Education and Training (Grants—Budget Measures) Amendment Bill

Members, the House is in committee on the Education and Training (Grants—Budget Measures) Amendment Bill. This is the debate on clause 4—Part 1 is “Funding of certain early childhood services and certified playgroups”. The question is that Part 1 stand part.

Thank you, Madam Chair, and it’s good for the opportunity to have Minister Chris Hipkins in the chair to discuss elements of this hastily introduced and rushed-through-the-House legislation.

Just for the benefit of people listening in to this committee, normally when legislation is introduced to the House affecting New Zealanders—in this case, the owners and operators and staff in early childhood centres—there would be plenty of time for a select committee to consider what was raised in the bill and for people to make submissions and be heard, and to have plenty of time to have their say. What we have here is a very truncated situation: we had a couple of weeks, a few people had a chance to say something, but, as the Minister, I’m sure, will remember from the weekend, where I understand he had a fairly hostile reception from an early childhood education sector conference, there has been widespread despair in the sector over the introduction of this bill at such speed.

The sector was blindsided by elements of this legislation; I’m sure the Minister will stand up and say that he’s raised the issue of pay parity with the sector—pay parity being, ultimately, higher earnings for those working in the sector—over a long period of time. That’s true, but what this bill has before us, and what we’re discussing in this legislation, is beyond that. It goes beyond simple remuneration and allows the Minister to dictate employment terms and conditions for these private businesses. So there is widespread concern about what exactly that means.

Secondly, the other piece of feedback that, I understand, he received over the weekend was a great unwillingness by many in the sector to take up the option which is outlined or enabled by this legislation, because, ultimately, what they’re being asked to do is take on higher costs without any extra funding of any note. So the two most likely consequences of this legislation are either higher fees for parents, which is the last thing they need in the context of rising living costs—particularly housing costs, which are causing real problems for many households across the country—or lower teacher ratios, that is more kids per teacher. That’s the only way that the early childhood centres can make this operate. On average, we’ve heard figures of around an extra $40,000 per centre added cost being put on to them, and there is no miracle. I suppose the Minister and the Government just assume that the owners will just have less profit, less to invest, and they’ll just lump it, but that’s unfortunately not how the world works. What we’re more likely to see is higher fees and lower ratios.

A couple of questions I have as a start for the Minister is what feedback did he get from the sector on the weekend and at other opportunities that he’s had to hear from them; does he have a sense of how many are likely to take up this option; and is he concerned that a likely outcome could be higher fees or more children per teacher as a response to this piece of legislation?

The other element is why he chose, rather than using the attestation mechanism, which is the process through which higher teacher salaries have been achieved in the past—why he didn’t go for that approach, but instead came for this legislation, which grants the Minister much wider powers to ultimately interfere with the employment terms and conditions in this private business. The broader consequences of that is, of course, an increase in general uncertainty or regulatory uncertainty that the owners of these businesses face.

Very happy to respond to that contribution, which seems to have demonstrated nothing other than that in the brief period of time that the bill was at the Education and Workforce Committee—and I acknowledge it was a brief period of time—the member who just spoke, Hon Paul Goldsmith, made no effort to read it or understand it. It’s only a couple of pages, and so I would encourage him to pick it up and have a look at it, because he made some extraordinary claims in that brief, rather boring contribution, including that centres were being asked to take on extra costs with no extra funding to meet those costs. The whole point of the bill is so that the Government can provide centres with the extra funding in order to meet the extra costs that the requirements will put in place. So I think he might have missed the whole point of what the legislation that we’re debating is about. He also asks why we’re not using the attestation mechanism to do this. This bill means we can use the attestation mechanism in order to achieve the thing that the member is speaking about. So I’m not sure he’s clearly been listening.

But he did raise some serious questions, and so I’ll respond to those. What feedback have we had from the sector? The feedback from the sector on the bill—as opposed to on the issue around sufficiency of funding to meet any potential requirements for pay parity—has been relatively limited. And the feedback from the sector, basically, is: would we envisage any circumstances under which we would use this to achieve an employment-related outcome that didn’t relate to pay parity? And I have given the sector an assurance that that is not the Government’s intention. So in terms of the legislation, that is the key piece of feedback on the key question from the sector. Most of their other feedback and other questions don’t relate to the legislation but relate to the potential application of the legislation, which is, particularly, what will the funding rates be, and what would be the conditions that would be attached to those rates.

In terms of what percentage of the sector might take it up, it is voluntary, and so, ultimately, we will know what percentage of the sector take it up when they have that option and they have the opportunity to exercise it or not.

Does the Government believe that this should lead to higher fees or changes to ratios? That is, of course, a difficult thing to predict, because all of the models that are in existence in early childhood services now—and it’s private sector entities; all of the different models that they have in place at the moment—lead to different cost structures.

It was interesting in the weekend, when I had a very robust conversation with representatives of the sector, many of them were saying, “We want to be like kindergartens. We want the same funding as kindergartens.” When asked if they wanted the same conditions as kindergartens, there was less appetite for that particular discussion. So, I guess, the point I would make is: Government is not telling these centres how to operate their businesses; ultimately, we are giving them the option of additional funding, and we’re saying that if they want to take up that option of additional funding, the condition will be that that funding flows through into better pay for their teachers. Those centres have been reporting now, for several years—as a result of the nine years that National was in Government, where early childhood education service funding was frozen—that they have been having difficulty recruiting and retaining teachers because they cannot afford to pay them sufficiently or pay them a competitive salary. So we want to step towards pay parity with kindergartens so that they can recruit and retain teachers. The gap between what they have now and what they will need to get to parity would not be as big if the funding had not been frozen for the nine years that National was in Government.

I want to ask the Minister a couple of questions about this bill. The first is I’d like him to put on the record in the Hansard to clarify exactly why the current legislation, which allows for the Minister to make grants subject to any conditions that the Minister specifies in writing—and it sets that out in section 548 currently—why an Act which says that when those grants are paid for any purpose or service that the Minister sees fit and requires that the service provider must ensure that it’s subject to those conditions, it actually meets those conditions—why these amendments are necessary.

Then, turning to the detail of these amendments, and accepting that the Minister may have good reason why he has had to add additions, I want to look at the detail of this wording, because if we look at new section 548(5A), which inserts a new—if we look at the new subsections in clause 4 that will be introduced, here we have a new power for the Minister: that he is allowed to apply conditions or purposes that relate to employment matters like, for example, remuneration. My question is: if the reason the Minister is making these amendments is because he thinks that it is necessary in order to set pay parity levels, then why not just limit it to remuneration, why does it need to be wider and relate to employment matters more broadly, and why, in new section 548(5B), has he gone to the detail of saying that the “conditions or purposes may be specified by the Minister to help achieve aims that are, or include, employment relations aims.”?

The reason I’m asking this question, Minister, is, really, on behalf of all the early childhood services out there who are saying, “What is this? It’s not what was written on the tin. We were told that this was about pay parity, but this seems to be the Minister reaching his hand into our business in some sort of union drive in which he’s trying to have a whole bunch of detailed employment conditions that he can now impose on us as a condition of funding.” I ask the Minister: why is it not limited to what’s in the current Act? Why, if he wanted to add an extension, did he not limit it to remuneration? Why does he have this broader power around employment conditions?

Finally, I want to ask the Minister this question, which is: if he is so confident that an optional scheme leaves genuine choice for service providers, then who does he think are the services that are most likely to be able to afford to opt in to a scheme that may well underfund these employment conditions? He’s been with the services at the weekend. He knows what they’re all saying. They’re all saying, “Well, you’re going to tie our hands behind our backs and say that ‘The only way that you can get more funding to pay your teachers is if you opt into my scheme.’ ” The Minister is saying that you have to opt in to this scheme in order to get the additional funding, but the additional funding may not actually cover the cost of that.

So what I would put to the Minister is that the services that will be able to afford to make that choice are the services that can then turn around to mum and dad and say, “We’re going to increase the fees.” So what I would say is that the services who are going to be able to pay their teachers more under this scheme are the services that probably already are the most able to attract and pay their staff well. I am concerned that we’re going to see a situation where services in some of our lower socio-economic communities, where their families and communities don’t have the resources to pay more fees, are going to be faced with a stark choice, which is to opt in and be worse off, or to stay out and have a great struggle attracting staff because they can’t compete on paying the wages. I would really appreciate it if the Minister would address those three points.

Thank you, Madam Chair. The latter of the points relates specifically to the rates of funding, which, of course, are not covered by this bill.

In terms of the member’s first question—why is section 548 insufficient as it stands now?—the advice that the Government received was that there is some ambiguity there as to whether or not a condition that relates specifically to pay parity could be attached, because of the relationship between section 548 and the purpose of the Act—bearing in mind that the purpose clauses of the Act have only recently been inserted. They were inserted when the Education and Training Act was passed last year that rewrote the previous Education Act, which didn’t have a similar purpose clause. So those purpose clauses in the Act relate to education—educational quality, educational outcomes—and there was some ambiguity as to whether or not an employment condition could be attached to the funding and be consistent with the overall purpose of the Act. So to remove that ambiguity, we are doing this particular legislative change.

The second question is: why not simply limit it to pay parity? Why use the broader language of, you know, employment conditions, if you like? That is because many of the issues that are related to pay parity do flow through to some slightly wider issues—not much wider, but slightly wider. So if you include step-based progression, for example—so, after a length of tenure each year, you step up a step on the salary scale—it’s arguable that you could argue that parity only would be going wider than that. We want to be able to deliver parity as the sector understands it, including the centre managers, which is that you step up each step, each year, which is what happens with kindergarten, primary, and secondary schools. We’re offering an equivalent in the funded sector, which is the education and care sector, which includes a diversity of provision.

In terms of those wider issues around will centres be better off or worse off, that will depend on the funding rates that are determined by Government, or offered by Government; they have not been finalised, and they are not part of this bill.

So do I take from that, from the Minister in the chair, Chris Hipkins, that not only is this bill intended to provide a vehicle for the Minister to introduce minimum pay rates but also to dictate to early childhood education services the conditions under which they must promote and pay a teacher more? The reason I ask that is that this is something that is quite jealously guarded by employers, the idea that they get to choose which of their staff they offer a pay rise to, under what conditions, and the idea that, actually, there may be circumstances in which they wish to pay someone more despite the fact that they haven’t had the length of service of another teacher. They may believe that one teacher is a great performer and deserves to be paid more than another teacher who’s actually been there longer but isn’t performing as well. So I would seek from the Minister clarification that what I understood to be his answer to the last question is that he has widened the conditions or purposes here in order to allow himself as the Minister to dictate those step changes and those salary conditions.

The second question I’d like to ask the Minister is, even putting that to one side—so this issue of wider step changes and his ability to dictate that—even if that was all he wanted to do, why do we find these words in this bill: “[These] conditions or purposes may be specified by the Minister to help achieve aims that are, or include, employment relations aims.”? Those words seem extremely broad; those words seem extremely vague. “Employment relations aims” could capture all sorts of things, and I would invite the Minister to give us some examples of the sorts of employment relations aims he would expect to be covered and to give the sector some comfort that that will be limited in some way.

Thank you, Madam Chair. In answer to the latter part of the member’s question, employment relations in this context, in terms of the way the Government intends to use this, relates to pay. In terms of the member’s suggestion around whether employers should be able to promote people or not, that is not something the Government intends to interfere with in any way. If someone is promoted, that is completely a matter for their employer. The intention of the Government is to specify minimum rates of pay. There is absolutely nothing stopping centres paying their staff more than the minimum rates of pay.

In terms of annual progression, which is pay progression as opposed to a promotion, our intention is to use this provision in a way that brings the rest of the sector into line with the kindergarten teachers’ pay conditions, which means that a person gets a pay increment every year up a stepped salary scale. Stepped salary scales are not at all uncommon in employment relations agreements.

Thank you, Madam Chair. Thank you for that clarity, Minister Hipkins. It kind of crystallised a whole lot of the questions that I had. My question is around certainty. I mean, we support this bill. It is a small, technical bill and it helps to achieve a whole bunch of things, and we know that the early childhood education sector has been waiting for pay parity for some time. We know that the differential in pay levels between those in kindergarten and those in non-kindergarten places can be huge, and that helps to exacerbate the teacher-workload issues and ratios and all of those things, as well. But I was wondering, around the issue of certainty, in terms of trying to get to full pay parity, certainty around what you think you will be doing in the next Budget and the Budget after that—

CHAIRPERSON (Hon Jacqui Dean): Order! The member won’t bring the Chairperson into the debate.

Oh, sorry. Yeah, so the question is around certainty and the sorts of anxieties that are being expressed from the sector but also from the teachers, as well. So I wanted to see what the thoughts were around responses to the sector and providers, in general, but also responses to the teaching sector, as well, within this Budget cycle, the next Budget cycle, and the cycle after that—moving, hopefully, to fuller pay parity.

In answer to the member’s question, the Government has set out to the sector that we intend to implement pay parity in a stepped way, and that is through instalments, if you like. This year’s Budget provided funding for the second instalment. Last year’s Budget lifted the minimum rates of pay out to the equivalent of the kindergarten teachers’ collective agreement or the kindergarten teachers’ pay scale; this year’s Budget maintains that minimum rate of pay—so created a smaller increment to keep up with the increase in kindergarten teachers’ pay and started to step further up the pay scale, up to step six on the pay scale; it is about a 10-step scale.

The commitment that we’ve given to the sector is that, over time, we will continue to step up, so we will continue to add extra steps. But I also was able to clarify for the sector, in the weekend, that opting in to this particular block does not commit a service to opt in to future increases, if they don’t wish to—they won’t have to opt out and go all the way back down to the bottom if they don’t want to opt in to the next increments, for example.

I just want to tease out Minister Hipkins’ comments about—I mean, the issue here is the uncertainty that the sector faces around a piece of legislation that we’re talking about here, which appears to be broader than what is required, and talks about applying conditions and purposes to employment matters and employment relations aims, and the Minister seems to be saying, “Don’t worry. Trust us. It’s not the Government’s intention to go further. We’re just going to do what we say, which is just focusing on pay parity.”

So the obvious question is: why should the sector trust this Government on this score, when there is every reason to suppose that there is a broader agenda which is hostile, frankly, to private sector involvement in education full stop, and hostile to private sector involvement in education in early childhood education, and when this is the same Government that’s made all sorts of commitments recently? The latest one, just as an example, is that there won’t be any new taxes, other than the higher income tax rate that has been introduced this year, and yet, of course, there are tens of thousands of potential ute owners who will be paying higher taxes.

CHAIRPERSON (Hon Jacqui Dean): Order! Order!

No, I’m using that by way of example to say this is a Government that wants people to trust them when they say it’s not the Government’s intention to meddle further than pay and conditions, and I’m wondering where the Minister gets his confidence that people will trust him.

Secondly, particularly given the fact that this legislation creates a deal whereby a provider opts in for the extra resources but doesn’t yet have a clear idea of how much it’s going to cost the operator long term—and there’s all sorts of uncertainty around that and what it means if a pay parity scale was to be imposed on operations. That could have very significant impacts on the pay structure. Where individual people start on the pay scale is an area of uncertainty, and it is an intrusion into the management and performance management of the firm. So it’s an intrusion in terms of the management style, but it’s, secondly, a great uncertainty around the cost structure.

So, I guess, the question I have for the Minister is: is he not surprised that there is a degree of uncertainty in the sector, as a result of this piece of legislation, and how will he reassure the sector that his intentions are narrow, beyond just a bald statement that that is indeed the case, given the history that we’ve seen from this Government?

I’ll give Minister Hipkins an opportunity to reflect on my colleague’s contribution, because I think that the Hon Paul Goldsmith really got to the nub of things, which is that there is concern that a condition like this in the bill gives significant power to the Minister that may not be matched with the funding through the Budget process that would allow these conditions to be set in a way that’s perceived as fair.

But my question is a separate one, which is about this phrase “employment relations aims.” It is a technical point, but I think it’s important, because what I am trying to understand is why we wouldn’t just leave it at “Subsections (5B) and (5C) apply to conditions or purposes—(b) that relate to employment matters (for example, remuneration).” Why is it that we’re clarifying that the Minister may be trying to achieve employment relations aims? I would put to the Minister and to this committee that if we are trying to achieve employment relations aims, generally the place that that’s done is in an employment relations Act and it is done between an employer and their employee. It is not something one would expect to see in the Education Act, which is about educating people. So why are employment relations aims in here, when it would seem that, for the technical point that the Minister is trying to achieve, simply clarifying it down to remuneration would be sufficient?

In terms of the contribution that the Hon Paul Goldsmith made, none of the matters that he raised in his contribution relate to the bill.

In terms of the issues that Nicola Willis just raised around what employment relations aims would the Government use here, the employment relations aim is quite a simple one: it is pay parity.

I struggle to understand why Minister Hipkins says in the debate that we’ve just had about this bill, where he assured the House that his intentions were good and it’s not the Government’s intention to do X, Y, and Z—and I’ve asked him, “Well, why should the sector trust him when he makes that statement?” I fail to understand how he then says it doesn’t relate to the bill—but anyway, that’s how he operates.

The second question I have is, when we talk about employment relations aims—so the new subsections 5B and 5C apply to conditions or purposes: “Those conditions or purposes may be specified by the Minister to help achieve aims that are, or include, employment relations aims.” I’d just like to list some potential employment relations aims that he would have in mind, because when I think of this Labour Government and their employment relations aims, I think higher union penetration might be an employment relations aim for this Government. That would probably be the number one employment relations aim that they have. I presume—well, I can’t presume whether or not that is indeed his aim or not. So I’d like to know what he has in mind there and why he needed that particular clause in this piece of legislation.

I move, That the question be now put.