the bit that we're still lifting the hood on and getting some clarity on."

Wolfe said services wanted the 20 hours policy extended to two-year-olds, but it had to be done in a manner that would not ask services to run at a loss.

Associate Education Minister Jo Luxton told RNZ she acknowledged the sector's concerns, and would like to meet with them to discuss the situation.

"The new funding conditions are about supporting parents. It's important to note that the funding rate has also been increased by 4.6 percent to support providers to continue to offer 20 hours ECE to parents.

"I am aware that some services are using workarounds to essentially charge fees for these hours.

"The 20 hours ECE subsidy is opt in. Services do not have to offer this to parents, however if they do opt in, they must not charge for those hours."

Luxton said the previous National-led government froze funding, which Labour had reversed.

"I've come from the sector and run my own ECE business. I know some of the pressures faced by the industry. It is tough, but I can tell you the investment this government has made is significant."