Roles and responsibilities in education

Roles and responsibilities in education PART A: EARLY CHILDHOOD AND SCHOOLS ISSUES PAPER 4 December 2014 1 Reform of the Federation White Paper

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Table of Contents Getting involved and having your say... iii Introduction... 1 CHILD CARE & EARLY CHILDHOOD LEARNING... 3 1.1 Introduction... 3 1.2 Evolution of our child care and early learning arrangements... 4 1.3 Pressures on current child care and early learning arrangements... 7 1.4 Questions for consideration... 16 SCHOOLING... 19 2.1 Introduction... 19 2.2 Evolution of our school education arrangements... 20 2.3 Pressures on current school education arrangements in Australia... 26 2.4 Questions for consideration... 37 APPENDIX A: Summary of child care and early learning service types... 42 ACRONYMS... 43 GLOSSARY... 44 REFERENCES... 48 ii Reform of the Federation White Paper

Getting involved and having your say The Australian Government would like as many people as possible to be thinking about how our federal system of government can be improved, particularly in relation to roles and responsibilities in education. A Green Paper setting out options for reform will be published in the second half of 2015, ahead of the publication of the White Paper in 2016. The Green Paper will allow the public the opportunity to make written submissions on the proposals put forward. For more information, please visit the website www.federation.dpmc.gov.au. iii Reform of the Federation White Paper

Introduction Education, from early childhood to higher education, is a lifelong continuum. At its most fundamental level, it is about people and the knowledge, skills, capabilities and qualifications they need to fulfil the life chances they aspire to and participate effectively in society and in the economy. This issues paper examines the current arrangements put in place by governments to support our educational attainment: in child care and early learning and schooling (Part A); and post-school, in vocational education and training (VET) and higher education (Part B). More specifically and consistent with the White Paper s Terms of Reference, it considers how the current split of roles and responsibilities, and the overlap and duplication inherent in them, is contributing to pressures on the efficiency and effectiveness of our education system, and governments capacity to deliver better services and educational outcomes for their citizens. Looking at the education sector and through this lens, Australians would probably identify the following as some of the major problems with the current arrangements: child care is becoming increasingly expensive and hard to access. Costs continue to rise and there continues to be fierce competition for quality child care places, the supply of which does not always meet the demands of today s flexible workforce; despite all the attention schools funding and policy has received over recent years, student outcomes continue to be mixed and quite poor for our most disadvantaged students. We continue to slip behind our international competitors on a range of educational outcomes. While the recent moves to needs-based funding should help, there is still more that can be done to improve outcomes; and the current VET arrangements are messy and have resulted in eight different systems which still fail to meet the needs of business and students. The design of the market for VET qualifications is not providing the training needed to prepare a skilled and mobile workforce for an economy in transition to new global economic realities, and there continues to be unacceptably low completion rates for those undertaking qualifications. Not all of these problems are caused by the current allocation of roles and responsibilities between the Commonwealth and the States and Territories, and not all of them can be fixed by any reallocation. But the current arrangements have also undoubtedly blurred the lines of accountability to the general public; in the education sector, Australians now do not know who to hold to account for what. The level of Commonwealth involvement in education, traditionally a State and Territory responsibility, has increased markedly since the Federation came into being. It also varies in degree and type across the sectors. Over recent years, the Commonwealth has increased its involvement in most aspects of the child care and early learning and schooling sectors, and now plays a key role in setting national policy and providing funding, despite these clearly being State and Territory responsibilities under the Constitution. Similarly, the arrangements between the Commonwealth and the States and Territories across policy, funding, and regulation in the VET sector have also seen the Commonwealth s 1 Reform of the Federation White Paper

involvement increase. The sector where the division of roles and responsibilities is most clear is the higher education sector, where the Commonwealth is clearly recognised and understood to be the major player. While the current arrangements have largely come about through shared arrangements, and in some cases deliberate system design, which are negotiated and agreed between the Commonwealth and the States and Territories, they are contributing to a system that it less efficient, effective and equitable than it could be in terms of delivering outcomes for all Australians. While the paper treats each sector separately, it is important to keep in mind the system as a whole, and to note that the downsides of the current arrangements are most obvious at the juncture points in the system, especially between preschools and schools, schools and VET, and VET and higher education. Here, policies are usually designed by different policy makers from different departments across different levels of government. This pursuit of different policy objectives has resulted in arrangements that are not always conducive to achieving enduring reforms and improvements in outcomes. The aspiration of achieving cleaner lines of responsibility and better public accountability should not come at the cost of proper policy coherence. Consequently, there are legitimate questions to be asked as to whether these arrangements are functional and rational, and should continue, and what the appropriate role for the Commonwealth should be. Advocates of Commonwealth involvement will point to national interest considerations, and the benefits that can be achieved for Australians through nationally harmonised or uniform approaches. However, others will argue these benefits may come at the expense of diversity, innovation and competition, and sometimes choice, among and within the States and Territories, and that the national interest can be progressed with, or without, the Commonwealth s involvement, or through re-conceiving the Commonwealth s involvement. The principles outlined in the Terms of Reference accountability, subsidiarity, national interest considerations, equity, efficiency and effectiveness of service delivery, durability and fiscal sustainability provide a useful tool in guiding these considerations. To encourage discussion and debate this paper asks questions about the nature of current arrangements. This paper does not propose specific reform options or solutions. Instead, the Green Paper to be published in the second half of 2015 will consider the application of the principles to future arrangements and set out possible reform options. The Green Paper will invite the public to make written submissions, ahead of the publication of the White Paper in 2016. Further details on how to get involved and have your say are at page iii of this paper. 2 Reform of the Federation White Paper

CHILD CARE & EARLY CHILDHOOD LEARNING 1.1 Introduction High quality child care and early learning services make a big difference to children, families and communities. Positive experiences in the early years improve children s long-term education and well-being. High quality child care and early learning improves performance in the early years of school and enhances children s capacity to capitalise on later educational opportunities. Vulnerable and disadvantaged children, and those with additional needs, have the most to gain from participation. All governments recognise that the benefits of child care and early learning extend beyond the child and their family, eventually accruing to Australia s economy. These services can improve economic performance in the short-term (through increased workforce participation), and the longer-term (through young people and adults with the skills to adapt to changes in their lives) and reduced dependence on government services (including welfare and employment services). 1 Australia s child care and early learning sector is highly diverse, with services delivered by a mix of commercial, government (including local government) and community providers. The main service types are long day care (LDC), family day care (FDC), preschool, outside school hours care (OSHC), in-home care, and occasional care. Mobile services also operate in some rural and remote communities and some jurisdictions offer distance preschool programmes. A summary of service types is at Appendix A. The sector is market-oriented, allowing families to choose a service and delivery model to suit their needs. Almost 16,500 Child Care Benefit (CCB) approved services and more than 4,000 dedicated preschools operated in Australia in 2012-13. 2 Around half of approved services are provided on a for profit basis. 3 The vast majority of Australian children benefit from a child care and/or early learning service before starting school. 4 In 2013, around 1.1 million children attended an approved child care service and 98 per cent of four-year-olds (around 288,000 children) were enrolled in a preschool programme. 5 Preschool programmes can be delivered through preschools attached to schools, standalone preschools, or approved LDC centres. Around 40 per cent of all children enrolled in a preschool programme are enrolled in a LDC centre. 6 1 For further discussion about the benefits of child care and early learning, see: OECD (2006) Starting Strong II Early Childhood Education and Care, OECD Publishing. 2 Productivity Commission, Child Care and Early Childhood Learning, Draft Report, Canberra, 2014, p. 81-88. 3 Productivity Commission, Child Care and Early Childhood Learning, Draft Report, Canberra, 2014, p. 77. 4 This includes services to help parents support their child s development. 5 Department of Education; Australian Bureau of Statistics, Preschool Education Australia, 2013, cat. no. 4240.0. 6 Australian Bureau of Statistics, Preschool Education Australia 2013, cat. no. 4240.0. 3 Reform of the Federation White Paper

Traditionally, the main purpose of Commonwealth involvement has been to facilitate parents workforce participation by subsidising the cost of child care. The Commonwealth is the major funder of the sector. It provided more than $6.5 billion in 2013-14, with child care fee assistance representing the bulk of this expenditure. 7 The States and Territories have traditionally been responsible for regulating child care and early learning services. State and Territory funding focusses on child care quality and early learning. In 2012-13, the States and Territories spent around $1.4 billion (including Commonwealth funding provided under National Partnership Agreements), 8 with around 80 per cent of this funding directed to preschool provision. 9 Local governments also play a prominent role. They plan, manage, fund and deliver a range of children s services, including child care and early learning. Increasingly, the roles of different governments have become blurred, especially by the recent policies of all governments looking to incorporate educational elements into child care settings to achieve better quality care. The Productivity Commission has undertaken an inquiry into future options for child care and early childhood learning, with a focus on developing a system that supports workforce participation and addresses children's learning and development needs. 10 The Commonwealth is considering broader reforms to the sector in response to the Productivity Commission s final report. Although there will be some overlap between the two processes, the White Paper has a unique focus on the allocation of roles and responsibilities between governments. 1.2 Evolution of our child care and early learning arrangements Early Federation to 1970s: the advent of preschools The introduction of compulsory schooling excluded very young children (usually those aged under six). Provision of early childhood education was therefore largely dependent on private initiative, with charitable Kindergarten Associations (or similar) in each State operating services for disadvantaged children. 11 Significant State involvement in preschool provision commenced during the 1960s and 1970s. 12 However, preschool did not meet the needs of working mothers and the following decades saw a strong push for increased child care services. 13 7 Productivity Commission, Child Care and Early Childhood Learning, Draft Report, Canberra, 2014, p. 131. 8 Productivity Commission, Report on Government Services, Volume B: Child care, education and training, Canberra, 2014, p. 3.8. 9 Productivity Commission, Report on Government Services, Volume B: Child care, education and training, Canberra, 2014, p. 3.8. 10 Productivity Commission, Child Care and Early Childhood Learning, <http://pc.gov.au/projects/inquiry/childcare>. 11 For example: the Crèche and Kindergarten Association of Queensland and the Kindergarten Union of South Australia. 12 F Press and A Hayes, OECD Thematic Review of Early Childhood Education and Care Policy, Australian Background Report, OECD, Paris, 2000, p. 17. 13 F Press and A Hayes, OECD Thematic Review of Early Childhood Education and Care Policy, Australian Background Report, OECD, Paris, 2000, p. 18. 4 Reform of the Federation White Paper

1972 to 2006: Commonwealth support for child care The Child Care Act 1972 marked the first substantive Commonwealth involvement in the sector. It established Commonwealth support for not-for-profit organisations to operate day care for the children of working and sick parents. 14 The focus of Commonwealth funding subsequently shifted from providers (supply) to families (demand), with the Commonwealth offering fee-relief to families using non-profit child care centres in 1984 and those using for-profit providers in 1990. 15 Soon after, the Commonwealth began helping government and not-for-profit preschools cater for Indigenous children. In 1994, the Commonwealth moved to a two-tiered subsidy system comprising means tested fee relief (Childcare Assistance) and a rebate for work related child care costs (the Childcare Cash Rebate Scheme). 16 Significantly, Commonwealth subsidies were linked to compliance with a new national Quality Improvement and Accreditation System, which operated concurrently with State licensing schemes. 17 CCB was introduced in 2000 as the main Commonwealth child care subsidy, replacing both Childcare Assistance and the Childcare Cash Rebate Scheme. The Child Care Tax Rebate (CCTR) was introduced in 2004, allowing eligible families to claim a proportion of out-of-pocket child care costs (up to a cap) as a tax rebate. 18 Since 2006-07, the CCTR has been paid directly to families (rather than claimed through the tax system), and was renamed the Child Care Rebate (CCR) in July 2009 to reflect this. Despite the growing emphasis on quality over this period, Commonwealth funding remained focused on addressing child care affordability to facilitate workforce participation. The States and Territories continued to concentrate on quality and early learning, including preschool provision and licensing of child care services. 2006 to 2014: National reforms to lift quality and access In response to mounting evidence about the benefits of early childhood development, all governments sought to improve access to child care and early learning programmes and lift the quality of those services. 19 These goals were progressed by individual governments and cooperative action through the Council of Australian Governments (COAG). From 2007, COAG agreed to: deliver universal access to preschool in the year before school through the National Partnership Agreement (NP) on Early Childhood Education, and subsequently the NP on Universal Access to Early Childhood Education (NP on Universal Access); 14 House of Representatives, Debates, No. 41, 1972, Child Care Bill 1972 Second Reading Speech, p.2288. 15 G McIntosh and J Phillips, Commonwealth Support for Childcare, Australian Parliamentary Library Publications, Canberra, 2002. 16 M Lindsay, Some Recent Developments in Child Care: 1 January 1994 30 September 1995, Current Issues Brief 6 1995-96, Australian Parliamentary Library Publications, Canberra, 1995. 17 M Lindsay, Some Recent Developments in Child Care: 1 January 1994 30 September 1995, Current Issues Brief 6 1995-96, Australian Parliamentary Library Publications, 1995. 18 The Child Care Tax Rebate rate was originally set at 30 per cent, increasing to 50 per cent from July 2008. 19 See for example: Organisation for Economic Cooperation and Development, Starting Strong II: Early Childhood Education and Care, OECD, Paris, 2006. 5 Reform of the Federation White Paper

the National Indigenous Reform Agreement, which included a target to ensure Indigenous four-year olds in remote communities could access preschool by 2013; the construction of Children and Family Centres to provide services to Indigenous children under the NP on Indigenous Early Childhood Development (now expired); and a National Quality Agenda, through the NP on the National Quality Agenda for Early Childhood Education and Care (Quality NP). The National Quality Agenda aims to lift the quality of services, promote national consistency and reduce regulatory burden through the introduction of a National Quality Framework (NQF). The NQF replaced existing State and Territory licensing and national quality assurance processes. The collapse of ABC Learning in 2008 (the first child care provider listed on the Australian Stock Exchange) reinvigorated debate about child care regulation and the merits of private provision. In response, the Commonwealth increased its scrutiny of services to ensure the responsible use of Commonwealth fee assistance. Current settings The Commonwealth continues to focus on providing child care fee relief (mainly CCB and CCR). Eligibility for Commonwealth assistance is governed by legislation and regulations collectively known as Family Assistance Law. The Commonwealth also influences the policy direction of the NQF and supports preschool participation through NPs with the States and Territories. It recently offered States and Territories a 12 month extension of funding for universal preschool access when the current NP on Universal Access expires in December 2014. 20 The COAG Education Council (comprising Commonwealth and State and Territory ministers) is responsible for agreeing national priorities for school education and early childhood, and reports to COAG. States and Territories have primary carriage of regulation (including quality assessment), and are responsible for preschool provision. The majority of services most preschools, LDC, FDC, and OHSC fall within the scope of the NQF. The NQF governs approval (licensing) of services, imposes minimum standards (including for staff-to-child ratios and staff qualifications) and introduces a national quality assessment process. 21 The National Quality Agenda a joint Commonwealth and State and Territory reform incorporated educational and developmental elements into child care settings to achieve better quality care and improved learning outcomes. This unified governments interests at the time in child care and early learning, and enabled diverse markets and settings to operate within the NQF. Services covered by the NQF are required to deliver an approved learning framework (an educational element). 20 The fixed-term extension to the NP on Universal Access in 2013 provided for 600 hours of preschool in the year before school, delivered by a degree qualified early childhood teacher who meets the NQF requirements. On 5 September 2014 the Government announced its intention to enter into new NP arrangements; S Ley (Assistant Minister for Education) Abbott Govt commits $406m for preschool certainty, media release, 5 September 2014, <http://sussanley.com/abbott-govt-commits-406m-for-preschool-certainty/>. 21 The NQF operates under an applied law system comprising the Education and Care Services National Law and Regulations. 6 Reform of the Federation White Paper

Both levels of government offer varying degrees of support for disadvantaged children and children with additional needs to participate in child care and early learning. 1.3 Pressures on current child care and early learning arrangements An increasing number of families are using child care and early learning services. Children are also attending child care for longer. In 2013, more than 1.1 million children attended an approved service in Australia. 22 Commonwealth expenditure on child care and early learning increased from $1.6 billion in 2003-04 to over $6.5 billion in 2013-14. 23 States and Territories also increased expenditure on child care and early learning during this period. 24 Around $400 million per year in funding for preschool is included in time-limited NPs agreed between the Commonwealth and States and Territories, which can affect the funding certainty for the sector. Despite this growing public investment in the sector, child care fees have increased substantially. The average cost of care (across all income ranges) for one child reached around 9 per cent of disposable income (after subsidies) in 2013. 25 Further, high effective tax rates (caused by the interaction of child care fee assistance, family payments, and personal income tax rates, can be a significant disincentive for single parents and secondary income earners in some families to participate in the labour force or work additional hours. 26 Accessibility also remains a concern. In many locations there are limited places and waiting lists are long. In particular, regional and remote communities and parents with irregular or unpredictable work requirements can experience difficulty securing suitable care. Some parents have argued that the lack of suitable care options limits their ability to work. Increasing demand for child care and early learning services is likely to exacerbate existing affordability and accessibility pressures. The Productivity Commission has estimated that, if current policy settings remain in place, just over 100,000 additional full-time places will be needed by 2026. 27 The complexity of the current system also imposes unnecessary costs and makes it difficult for families and services to navigate. The sector attracts State or Territory and Commonwealth regulation. Child care and early learning services are also subject to local government regulations (including building regulations). Further, the existence of multiple (sometimes overlapping) programmes aimed at improving access to services can make it difficult for families and providers to work out what assistance is available to them. 22 Department of Education, Child Care and Early Learning in Summary, December quarter 2013, Canberra, 2014, p.2. 23 Department of Education, Submission to the Productivity Commission Inquiry into Child Care and Early Childhood Learning, 2 February 2014, p. 16, viewed June 2014, <http://pc.gov.au/ data/assets/pdf_file/0005/133466/sub147- childcare.pdf>. 24 Productivity Commission, Report on Government Services, Volume B: Child care, education and training, Canberra, 2014, Table 3A.3. 25 Department of Education, Child Care and Early Learning in Summary, December quarter 2013, Canberra, 2014, p. 10. 26 Productivity Commission, Child Care and Early Childhood Learning, Draft Report, Canberra, 2014, p. 6. 27 Productivity Commission, Child Care and Early Childhood Learning, Draft Report, Canberra, 2014, p. 197. 7 Reform of the Federation White Paper

Not all of the pressures on child care and early learning can be attributed to the allocation of roles and responsibilities between levels of governments. Some pressures arise from how jurisdictions exercise their responsibilities and can be resolved by individual governments. However, clarifying roles and responsibilities between governments will free up resources to tackle these issues and will make it easier for the community to hold the right level of government to account. Pressures on child care and early learning also cannot be resolved in isolation. In particular, preschool and school are closely linked. This is especially the case for the year before compulsory school commences (preschool) where there are different arrangements across jurisdictions and services can be delivered on shared sites, including preschools attached to schools. Victoria s Linking Learning Birth-12 Years Project aims to improve collaboration between child care and early learning services and schools to create a more seamless approach to curriculum and pedagogy across the education continuum. Policy Both levels of government develop policy with respect to: equity and access; quality; workforce development; and consumer information. Equity and access The Commonwealth and the States and Territories have been working together (through COAG) since 2008 to boost preschool participation. Both levels of government also separately offer programmes to promote equitable access to child care and early learning services. However, some families still report difficulty accessing appropriate services when they need them. Accessibility concerns arise where there are not enough places to meet demand, or where the places available do not meet the needs of families looking for care. For example, emergency services workers can find it difficult to secure affordable child care that matches their irregular or unpredictable work hours. Inflexible child care arrangements adversely affect workforce participation and contribute to family stress. Some families pay for surplus days to ensure care will be available when work commitments arise. Others rely on informal care arrangements that do not attract Commonwealth fee relief. The Commonwealth helps cover child care fees for children who are at risk of serious abuse or neglect, and families experiencing temporary financial hardship. 28 It also administers programmes to: (1) help establish or maintain services in areas where they might otherwise be unviable; 29 (2) help services include children with additional needs; 30 and (3) improve educational outcomes for Indigenous children. 31 States and Territories also fund initiatives to address equity and access issues associated with child care and early learning. For example, in Queensland the Embedding Aboriginal and Torres 28 Special Child Care Benefit. 29 Community Support Programme. 30 Inclusion and Professional Support Programme. 31 For example: the Children and Schooling Programme (part of the Indigenous Advancement Strategy). 8 Reform of the Federation White Paper

Strait Islander Perspectives in Early Childhood programme strengthens the capacity of preschool providers to engage with Indigenous families. In New South Wales, the Supporting Children with Additional Needs programme helps preschools include children with additional needs. Quality States and Territories are responsible for administering the NQF, including as regulators. However, both the Commonwealth and States and Territories influence quality policy through the COAG Education Council and the Quality NP. The Australian Children s Education and Care Quality Authority the independent, national authority that oversees the NQF is jointly funded by the Commonwealth and the States and Territories, and is responsible to relevant ministers from all jurisdictions. 32 These arrangements require agreement by all nine governments to change the quality standards in the NQF. 33 Workforce development Workforce development initiatives are not coordinated between governments. In 2014, LDC providers had the opportunity to apply for Commonwealth funding to help meet the costs of professional development for their staff. 34 The Commonwealth also funds Professional Support Coordinators and Indigenous Professional Support Units to deliver subsidised professional development, training and advice for services (other than LDC centres). States and Territories also support the child care and early learning workforce. For example, the Western Australian Government provides scholarships for early childhood educators and the Victorian Government offers low-cost professional development opportunities. Information All levels of government are involved in providing consumer information about child care and early learning. The Commonwealth operates the My Child website and the Child Care Access Hotline to help families identify vacancies and make informed decisions about care. It also funds a home based parenting and early learning programme that empowers parents to prepare their child for school. 35 In most States and Territories, official information on child care and early learning is delivered through local government and portfolio agency websites. Queensland also operates a Kindy Hotline to provide advice and information on child care and early learning. 32 Australian Children s Education and Care Quality Authority, How We Work, viewed August 2014, <www.acecqa.gov.au/welcome/how-we-work>. 33 Any changes to the NQF must be agreed by the COAG Education Council. 34 Long Day Care Professional Development Programme. 35 Home Interaction Program for Parents and Youngsters. 9 Reform of the Federation White Paper

Information about the quality and availability of child care and early learning services, and how families are accessing them, also plays an important role in helping governments plan. The Commonwealth requires enrolment and attendance information from services for the purpose of administering child care fee assistance. States and Territories also collect information from services. Improved data sharing arrangements could help all governments better respond to the pressures facing the sector. Funding Child care and early learning services attract a mix of local government, State, Territory and Commonwealth funding, and the composition of funding is different in each jurisdiction. Different levels of government make most funding decisions independently. This can lead to poorly targeted support that distorts families choices and reduces the level of assistance provided to those most in need. Government expenditure has increased substantially in recent years by 80 per cent ($3 billion in real terms) since 2007-08. 36 Individuals also contribute to the sector through the payment of fees. 37 Over the past five years, fees have grown on average by 7.8 per cent per annum. The Commonwealth provides around 80 per cent of government funding for child care and early learning. 38 Around 85 per cent of this funding goes to CCB and CCR to help families meet the cost of child care. 39 Growth in child care attendance and fees has caused expenditure on these payments to increase from under $2 billion in 2003-04 to over $6.5 billion in 2013-14. 40 CCB and CCR are not available in relation to most dedicated preschool services, but they do extend to LDC services delivering a preschool programme. Government expenditure is likely to continue to grow as demand for child care and early learning places are expected to increase over time. If current arrangements continue, Commonwealth outlays on child care fees assistance are likely to nearly triple over the next decade. 41 Despite this significant investment in fee assistance, many families still find the cost of child care prohibitive. The consequences of not participating in early learning programmes are most severe for children from disadvantaged backgrounds and those with additional needs. A smaller proportion of Commonwealth funding is concerned with the educational aspects of child care and early learning. This includes: funding to States and Territories under the NP on Universal Access ($404 million allocated in 2014-15); 36 Productivity Commission, Child Care and Early Childhood Learning, Draft Report, Canberra, 2014, p. 123. 37 Preschools in public schools and some services operating under the Budget Based Funded Programme are free from compulsory fees. 38 Productivity Commission, Child Care and Early Childhood Learning, Draft Report, Canberra, 2014, p. 128. 39 Productivity Commission, Child Care and Early Childhood Learning, Draft Report, Canberra, 2014, p. 131. 40 Department of Education, Submission to the Productivity Commission Inquiry into Child Care and Early Childhood Learning, 2 February 2014, p. 16, viewed June 2014. 41 Department of Education, Submission to the Productivity Commission Inquiry into Child Care and Early Childhood Learning, 2 February 2014, p. 27, viewed June 2014. 10 Reform of the Federation White Paper

funding to States and Territories under the Quality NP (around $19 million allocated in 2014-15); funding to help government and not-for-profit preschools to improve preschool attendance and early learning outcomes for Indigenous children (around $14 million allocated in 2013-14 42 ); support for the professional development of educators (including the LDC Professional Development Programme, for which around $207 million has been allocated over three years); and a trial of online foreign language learning in up to 40 services providing a preschool programme (around $9.8 million allocated over two years). Chart 1.1 below provides a breakdown of Commonwealth funding. By contrast, State and Territory funding focuses on preschool. The States and Territories spent around $1.4 billion on child care and early learning in 2012-13 (including around $550 million in Commonwealth funding provided under NPs). 43 Approximately 80 per cent ($1.1 billion) was directed to preschool provision. 44 Preschool funding predominantly benefits children in the year before school. Current funding levels do not support preschool provision for younger children, except in limited circumstances. For example, Victoria provides funding for 3 year olds in child protection to attend preschool. The interaction between preschool funding and Commonwealth child care fee assistance is perceived by some States and Territories to be inequitable. 45 States and Territories that deliver preschool directly (i.e. through schools) spend more per child than those that favour private provision (i.e. through child care centres, which attract Commonwealth assistance). 46 42 This funding has been rolled into the Children and Schooling Programme, which forms part of the Indigenous Advancement Strategy. 43 Productivity Commission, Report on Government Services, Volume B: Child care, education and training, Canberra, 2014, p. 3.8. 44 Productivity Commission, Report on Government Services, Volume B: Child care, education and training, Canberra, 2014, p. 3.9. 45 Western Australian Government, Submission to the Productivity Commission Inquiry into Child Care and Early Childhood Learning, 20 February 2014, p. 2, viewed June 2014, <http://pc.gov.au/ data/assets/pdf_file/0018/134460/sub416-childcare.pdf>. 46 Productivity Commission, Child Care and Early Childhood Learning, Draft Report, Canberra, 2014, p. 152. 11 Reform of the Federation White Paper

Chart1.1: Composition of Commonwealth funding (2014-15 Budget) * This includes equity and access programmes, and support for the child care and early learning workforce. Source: Department of Education. Total Commonwealth expenditure on child care and early learning is projected to exceed $7.2 billion in 2014-15. Delivery Australia s child care and early learning sector is diverse. Families can choose from a range of centre-based and home-based services to meet their needs. These are delivered by a mix of community, commercial and government providers. For example, local governments in Victoria manage, fund and deliver many child care and early learning services. State and Territory governments have designed service delivery models that reflect their demographic, geographic and cultural circumstances. As a result, service delivery varies significantly across jurisdictions. Delivery of child care and early learning is sometimes integrated with other services. For example, the Northern Territory Mobile Preschool Programme incorporates nutrition education and other health services. A number of jurisdictions have developed innovative delivery models to meet the unique needs of local communities, including rural and remote communities. For example, almost 50 per cent of children in the Northern Territory live in remote and very remote areas (compared to less than 3 per cent nationally). 47 These children access early learning programmes via a range of models, including multi-level classes and mobile preschools. Similarly, Queensland offers ekindy distance early learning for children in rural and remote locations, and those unable to access a centre-based program for medical reasons. In Victoria, Kindergarten Cluster Management (grouping a number of kindergarten services under a management organisation) supports service delivery in communities where independent providers may not be viable. There is a strong demarcation in the delivery of preschool programmes across Australia. Chart 1.2 below illustrates the distribution of preschool enrolments across provider types. 47 Australian Bureau of Statistics, Northern Territory Census, Community Profiles, cat no. 2002.0, ABS, Canberra, 2011. 12 Reform of the Federation White Paper

New South Wales, Queensland and, to a lesser degree Victoria favour private provision. In these jurisdictions, LDC centres play a significant role delivering preschool programmes. In Western Australia, South Australia, Tasmania and the Australian Capital Territory, preschool is predominantly delivered by the State or Territory government. It is largely embedded in the school system and is considered to be the first year of formal schooling. Fees are generally lower for dedicated preschool programmes than LDC. Preschool in government schools is generally funded by State or Territory government on the same basis as schools and parents are not generally required to pay fees. State or Territory governments may subsidise private preschools, but not usually preschool programmes in LDC centres. Chart1.2: Distribution of children enrolled in a preschool programme, by provider type (2013) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% NSW Vic. Qld SA WA Tas. NT ACT Aust. Preschool programme within a LDC centre Non-government preschool Government preschool Source: Australian Bureau of Statistics, Preschool Education Australia 2013, cat. no. 4240.0, ABS, Canberra, 2014. Excludes children enrolled in more than one provider type or across multiple preschools. An increasing number of parents (particularly mothers) in the workforce and mounting evidence of the potential benefits of child care and early learning have fuelled demand for services. The occurrence of non-standard work hours is also likely to continue, suggesting an ongoing need for more flexible care options. Regulation The States, Territories and the Commonwealth all regulate elements of the sector, albeit for different, complementary reasons. States and Territories are responsible for regulating services, including with respect to safety and quality, and are responsible for administering the NQF in their jurisdiction. They handle almost all service interactions. The Commonwealth does not directly regulate service delivery, but it does regulate eligibility for Commonwealth child care fee assistance. 48 48 Not all child care services are eligible or choose to provide child care which attracts Commonwealth fee assistance. 13 Reform of the Federation White Paper

Approval to operate under the NQF does not constitute approval for the purpose of Commonwealth child care fee assistance, which must be sought separately from the Commonwealth. While this allows the Commonwealth to influence quality, it can also lead to overlap and duplication of approval processes for providers. To establish a new LDC centre, potential providers are required to: apply for approval (a license) from the State or Territory authority; apply to the Commonwealth for approval to administer child care fee assistance on behalf of families; and (if applicable) comply with local government planning regulations. Services that attract Commonwealth fee assistance are also subject to dual reporting obligations, albeit for different purposes. In addition, services that receive Commonwealth child care fee assistance are not necessarily within the scope of the NQF, and may be regulated by other State or Territory legislation or unregulated. 14 Reform of the Federation White Paper

Summary of current arrangements The following table summarises current government involvement in the sector. Area State and Territory role Commonwealth role Overlaps Policy Shared Shared Medium Policy lead for preschool. Policy lead for child care affordability. Policy lead for services not covered by the NQF. Shared policy role with respect to quality (through the NQF) and equitable access. Shared policy role with respect to quality (through the NQF) and equitable access. Secondary policy role with respect to preschool access (through the NP on Universal Access). Both levels of government have a policy role. For quality and access (including preschool access), these roles are coordinated through COAG. However, the Commonwealth and the States and Territories independently develop and implement policy to target equitable access to child care and early learning. Secondary Lead Medium Funding Shared funding role for preschool (though the relative contribution of each government varies according to how services are delivered). Provides funding to ensure equitable access to services and support workforce development. Majority funder of child care (through fee assistance). Majority funder of information services. Shared funding role for preschool (through States and Territories). Provides funding to ensure equitable access and to support workforce development. Some services attract Commonwealth child care funding (through fee assistance) as well as State or Territory preschool funding. Both levels of government directly contribute funds to ensure quality, equitable access to services and to support workforce development. Lead Secondary Low Delivery Provides preschool services (though the extent to which governments directly deliver preschool services varies across jurisdictions). Directly supports the delivery of around 340 child care services, predominantly in regional, remote and Indigenous communities. There is minimal overlap, as Commonwealth funded services target areas where mainstream services would be unviable. Lead Lead Medium Regulation Lead for approving (licensing) and regulating services (including those covered by the NQF). Works with the Commonwealth to oversee the NQF. Lead for regulating the use of Commonwealth child care fee assistance. Works with States and Territories to oversee the NQF. Most services are subject to both Commonwealth and State or Territory regulation and reporting obligations though for different purposes. Key Who leads Level of overlap Lead Secondary Shared lead High Medium Low 15 Reform of the Federation White Paper

1.4 Questions for consideration Collaboration between the Commonwealth and the States and Territories has improved quality and access. However, the pressures discussed above indicate that existing arrangements could be improved. The principles in the White Paper s Terms of Reference provide a useful lens for considering the allocation of roles and responsibilities between governments. Accountability To hold governments to account, members of the public must be able to: (1) identify which government is responsible; (2) access information about government performance; and (3) influence government behaviour. Overlapping Commonwealth and State and Territory roles (and changing policy emphasis over time) risk obscuring which level of government is ultimately accountable for child care and early learning, especially preschool education. Questions for discussion Does the current allocation of roles and responsibilities between governments provide certainty about which level of government is accountable for child care and early learning? If not, how can this be remedied? Does the community have sufficient information to hold governments accountable for outcomes? If not, what changes are needed? Subsidiarity The principle of subsidiarity means responsibility should sit with the lowest level of government practicable. Lower tiers of government usually have the strongest capacity to respond to the specific needs of their constituency. However, subsidiarity is not always inconsistent with Commonwealth involvement. For example, due to economies of scale and equity considerations, the Commonwealth may be the lowest level of government capable of subsidising child care by making payments to families. Questions for discussion Do current arrangements provide sufficient flexibility for States and Territories to meet local needs? Has the overlap of Commonwealth and State and Territory responsibilities hindered this? Which level of government, if any, should be responsible for responding to market failure in the child care and early learning sector? 16 Reform of the Federation White Paper

National Interest The provision of high quality child care and early learning services is in Australia s national interest. Sometimes the national interest is served through collaboration between governments. Smaller jurisdictions in particular can benefit from cooperative policies, actions and investments. However, this does not necessarily imply that Commonwealth leadership or involvement, or national uniformity, is required. There is an argument that Commonwealth involvement should be limited to where it would engender significant efficiency gains, or where there are extensive spill-overs into other areas of Commonwealth responsibility. For example, the most significant consequence of effective early learning is school readiness, with schooling being a State and Territory responsibility. Questions for discussion Is there a national interest rationale for continued Commonwealth involvement in child care and early learning? If so, in which roles and how should those roles be determined? How can national interest goals be pursued without undermining State and Territory responsibilities? In what areas, if any, do the benefits of national consistency outweigh the benefits of jurisdictional diversity? Equity, efficiency and effectiveness of service delivery, with a focus on regions Cooperation between governments has led to improvements in child care and early learning, and efficiencies in harmonising regulatory regimes. The establishment of the NQF is an example of this. However, ongoing shared roles can lead to reduced equity, efficiency and effectiveness of service delivery. For example, the overlap between the NQF and Commonwealth oversight for the purpose of child care fee assistance may act counter to the efficient delivery of services. Child care services are required to obtain approval from the Commonwealth in addition to the State or Territory. These services are also required to report to both levels of government. Questions for discussion What changes could be made to roles and responsibilities that might improve the equity, efficiency and effectiveness of child care and early learning service delivery for children, families and providers? Are there changes that could be made to roles and responsibilities to improve outcomes for vulnerable or disadvantaged children? Durability Disruptions to policy, funding, regulation or service delivery can create uncertainty and impose transition costs. Accordingly, it is important for the allocation of roles between governments to be able to withstand changes in population, community expectations, workplace flexibility, and funding bases. Since 1972, successive Commonwealth governments have committed funding to 17 Reform of the Federation White Paper