OECE’s Submission to the Ministry for Regulation on the ECE Regulatory Review

This submission to the Ministry for Regulation takes an economic perspective on the ECE regulatory system and regulations – that what is good for children and families is good for the sector and ultimately our society and economy.

Title: The Economics of Early Childhood Education and Care Regulations

Submission to the Ministry for Regulation
On the ECE Regulatory Review
Submitted by: Office of Early Childhood Education
Date: August 30, 2024.

Abstract

Minister Seymour issued a statement to the early childhood sector that read: “I seek to remove the regulatory burden but in return I want to ensure the $2.7 billion Crown investment in early childhood works for the people of New Zealand”¹. 

In this submission on the Economics of Early Childhood Education Regulations we outline that there are various outcomes which government may seek for its $2.7bn investment and discuss how regulation may incentivise behaviour which can lead to desired outcomes.  Deregulation of ECE would lead to sub-optimal outcomes. Saving money now could cost a lot more later.  We identify group-size in centre-based services as a feature that NZ needs to have regulation on.

We review issues in the regulatory system and report that in the current context of compliance, monitoring and enforcement, fund and forget is not an appropriate strategy for NZ’s ECE sector. Funding services to provide care and child education but leaving the setting and monitoring of standards up to ECE providers whose main focus is maximising revenue will not work for children and families or benefit the economy.  However, compliance would be enhanced by (a) viewing parents as a valuable source of information, (b) enabling teachers and all children’s workers in ECEs to exercise responsibility, and (c) service provider training.

We outline the basic structure of the ECE regulatory system and make suggestions for what a more efficient system would look like.  We also include a list of recommendations to (a) improve monitoring and enforcement, (b) create new requirements to respond to current needs and gaps, and (c) strengthen some of the current requirements.

About the Office of ECE – Te Tari Mātauranga Kōhungahunga

The OECE support’s the provision and use of ECE, alongside promoting safe and better quality ECE for children and their families and whānau. We place the interests of children and their parents, family and whānau in ECE at the centre of our work. Our work involves driving high-quality ECE provision. We promote the Code of Conduct for Early Childhood Services and uphold the Rights of Children in ECE

Desired outcomes and incentives

A desired outcome that a government wants in return for its financial investment may be childcare or it may be more than just childcare, e.g.

• Safe care.
• Reduce or eliminate educational disadvantage.
• Promote children’s social development and/or other areas of learning and development such as cognitive, language, and physical.
• Introduce children to a group environment before they start school.
• Accessible ECE, or accessible only for certain groups e.g., immigrant families, teenage parents, single parents, infants or preschoolers, children with learning needs.
• Raise household income through parent engagement in paid work or study.
• Grow social capital – parent development of skills e.g. by being on committees.
• Better parenting – parents observing and learning from teachers and educators.
• Preservation and passing on of culture: “the ability to talk and communicate, to share ideas, to interact on the basis of common understandings is the ultimate ties that bonds us all together as a society. Education is a vital part of that bonding“.²

Economic development is an outcome that can be achieved through investment in quality ECE, according to the World Bank’s perspective: “Increasing access to quality childcare can have multigenerational impacts, improving women’s employment and productivity, child outcomes, family welfare, business productivity and the economy as a whole” (p. 12).

Regulatory and funding mechanisms

The two main mechanisms used by governments in countries across the world to incentivise behaviour which can lead to desired outcomes for ECE are 1. Funding and 2. Regulation. 

Funding can be most effective as an incentive when it sits alongside standards (i.e. regulations and rules).  In Australia, the approach taken is one of incentivising services to engage in working toward higher standards.  To get funding, early childhood services need to engage in a quality review and assessment process every 1, 2, or 3 years depending on their rating.  Additionally, different States across Australia prescribe minimum requirements (regulations) for things like teacher qualifications and adult-child ratios across age groups (more detail on this is provided in a presentation on Australia’s assessment and rating system for quality early childhood education and care by Associate Professor Wendy Boyd).

In NZ, funding is used in various ways. For example, it is used to incentivise the growth in supply of services providing long-day childcare to support women’s labour-market participation (e.g. Kindergarten Associations were incentivised by 20-Hour ECE funding to relicense their kindergartens as all-day services; and education and care centre providers are funded by government at higher rates compared with Playcentre).  But funding is not used well to incentivise the provision of ECE services in locations that might suit children and families best such as in schools, workplaces and employer-supported ECE provision.  Funding is also not used well to ensure an adequate supply of education and care centres that are breastfeeding-friendly and allow families to enrol in just the hours of care they need for their child and not be locked into paying for more hours than they want.  

Funding is used to incentivise teacher-led centre-based services to employ a higher proportion of qualified staff but arguably the outcome is sub-optimal. Services can claim the funding incentive even if they have non-ECE qualified teachers which defeats the purpose of the funding being to ensure that children are taught by appropriately skilled and knowledgeable adults.  Another example, of funding leading to sub-optimal or undesired outcomes is the Overseas Teachers Finder’s Fee, which is simply cash in the hand for service providers because they are not required to retain their teachers, and it has not helped the teacher shortage.   

In the past, certain grants were available only to not-for-profit community ECE groups.  Today funding is used as a mechanism to increase the supply of child places by incentivising business investors to enter the sector.  Funding is applied evenly regardless of who owns a service and profit-making is possible should the service provider desire this.  However, this may not support other desired outcomes.  The results of a 2020 survey of the ECE teacher workforce discovered sizeable differences in views on the quality of care and education provided to children between those who worked in private and those who worked in community ECE teacher-led centres.  Respondents from the private part of the sector were:

• less likely to have time to develop relationships with children as individuals,
• less likely to experience staffing ratios that were better than the minimum legal requirement, and
• more likely to view the quality provided by their service or any other service like their service as not being what they would be happy to use for their own child.

The last cost-driver survey done by the Ministry of Education in 2013 revealed that private services had lower costs (e.g. lower waged staff) and higher incomes than community-based services.  Community-based services had lower parent fees and higher costs than private services³. 

Douglas Higgins,⁴ a former UNICEF senior manager noted to the Productivity Commission that in NZ the “impact of substandard ECE on costs to the health sector, reduction of taxation revenues, and higher social safety-net welfare costs, indicates that the current structure of New Zealand’s ECE contributes to undermining social and economic development.” (p. 22)

Regulations and rules (licensing criteria)

Regulation standards are necessary to set the benchmark for adequate care and education of children. It lets everyone know what the expectations are for every service.  It sets what we call the “floor of quality” below which no ECE service should operate.

Deregulation and risk 

We have two warnings for the Regulatory Sector Review into ECE concerning the political call to reduce the regulatory burden on service providers. First, we caution against deregulating the ECE sector because unregulated ECE or back-yard care has significant risk for children.  A baby farming scandal and crisis over the care of young vulnerable children led to the promulgation of the Child Care Centre Regulations on the 7^th November 1960, pursuant to the Child Welfare Act 1925. 

Second, we caution against rushing to loosen or remove rules and requirements by stripping out regulations as there is a risk of simplifying processes with unintended consequences costing our country thousands or millions of dollars more in the end and jeopardising children’s safety, learning, and lives.  Before decisions are made to remove any rules and requirements when other safeguards are not in place, it is important that you do a Child Impact Assessment (CIA) and obtain feedback from relevant health, child protection, children’s rights, and international experts on ECE quality. 

When regulations and rules are fashioned to suit the wishes of service providers without consideration of potential unintended consequences this can lead to sub-optimal outcomes. An example is what happened in response to a change in regulation for the supervision of children resting and sleeping.  The Education (Early Childhood Centres) Regulations 1990, Clause 23, No. 4 required that “the licensee of a licensed centre shall ensure that all children resting or sleeping are at all times within sight of a staff member”.  The Education (Early Childhood Services) Regulations 2008 did not include this requirement and instead a licensing criterion was established that only required a staff member to check sleeping children every 5 or 10 minutes.  This meant that staff did not need to stay with children and were free to do other things – saving service providers money. However, the Ministry of Education realising that these checks might not even happen, and children could be left unsupervised behind closed doors in sleep rooms for very long periods, introduced a requirement for centres to keep a record of each time the child is checked.  Therefore, there is now an added paper-work burden on staff and children lose out by not having the same level of supervision as before the change in regulation.  

An example of under-regulation (group sizes)

There is a core set of regulatory provisions that research studies including large scale studies in America and the UK agree are key indicators of positive developmental outcomes for children: adult:child ratios, group size, and adult training in child development and ECE.  NZ does not have regulation for group size in ECE centres.  This is of particular concern because failure to regulate group size erodes the benefits of ratios and ECE trained teachers.  The three indicators of ratios, group size, and ECE trained teachers are inter-related and all are necessary to regulate. The government would be wise to regulate group size in centres to maximise the benefits of the Crown’s $2.7bn investment in ECE. 

Compliance, monitoring and enforcement

ECE services are licensed in perpetuity and therefore there is no renewal process to ensure ongoing compliance after a service receives its licence.  In this section we discuss compliance, monitoring, and enforcement issues.

Compliance

Compliance ensures the ECE service operates legally, protecting the service’s revenue stream, its reputation and operation. Regulatory compliance in ECEs is also important to protect everyone from harm and mitigate risks.  For example, meeting children’s worker safety checking requirements will ensure a staff member is not employed who has faked their qualifications or has previously abused children.

Ideally, ECE service providers see the benefits of compliance and manage this.  For example, Playcentres are known to have self-reported to the Ministry of Education when they are unable to meet Reg 44(1)(a) qualification requirements for adults or Reg 44(1)(d) person responsible qualification requirements.

Monitoring

The rise in the number of complaints, serious incidents, and discovery of non-compliance in services which may have existed for years shows that the high-trust model for compliance in NZ ECEs is not working.  It is not appropriate to leave the monitoring of standards and compliance up to the private sector whose main focus is maximising revenue. 

But, the Ministry of Education is not resourced to undertake regular monitoring and compliance checks.  Irregular monitoring and infrequent inspections make a travesty of the regulatory standards designed to protect children and ensure services function satisfactorily.  

Enforcement

Regulations are only as effective as their enforcement.  At present enforcement is limited by resourcing constraints constraining the Ministry of Education’s ability to visit and build relationships with individual service providers to support compliance.  The upshot of irregular and inadequate monitoring is the emergence of lobbying against regulations by service providers and their representatives, a growth of misinformation on regulations, and souring of service provider relationships with the Ministry of Education.  

Providers can react negatively when concerns trigger a licensing visit by the Ministry of Education, and if they believe they are compliant or that non-compliance doesn’t matter.  Providers have also started contacting and lobbying government ministers to challenge Ministry decisions.

A second issue with enforcement, is the question of whether the penalties for non-compliance are working and are strong-enough to deter non-compliance. The main penalty is a downgrade in licence to provisional. At most a service can lose its licence for very serious or persistent non-compliance, and this happens rarely. There are no fines. The Ministry may fund the cost of professional support to help the service develop the necessary knowledge, skills, and processes to become compliant. 

The question of effective penalties is something that is best left to be examined after proper monitoring and regular inspection of ECEs is put in place, and three specific activities to uphold regulation and compliance are implemented as described in the next section.

What complements rules for a broader regulatory agenda

1. Viewing parents as a valuable source of information

Parents are not seen in the regulatory system as having a significant role to play as a valuable source of information and ensuring ECE services value compliance and follow the rules. 

In ECE services, parents can be told that if they don’t like what’s happening and complain they can leave or go somewhere else (i.e. to shut-up or risk their child’s place). 

The word of the service provider is more likely to be accepted by the Ministry of Education over the word of parents when parents make complaints.

Parent representation on Ministry of Education and ECE related advisory committees is not supported.  This needs to change. 

2. Enabling teachers and all children’s workers in ECEs to exercise responsibility

Teachers and all children’s workers have a responsibility to protect children and ensure their wellbeing.  When they see harmful practices, they should step in and stop what’s happening (see: presentation by Dr Mary Moloney on Early childhood education regulations, policy makers, and our collective responsibility to children (youtube.com). However, ECE staff can experience bullying and may find that they are not listened to or believed when they speak up (read how hard is it to shut down a centre).  Staff may have employment contracts that require them not to speak negatively about the service to anyone.  Staff may be fearful of being seen to be troublemakers and that they may not get another job in an ECE (i.e. be ‘black-listed’). 

Better protections are needed for staff who speak up regarding non-compliance.   In-service training needs to be made available and accessible to teachers and all children’s workers on what the regulatory requirements are and the tools to help them exercise their personal/professional responsibility for compliance.

3. Provider training

Service providers don’t know what they don’t know.  A service provider can be anyone. There’s no requirement for providers to be trained early childhood teachers or have any experience working in ECE.  Even if they have ECE experience they may find it difficult to understand management and human resource requirements, playground, or building requirements. 

Compulsory training for service providers on their responsibilities and legal requirements, would support the regulatory system by enabling service providers to be better informed and engage proactively and positively in compliance activities.

A more efficient approach to the regulation of ECE

The current system is underpinned by the Education and Training Act 2020.  The Act allows regulations and licensing criteria to be developed and requires government to fund all licensed ECE services. 

The Education (Early Childhood Services) Regulations 2008 outlines the minimum standards every licensed service, whatever the service type, is required to meet to operate.

The Licensing Criteria, which the Ministry of Education has developed, are used to assess compliance with the minimum standards. 

The layers that make-up the ECE regulatory system are shown in Chart 1. What a more efficient system would look like is illustrated in Chart 2. 

1. Licensing criteria more specific to service type

There are four different sets of licensing criteria depending on the category of service:  home-based, centre-based education and care (namely teacher-led centres and Playcentre), Kōhanga reo, and Hospital-based services. 

This categorisation of services arguably is too broad.  Playcentre and teacher-led centres are assessed using the same licensing criteria, yet these two groups of services have very different roles in the sector.  Moreover, it does not make sense that centres whose purpose is solely to provide sessional educational experience for children in the year or two before they start school are assessed using the same licensing criteria as long-day care centres.

2. Replace guidance with indicators of meeting licensing criteria

For each criterion in the Licensing Criteria the Ministry provides written tips and information for how a service might choose to meet it.  The ‘guidance’ as it is called, causes confusion for compliance.

The guidance needs to be replaced with carefully worded indicators of meeting criteria so services know exactly what is required of them to meet the criteria and therefore the minimum standards. 

3. Locating regulatory responsibilities in the Ministry of Education

The Ministry of Education has stewardship of the ECE sector, but in relation to other Acts and Regulations relevant to ECE it discharges its responsibilities to other organisations and agencies. However, there are areas where the Ministry of Education would be better placed to make judgements on compliance, such as when there are accidents involving young children and helping to determine breaches under the Health and Safety at Work Act 2015.  

In areas where the Ministry of Education has responsibility, it can defer to other agencies instead of developing its expertise, e.g. the Ministry of Education requires ECE service providers to implement the Ministry of Health ECE service guidelines on preventing food-related choking by young children.  Another example is ventilation. There is ample evidence that C0² monitors would help prevent and reduce the spread of airborne diseases in centres. But the ministry seems to be waiting for Health NZ on this.

Outside of the Education (EC Services) Regs 2008 there are further ECE relevant regulations.  For example, the requirement for ECE centres to keep an immunisation register is in the Health (Immunisation) Regs 1995.  It would save time and support service providers if all relevant requirements in other regulations were in the Licensing Criteria.

Recommendations

Below is an initial list of recommendations to improve monitoring and enforcement, create new requirements to respond to current needs and gaps, and strengthen some of the current requirements.

1. Improving compliance, monitoring and enforcement

• Instruct and require the Ministry of Education to do yearly inspections of ECE services, to check compliance and provide support.
• Introduce mandatory reporting to the Ministry of Education of suspected non-compliance in ECEs for government agencies such as ERO, and for tertiary education providers that place students in ECEs for teaching practice.
• Introduce mandatory reporting to the NZ Police by ECE providers of suspected child abuse that has occurred either within the ECE service or outside of it.
• Add into licensing regulation that any service that acts to cover up a serious incident or injury involving a child or denies knowledge of how an injury occurred to avoid investigation or being sued, will have its licence revoked.
• Require services to report all incidents and injuries to children requiring medical attention from a health professional to the Ministry of Education whether the child is admitted to hospital or not.
• Require service providers to be transparent on the occurrence of serious incidents by informing the families of all enrolled children that there has been a serious incident and what happened.
• Require service providers to inform the families of all enrolled children in writing when (a) their licence is downgraded or changed for any reason and (b) when they receive a written directive by the Ministry to fix a serious health or safety breach.
• Require organisations that operate community-based services to involve parents in governance and decisions concerning their service e.g. through a parent management committee.
• Require annual reporting by service providers to the families of enrolled children on how they are meeting the Code of Conduct for Early Childhood Services.
• The Health (Immunisation) regulations 1995 requirement for keeping a record of child immunisations should be included in the ECE regulations or licensing criteria.
• Require the Ministry of Education to work with Worksafe on assessing safe practices, policies, and procedures, in the ECE context for infants, toddlers, and young children.
• Revise and improve the standards that are applied by Worksafe in relation to children’s health and safety in ECEs. This includes the standards for notifiable incidents and whether Worksafe investigates.
• Require the Ministry of Education to develop licensing criteria for all health and safety regulations and not ask ECEs to go to other agencies for any requirements.
• Require ECEs to have a policy on bullying covering all adults in the service and a procedure for reporting.
• Require the Ministry of Education to co-ordinate compulsory training for all existing and new service providers and staff who hold the role of ‘person responsible’ on the regulations and rules and their responsibilities for assuring compliance.

2. New requirements to meet needs and address gaps

• Regulate for group size in teacher-led centre-based services (i.e. the maximum number of children per group based on child age and health and learning needs and requiring that each group of children have their own teacher or teachers). 
• Require children’s toilets in centres to have doors or partitions that provide privacy.
• Ban see-through toilet doors and partitions.
• Ban the use of personal cell phones and electronic devices in centre-based services by staff and managers and service providers for taking images of children.
• Ban services from having no-touch policies and practices (for example restricting staff from picking up a crying infant or child who has fallen over).
• Require centre-based services to have physical environments that include a lot of softness (including real grass, cushions, rugs, carpet, couches, swings), and not be dominated by hardness (e.g. wood, concrete, and artificial ground surfaces).
• Reinstate the previous service size regulation that had a limit of 50 children per licensed space and fund appropriately for the smaller size.
• Require centre-based services to have and use a CO2 monitor to keep check on their compliance with the regulatory requirement for ventilation.  
• Require all services to keep a record of early childhood service staff vaccination and immunisations. 
• Add a curriculum requirement that ECEs must implement practices to enable parents to engage in learning activities with their children in the ECE and/or at home (See the UNICEF paper for more).
• Legislate for the right of all young children to participate in ECE. Children currently don’t have a right to participate in ECE in NZ Aotearoa, and this is a change that our country could make to support children’s rights.

3. Current laws and requirements that need to be changed / improved

• Repeal Section 26 of the Education and Training Act 2020 to support free kindergartens to return to being donation-based, so children can experience ECE no matter what their family income may be.
• Amend the term ‘education service’ in the Education and Training Act (the Act) to include all ECE services that are incorporated societies and have charitable status.
• Change the minimum requirement for indoor space in centre-based services from 2.5 square meters per child to 5 square meters per child.
• Amend the ratio for sessional centre-based services from 1:15 to 1:10 for children aged 2 years and older so the ratio requirement is the same as all-day services.
• Change the requirement for how ratios are calculated from the current ‘under-the-roof’ approach in centre-based teacher-led services to how many children are in a space (room and playground area).
• In the requirement for how the ratio is calculated in teacher-led centre-based services add that any teaching staff who is doing cleaning or maintenance that means their attention is not on the children, is to be excluded from being counted toward meeting the ratio requirement.
• Amend Regulation 44, Clause 3 to require that at least 50% of the staff counted in the adult-to-child ratio with children in teacher-led centres must be ECE teacher qualified and hold a practising certificate. 
• Restore the regulatory requirement that a Person Responsible in teacher-led centres must be ECE teacher qualified. An ECE teaching qualification recognised by the Teaching Council NZ and no other qualification must be recognised in the regulations as the benchmark qualification for teaching in a teacher-led ECE centre (the three-year Diploma/Degree or Graduate Diploma (Level 7) qualification).
• Restore the regulatory requirement for a ‘Person Responsible’ to hold a full practising certificate. 
• Amend the First Aid Certificate requirement to include that in teacher-led centres every adult in the adult:child ratio must hold a current First Aid Certificate.
• Add a requirement for maximum room temperature.
• Introduce standards for the management of health conditions such as food allergies and coeliac disease, and to fully enable the participation of children with disabilities.
• The Governance and Management standard requires that professional support and development be provided to staff. It needs to also state what kinds and how much professional support and development is adequate, and who is to pay for this.

Conclusion

Funding services to provide child care and education but leaving the setting and monitoring of standards up to providers is not an appropriate strategy for NZ’s ECE sector.  The reasons include that:

1. The ECE sector is a mostly privatised one.
2. Service providers have influence on decision-making at Ministry of Education and government levels.
3. Parent representation on advisory committees is not supported.
4. ECE staff may not always have the ability and support to stop or prevent bad or harmful practices.
5. Parents can be told that if they don’t like what’s happening in their ECE and make a complaint, they can leave or go somewhere else. 

It is important that the regulatory system provides an adequate baseline of quality for all ECEs that protects and is good for children and families, along with supporting services to deliver early childhood education and care that meets desired outcomes. 

Footnotes:

1. He Pānui Kōhungahunga | Issue 100, 15 Feb 2024.    ↩︎
2. Education to be More:  Report of the Early Childhood Care and Education Working Group, 1988. p.15. ↩︎
3. This data on cost drivers comes from the Income, Expenditure and Fees of Early Childhood Education Providers Survey 2013.  The Ministry of Education has not published a more recent report ↩︎
4. Higgins, D.G. (2022). Does Current Early Childhood Education Policy in Aotearoa New Zealand Contribute to Persistent Disadvantage?  Public submissions on initial inquiry scope – A fair chance for all. Productivity Commission inquiry. ↩︎

END of the review paper: The Economics of Early Childhood Education and Care Regulations and Regulatory Systems

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