Opinion: To the point - Where do subsidies go?

The Minister for Competitiveness, Stephen Timms, launched our new international centre for the study of the mixed market economy (www.uel.ac.uk/icmec) recently. He spoke about the new legislation coming into force on childcare and nursery education and described local authorities as 'providers of last resort'. He stressed that before creating any new places, those in the existing private sector should be utilised first, adding, 'It would make no sense to have one set of funding rules for PVI providers delivering the free entitlement and another for those in the public sector - particularly when over 80 per cent of all childcare is delivered by PVI providers and a third of children access their free entitlement in PVI settings.'

The private sector has long argued that school-based nursery provision is privileged in its funding. Private operators have lobbied hard for an increase, and now the Government is going to grant it. But does giving the same amount to private and public sector provision mean that the funding rules are fair? The rules don't specify what happens to the money. All public sector and non-profit providers are required to plough back the money into the service. If they make a surplus they cannot keep it for themselves.

In the US, Forbes Business Magazine has recently run a feature on ABC nurseries. It says, 'ABC certainly owes its success to government funding - it represents 40 per cent of its revenue in Australia.' This government funding has made ABC owner Eddie Groves very rich indeed. The article goes on to say that in the Australian parliament he has been accused of getting rich 'by milking government subsidies'.

Corporate firms rely on government subsidies to fuel their profits. Subsidies get converted into assets such as property. The corporate sector makes the capital investments, carries the financial risks, and reaps the profits. It is standard business practice to operate in this way. But are the criteria of the market the only consideration?

Given the high cost of childcare in the UK, and the low pay of staff, should Government money be used in this way? Surely parents should have some real choice in how their hard-won earnings are spent and how it ends up?

The Forbes magazine article is at www.forbes.com/home/free_forbes/2007/1001/102.html.

Helen Penn is professor of early childhood studies at the University of East London.