Interview on 7LA Tasmania Talks with Brian Carlton
Making child care more affordable, accessible and flexible

Brian Carlton: Okay, there’s a fair bit going on in Canberra, as I’m sure you’re aware. The so-called omnibus bill, which to the best of my working out is about 16 different bills bundled into one. Some of them are savings bills; some of them are spending bills. Ostensibly the savings are meant to be coming from various changes to the family payments and then there is an up, we’re told, in terms of child care subsidies. 

Okay, clearly there’s a whole bunch of other things here. As I say, the omnibus bill is literally as you would imagine from the word, a whole bunch of bills all bundled in together which in this case, the Senate is expected to vote on in one go. That’s not likely to be the way this works, based on some noises from the Government acknowledging that they’re struggling to get this through. Labor won’t support it. Nick Xenophon’s basically dug in and he’s not going to either. Jacqui Lambie won’t. So there’s issues with the crossbenchers there. 

So what I wanted to do is sort of isolate one area here of what’s happening. Perhaps we’ll get an overview explanation from the minister but isolate one area and just explain what the Government’s intending to do with child care subsidies. To that end, and I’ll ask him why in a sec, this area’s being looked after the Education Minister federally, as opposed to the Social Services Minister. 

I have the former on the phone now, Simon Birmingham, and minister I must apologise too, we had a bit of backend confusion as to when you were available and a schedule clash or two. So I must apologise for giving you what seemed to be a slightly hard time but I’m very glad you’re here today, thank you.

Simon Birmingham: Well good, good morning Brian. I’m pleased you could finally get us on air and yes, for the benefit of your listeners, we’d certainly said last week that I was available and happy to talk and thankfully all confusion has been ironed out and here we are able to chat today.

Brian Carlton: Okay, minister I think most of the confusion was mine. Can you clarify why you’re looking after what are effectively child care rebates in the education portfolio?

Simon Birmingham: Because across the child care sector, of course, there’s an awful lot of early education and early learning that happens. And so as a government, we believe the priority there is on ensuring that in the ongoing regulation and focus in that child care sector, we do have high quality early education outcomes and that’s why it sits in the education portfolio, even though the actual payment of the subsidies and so on is a form of welfare in some ways, the delivery of child care is delivering not just care for children but educational opportunities and outcomes.

Brian Carlton: Okay. In terms of the child care rebate, let’s look at that for a sec. The plan was to lose some family payments that would fund increases the child care rebate overall. Can you just talk us through that?

Simon Birmingham: That’s right. So firstly if you look at the current model, there are two different payments that people get. It’s terribly confusing. There’s a child care benefit and a child care rebate. Our proposal is to reform that by abolishing all of those …

Brian Carlton: Right.

Simon Birmingham: … and putting in place a new single child care subsidy, a means-tested subsidy, as against the current child care rebate which isn’t. And this involves additional expenditure, additional investment in the child care and early education system to the tune of about $1.6 billion. And of course, at a time when the budget’s deep in deficits, we want to make sure that every single extra dollar that we spend is paid for and funded and that preferably overall we drive more savings into the budget. And that’s exactly what we’ve proposed here with a range of different savings measures the Government’s proposed over the years and indicating that we must get sufficient through to pay for the child care reforms and to make some further savings to the budget bottom line.

Brian Carlton: Okay. I don’t think anybody would have too many problems with the fundamental nature of the change. As you read through the detail though, and as ever the devil is in it, you read this staggering stuff. Like for example, a family income of $170,000 a year to $250,000 a year attracts a subsidy of 50 per cent of child care costs. And then when you get to the top end here, so from 250,000 to below 340,000, the rates graduates down to 20 per cent, tapers off. But families earning more than $340,000 still get a 20 per cent coverage of their child care costs on behalf of the taxpayer. They don’t need that, minister. Why is that there?

Simon Birmingham: Well Brian, it may come as a surprise to you and many of your listeners to know that that’s actually a significant cut that we’re undertaking at that top end …

Brian Carlton: [Talks over] I don’t care whether it’s a cut or whether it’s an increase, I don’t care. We don’t care.

Simon Birmingham: … so we can get more in the lower end. Now, so at present under the current child care rebate model, those high income earning families can get 50 per cent of their child care fees paid for, without any consideration of their incomes.

Brian Carlton: [Interrupts] How on earth did we end up in that situation? Can we just stop now there for a sec, because minister, you’re talking to a state now that has below average national income levels. You have people who are in dual working family, in other words both parents are out working. Their take home family income might be $70,000 or $80,000. They pay tax. Part of their taxes are going to fund families earning more than $340,000 and there’s no ceiling on this is there, minister? There’s no top end, so if you earn $1.5 million a year or a billion dollars a year, you still qualify for the 20 per cent.

Simon Birmingham: There is no ceiling on it, you’re right. And as I say it’s currently 50 per cent now. That’s been the case for a long time.

Brian Carlton: Well, why do they get anything? Why do they need- minister, please make the case for me: why does a family earning in excess of let’s just say $250,000 a year need any government subsidies for child care?

Simon Birmingham: So, what the Productivity Commission when we got them to analyse the child care system found was they said what really matters in all circumstances is the second income rather than necessarily the family income. But what a decision between whether somebody goes in to the workforce or not is still a consideration about whether that second income earner is worth their time and money going in to the workforce.

Brian Carlton: [Talks over] Does it make that much difference if the first income earner is earning so much by themselves?

Simon Birmingham: Well, it can make a difference. Now the Productivity Commission recommended that the maximum rebate should be 30 per cent. As a Government we decided we thought that was still too generous so we’ve put it in this legislation at 20 per cent. That’s a cut of thousands of dollars a year to those families compared with what they’re currently getting so that we can invest it back in the lower end.

Brian Carlton: [Talks over] No, you- okay- minister …

Simon Birmingham: And you talked about the- you talked about the average of families in Tasmania …

Brian Carlton: Okay.

Simon Birmingham: Let me tell you a family earning $80,000 a year with two children, two people at work, two children in the child care system for three days a week, they will, under our reforms, including the changes that are proposed to Family Tax Benefit, be $3000 a year better off.

Brian Carlton: How much better off would they be, minister, if we weren’t funding families above $250,000?

Simon Birmingham: Well Brian, what we’re paying for families earning less than $65,000 a year is 85 per cent …

Brian Carlton: [Interrupts] Which is excellent. That’s what I exactly what I’m arguing minister, exactly.

Simon Birmingham: So it’s costing $100 a day for them to have a child in child care. It will actually only cost them $15 because we’ll be picking up, the taxpayer will be picking up 85 per cent of the cost there.

Brian Carlton: Look, for low income families, minister, I have absolutely no issue with that at all. In order to survive in the modern economy, more often than not two parents need to work and that obviously means outsourcing child care. The state has to pick up some of the responsibility for that because we’ve largely created the economy in which these families are operating. 
Having said that though, having said that, how much more money could be steered towards people who genuinely need it? I mean, we get lectured all the time about the age of entitlement and how we have to pull back on this and pull back on that, and it’s right. I made exactly that editorial comment yesterday, and then when people read a change to a child care payment, where families earning not- un-means tested, families earning more than $340,000 up to infinity still get 20 per cent of their child care rebate. It’s just nonsense. You cannot sustain that argument. People will- it doesn’t pass the pub test, sir, with respect

Simon Birmingham: Well, Brian [laughs], would you believe, and I guess this is- you know, this is the battle we have to try to get things through the Senate. So would you believe that at the election, the Labor Party’s alternative policy – because we actually took this policy to the last election – the Labor Party’s alternative policy to ours, and ours, as I say, is to take a 50 per cent subsidy for those high income earners and cut it down to 20 per cent …

Brian Carlton: [Talks over] I’m saying to cut it down to nothing, minister.

Simon Birmingham: … Labor’s alternative, and this is one of the reasons why they oppose what we’re putting forward in the Senate, was to actually keep paying 50 per cent and let them claim not a cap of $7500, but a cap of $10,000. So this is actually one of the real challenges we have in getting reforms through the Australian Senate, that you have to consider all these different permutations and Labor have said they think it’s unacceptable to even go to 20 per cent. So we have tried [indistinct] …

Brian Carlton: [Talks over] In this specific income bracket.

Simon Birmingham: … a better deal, a better deal by cutting at the top end, cutting by thousands of dollars for each of those families what they’re currently getting, reinvesting it at the bottom end. But even that is facing opposition, before we get to your proposition which would be to take it to zero at some stage.

Brian Carlton: Take it to zero. Minister, come on. Again, the pub test. I know it’s a cliché, use the sniff test, call it whatever you want. But the idea that any- a family earning –  and I’m just- this is an arbitrary number here – a family earning more than $250,000 gets any support from the taxpayer at all under any circumstances is insane.

Simon Birmingham: [Laughs] As I say, Brian, we’re trying to reduce it. And I appreciate you’re arguing we should go even further. What I’m arguing is …

Brian Carlton: [Interrupts] For those who don’t need it, minister. For those who don’t need it. For those who don’t need it. This is not- and I’m not making an absolute argument here. I’m absolutely backing your case for increasing the rebates for families on low incomes. That’s just common- it makes sense. But the sense runs out when you go through the actual fine detail of this. Now, I just challenge anyone, any family – or sorry, any family earning less than $250,000 a year to come up with one justifiable reason why that family should receive one brass razoo of taxpayer coin.

Simon Birmingham: And- look …

Brian Carlton: [Talks over] For anything, minister! For anything. Minister, for anything. Not just child care rebates. For anything.

Simon Birmingham: And look, I’d be happy- well. I’d be happy for us to perhaps have this argument if there was support for us to make the cuts at the top end that we’re already proposing. We can’t even get that support at this point in time. I mean, the one other point though, just in fairness, that I’d make – and this is not an argument for us to give money or more money when we’re proposing …

Brian Carlton: [Talks over] We’re going broke, minister [laughs]. We’re going broke.

Simon Birmingham: … to reduce the amount of money [indistinct] the high end, but the vast majority of tax paid in this country is of course paid by higher income earners. The- families in the types of circumstances where we’re talking about increasing the child care rebate to them …

Brian Carlton: [Interrupts] Yes, we have a progressive marginal income tax system.

Simon Birmingham: … in net terms don’t actually pay tax once all of the Government benefits that are received back and so on are taken into consideration. But what we want to do still is increase the support so those families at the lower end don’t fall off a cliff [indistinct] child care support. They- it’s only families under $185,000 a year who will have the cap on child care support completely abolished. It’s only families on lower and middle incomes who will see their rate of child care benefit increased, and families on higher incomes will see a decrease. So it is actually a big change, a change that is absolutely moving in the same direction that you’re arguing for, maybe not going as far as you want. But even moving in that same direction, we’re having trouble getting the Labor Party to even engage in the conversation at all.

Brian Carlton: Well, this I would put it to you is exactly the problem that people are identifying with politics. There’s argy-bargy. You can’t do this because they won’t agree, all of that. Okay, we don’t care. Because what is at stake here is a principle, minister. A principle. And that is that a $70,000 a year single income earner, their taxes are subsidising families earning in excess of $250,000, $340,000 a year up to infinity. Please explain that to them.

Simon Birmingham: Well, Brian, I’m trying to really drive home the point here.

Brian Carlton: [Talks over] No, I know what you’re saying, minister. You’re talking about politics. Minister, you’re talking about politics.

Simon Birmingham: [Inaudible] so that we can [indistinct] in supporting those lower income families.

Brian Carlton: No, minister, you’re talking about politics. I’m talking about what’s the right and the wrong thing to do.

Simon Birmingham: [Talks over] I’m talking about policy. Policy that’s before the Parliament right now.

Brian Carlton: Okay. Why should a $70,000 single income earner be subsidising a family on a million bucks a year for child care? Why?

Simon Birmingham: Brian, we have a tax system, as you say, that is highly progressive. Now, a family on a million bucks a year, if you put it that way, is going to be paying hundreds of thousands of dollars a year in taxes. Hundreds of thousands of dollars a year in taxes.

Brian Carlton: Okay, so is the single person. So is the single person, minister.

Simon Birmingham: So that family, that million dollar family is subsidising hundreds of other Australian families in the taxes they’re paying.

Brian Carlton: But that’s sort of how the system’s designed to work, minister. The system is not designed to take from those earning significantly less than that and giving it to the rich people.

Simon Birmingham: And rich people earning- you don’t have to be earning a million dollars, but rich people earning hundreds of thousands of dollars are all significantly net contributors into the tax system. 

Brian Carlton: [Talks over] Minister, if I declared a …

Simon Birmingham: They’re giving a- they are subsidising many other families.

Brian Carlton: Okay, don’t worry, this is never going to happen. But if I somehow declared a personal income of a billion dollars and I’ve got two kids in child care, the poor mugs out there earning 50, 60, 70 grand a year are going to be paying for me to send my kids to child care.

Simon Birmingham: No, Brian. If you suddenly had an income of a billion dollars, you’d be paying about $500 million in tax. 

Brian Carlton: [Interrupts] Yeah, no, I’m talking about child care costs.

Simon Birmingham: So you would be subsidising thousands of families at that stage.

Brian Carlton: No- yes, but that’s the understanding. But minister, that’s how it works. 

Simon Birmingham: Yes, and that’s exactly what would be happening.

Brian Carlton: So you’re saying oh, the poor rich people are paying a little bit too much tax, so we need to give them some back in the form of a child care rebate.

Simon Birmingham: Well, no. You come back to – and this is again, as I said before – the argument the Productivity Commission made and others make. [Inaudible].

Brian Carlton: [Interrupts] Well, somebody with a bit more sense among our elected representatives needs to have a bit of a chat with the Productivity Commission, or perhaps in this instance just ignore them on the basis that it’s crazy.

Simon Birmingham: Well, we think it is a problem, the scale of the rebates that are going to high income earners.

Brian Carlton: [Interrupts] Well change it, minister. You’re the Government.

Simon Birmingham: Well, we are changing it, Brian. That is why we are changing it, and as I said, Labor’s reforms they proposed at the last election would have put $176 million more into the pockets of families earning more than $250,000.

Brian Carlton: [Talks over] And minister, this is not just a …

Simon Birmingham: We are proposing to take millions of dollars away from those families and put it into the pockets of families earning less. Now, as I said. Hear your argument; you’d like us to go even further. But right now, we can’t get the Senate to go as far as we are proposing, and Labor are one of the main roadblocks and obstacles to that. So I’m here, happy to talk to you.

Brian Carlton: [Talks over] Okay, well, one- okay [laughs].

Simon Birmingham: I’d like to know whether any of the Labor MPs from Tasmania will come on and say why they think a 50 per cent rebate should continue to go to the families you’re talking about, which we are proposing to cut to 20 per cent. You argue it should go to zero.

Brian Carlton: [Talks over] Of course it should go to zero.

Simon Birmingham: I hear that. We are proposing to take it from 50 per cent to 20 per cent. Labor are defending 50 per cent.

Brian Carlton: Welfare was designed for people who cannot, cannot fend for themselves. It’s meant to be a short term thing. It’s not meant to be an ongoing permanent subsidy for families earning a bloody million dollars a year. I’m sorry, minister. It’s just not going to wash with me, and I doubt very much it’s going to wash with too much of my audience. We’ll find out when the phones go berserk.

Simon Birmingham: And I hear you, and again I’d just stress to your audience, we’re proposing a cut for those top earning families from 50 per cent child care rebate to 20 per cent child care rebate. We’re reinvesting that so that low income families can go from about 72 per cent child care rebate to 85 per cent child care subsidy. So a big reinvestment in at the bottom end, and yet as I say, the policy Labor took to the last election defended keeping the 50 per cent and was going to pay those families even more into the future.

Brian Carlton: Are you going to break up the Omnibus Bill in order to get at least some of it through?

Simon Birmingham: We’ll do what it takes, is probably the short answer there in terms of negotiating with the crossbench on the presumption that Bill Shorten and Labor continue to check out of this conversation. We will negotiate as we have to with the crossbench to make sure that we do help those low income families, give them the additional support that they need, and still pay for it without adding to the nation’s credit card.

Brian Carlton: Yeah, adding to the credit card. We keep hearing about that. Adding to the nation’s credit card. Adding to the nation’s credit card, and here we are paying subsidies to rich people. I don’t get it. Minister, I appreciate your time today. Thank you.

Simon Birmingham: Thank you Brian.