KEY POINTS:
When is a free childcare policy not free childcare? When centres have to charge a "voluntary" supplement, or raise their charges for unsubsidised children, or reduce their activities to the level of costs the Government will meet. Or when more than a third of childcare providers will not have a bar of it.
Just 62 per cent of childcare centres nationwide had signed up to provide the Government's 20 hours a week for 3- and 4-year-olds when the policy finally came into operation on July 1. And most of those that did have done so at a price that will be paid by parents, either directly in supplements, higher charges for younger children and hours beyond the free 20, or indirectly in reduced services.
The Government could have avoided this problem, of course, by simply paying the rate that childcare centres say they need to fully cover their costs. But it rightly refuses to do so because childcare centres are private businesses and it would be giving them a blank cheque.
It would be different if the state was paying only for parents who could not otherwise afford 20 hours of childcare weekly. In those circumstances the taxpayer would get the benefit of buying childcare at the rate accepted by people who can afford to pay for it and have shopped around.
But this Government prefers policies that give state assistance to everyone whether they need it or not. All three policies it presented for the Labour Party's edification at a rally last weekend had that common denominator. Free childcare, subsidised doctor's visits, retirement savings incentives, are illusory benefits for most. For every child or elderly person receiving cheaper primary health care there are probably now two or more working adults paying more for doctor's visits than they were before the scheme started. And the KiwiSaver incentives will benefit mainly those with money to spare, many of whom will have been in superannuation plans that carried no cost to the taxpayer.
If the Government really wanted to ensure every 3- and 4-year-old had 20 hours of early education a week, it could do so by providing an income-tested benefit for the purpose. Households below a certain income would have their children's costs paid to centres by the Ministry of Education, fully paid because the ministry could be confident it was being charged the rate that centres had to offer in a competitive market.
Lower-income households would be better off since they would get genuinely free childcare, and taxpayers overall would save money that would otherwise be wasted on needless assistance. Free benefits for everybody serve the interests of nobody except those who want to exploit them for political credit. They are the kind of monument that Labour governments particularly relish, as witnessed in West Auckland last weekend.
Universal benefits are an illusion that works only in political terms. Economically they are a a needless burden on a country's productive resources, not just in financial terms but in its habit of displacing better investment decisions.
Hardly anybody worries about the economic damage unless the country's fortunes falter from too many high costs for poor returns, high taxation and declining real incomes. Only then, when a country comes to examine how it came to be in such a state, do politicians take a hard look at the value of universal benefits.
And even then, it can be very hard to apply a means test to a free service citizens have come to regard as a right. Childcare centres that resist this illusory benefit do us all a favour in the long run.
