Grants inflate costs: union

PUBLIC subsidies may be pushing up fees at childcare centres, the workers' union has told the Gillard government.

The union, United Voice, said the government should take the childcare rebate away from parents and pay it directly to centres and regulate fees based on the true cost of care.

Prime Minister Julia Gillard called a summit of childcare providers and unions last month to address concerns about the rising costs of care, and has called for submissions from interested groups.

Last year, the Commonwealth spent $4.2 billion on childcare subsidies to parents - almost three times what it spent eight years earlier. Yet according to research by the union, childcare fees nationally increased by an average of more than 11 per cent between April 2011 and April 2012. The main subsidies are the means-tested childcare benefit, and the non-means-tested childcare rebate, which pays parents 50 per cent of their out-of-pocket costs up to a yearly cap of $7500.

The union's submission is strongly critical of the rebate, arguing despite being intended as a measure to make care more affordable, it may actually be fuelling fee increases.

''As a subsidy based on the principle of subsidising market prices rather than actual costs, [the rebate] is a highly problematic form of public expenditure, which may itself be a significant contributing factor towards fee inflation,'' the submission said.

The union said the rebate gave the government little capacity to control prices, but committed the government to subsidise whatever price the operators opted to charge.

Currently, parents can choose whether to have the rebate paid to them or to their childcare centre. The union argues this choice should be removed and the rebate paid directly to centres to put them in a stronger financial position by giving them more secure cashflows and reducing debts from parents.

The union called on the government to regulate fees through an independent price-setting authority.

A spokesman for Childcare Minister Kate Ellis said that in 2004 a family earning $75,000 with one child in full-time care spent about 13 per cent of its disposable income on childcare, but by 2011 this percentage had dropped to 7.5 per cent.

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The story Grants inflate costs: union first appeared on The Sydney Morning Herald.

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