SIMON BIRMINGHAM: Labor’s universal childcare plan feels more like vote buying than evidence based policy

Everybody hates government waste. It’s just that opinions of what’s wasteful often differs from taxpayer to taxpayer.

Take today’s announcement by the Prime Minister of his dream for universal childcare, subsidised by the government for everyone, regardless of income or work status.

At one extreme, some taxpayers will see all childcare subsidy payments as wasteful and believe that parents should be responsible for looking after their own little sprogs.

“We didn’t have it in my day when everyone took care of their children themselves, worked if they had to, and the kids turned out just fine,” some may say.

At the other end of the spectrum, others will believe that early childhood education demands universal access to child care for all, and that a universal subsidy helps all parents to get back to work.

“Think of the children. It’s their right to early childhood education, just as it’s a mother’s right to go back to work,” others will contest.

And so the predictable battle on talk back radio is drawn. Black versus white. Little room for the shades of grey.

Yet the grey zone is where the truth lies. Children do need early education. The economy does benefit from parents returning to work. But to make these subsidies universally available in the way Labor proposes would incur billions of dollars of wasteful spending.

Anthony Albanese’s proposed first step is to abolish the activity test that requires parents to be working, studying or volunteering (or children to be in higher risk circumstances) to be able to access childcare subsidy.

Let’s remember what the activity test is as well — it’s four hours per week of working, studying, volunteering or looking for a job. So this is a very light-touch activity test to get on the first rung of child care assistance.

Labor has promised that if re-elected taxpayers will subsidise three days a week of care for all families earning up to $530,000 income, regardless of whether one parent stays at home or not.

The only cogent argument for why parents who aren’t working or studying still need to routinely send their children to child care is educational.

It is true, to a point, that the cognitive, developmental and social skills of our youngest Australians benefit from professional learning alongside other children. That’s why Liberal and Labor governments have long supported universal access to preschool for all four-year-olds.

Former prime minister Julia Gillard led a royal commission for South Australian Labor Premier Peter Malinauskas into optimal early childhood education needs. Her lead recommendation was to extend universal preschool to three-year-olds.

Why then is Labor under Anthony Albanese proposing to go so much further and have taxpayers also subsidise three days a week of childcare for babies and toddlers, even when a parent is at home?

It feels more like vote buying and union appeasement than evidence based policy. Let’s promise a big government handout, to further grow a sector that also happens to have rapidly growing union influence in the Labor Party.

Clogging up the childcare system with parents dropping off their kids for taxpayer subsidised care so that they can go to play golf or attend a Pilates class is also the antithesis of a productivity measure.

If you’re a parent already struggling to get a place in child care for the days that you have to work, what do you think will happen when all of these extra families start demanding their places too?

Under this Labor proposal Australia will end up with the families who most need and warrant childcare support playing hunger games with others for finite numbers of places. The basic laws of economics mean that such growth in demand can also only incentivise childcare providers to further jack up their prices.

It is also of note that those working parents, paying their taxes, will be the ones facing even greater tax burdens to pay the subsidies for the childcare of those non-working parents.

Price increases take us to the foreshadowed stage two of Labor’s big spending pre-election offering on child care: abolishing or dramatically scaling back the means testing of subsidies.

Right now, not only are subsidised places tested against the work activity of parents, but the level of subsidy is tested against the income of those parents.

Ensuring that the greatest support goes to those working the hardest and earning the least, sounds like the Labor Party of yesteryear. Instead, the current Labor Party is proposing to give more places to those not working at all, and higher subsidies to those earning the most. It sure is a topsy-turvy world!

There’s absolutely a productivity benefit in subsidising child care for those parents returning to work, who in turn increase the workforce participation rate. It is both an economic measure and, given it disproportionately drives women’s workforce participation, it is also an equality measure.

However, at some level of income the costs of child care become a negligible determinant in whether or not someone returns to work. That’s why the current subsidy is means tested.

Yes, everyone likes to receive government payments and to see some of their hard earned taxes returned to them. But it’s highly inefficient to embed yet more tax and spend churn in an already very costly childcare system.

High income earning families shouldn’t face the risk of higher taxes, only to have some of it paid back to them in subsidies that they don’t really need, and which won’t really change their behaviour or decisions around when or how much to work.

This stuff is complex. It’s riddled with shades of grey. There is a big role for the government in delivering valuable early childhood education and in maximising workforce participation.

Yet blunt policy, that eliminates effective targeting of government spending, like that just announced, should be seen by everyone as wasteful.