The Marketisation of Early Childhood Education and Care (ECEC) in Australia: A Structured Response

• DOI: http://doi.org/10.1111/faam.12018
• Author: Deborah Brennan,Susan Newberry
• Published date: 01 August 2013
• Date: 01 August 2013

Financial Accountability & Management, 29(3), August 2013, 0267-4424

The Marketisation of Early

Childhood Education and Care

(ECEC) in Australia: A Structured

Response

SUSAN NEWBERRY AND DEBORAH BRENNAN∗

Abstract: The marketisation of early childhood education and care (ECEC) offers

opportunities to test assumptions about the benefits of a market framework.

In Australia, where marketisation included reshaping, extending, and increasing

government subsidies, one major listed company (ABC Learning Limited) emerged to

dominate child care. Child care prices increased rapidly to become an election issue,

and government subsidies increased. ABC acknowledged its economic dependence

on government policy and subsidies. Until its collapse in 2008, ABC was the world’s

largest listed child care operator, and operating internationally. ABC’s structured

business model separated child care properties (propco) from child care operations

(opco). ABC was the opco and leased the child care properties from propcos. As

ABC grew and replicated its structured model to other forms of property including

intangible assets, the rising child care prices and government subsidies supported

a growing array of other enterprises all seeking profitable operations. This paper

explains the structured opco-propco model, identifies its interaction with accounting

and lessons to be learned from marketisation.

Keywords: marketisation, child care, opco-propco, PPP, government subsidies

INTRODUCTION

During the last 30 years of economic restructuring and new public management

style (NPM) public sector reforms, governments internationally have been

urged to reduce their size and role (see, for example, World Bank, 1995).

Regulations to support competitive markets have been a feature of the economic

restructuring, and various forms of privatisation a feature of public sector

∗The authors are respectively, Professor of Accounting, University of Sydney Business School;

and Professor, Social Policy Research Centre, The University of New South Wales.

Address for correspondence: Susan Newberry, Professor of Accounting, University of Sydney

Business School, The University of Sydney, NSW 2006, Australia.

e-mail: Susan.Newberry@sydney.edu.au

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reforms. These include outright privatisation by disposal of state assets and/or

state-run operations, and reducing the government’s role and activities in favour

of market arrangements (Osborne and Plaistrik, 1997; and Salamon, 2002).

Competition and privatisation are thus complementary features of reform, with

increasing private provision counter-balancing shrinking government provision.

Trade liberalisation negotiations that encompass services coincided with these

changes. Various social services, including education and health services, that

in many countries have been provided by governments or controlled for social

reasons are today candidates for trade liberalisation (Kelsey, 2008). Gradually,

these services are being reshaped into market-like activities. The underlying

assumption is that all services should be open to private provision in market

conditions. Political sensitivity, especially about social services, means that

ideological preferences for market arrangements may be de-emphasised and

potential benefits emphasised (Savas, 2000; and Feigenbaum et al., 1998).

Competitive markets are supposed to improve cost effectiveness and increase

choice of services (Savas, 2000, pp. 119–20).

This paper addresses the radical marketisation of one social service, early

childhood education and care (ECEC) that, in Australia, was not a government-

provided service. Rather, it was provided in the private sector by a mix of small

private providers and government-subsidised small community organisations.1

Australia’s generic National Competition Policy (NCP) applies to the provider

side of the ECEC market, while on the purchaser side government subsidies

offset parents’ costs. Thus multiple purchasers (parents) were supposed to

purchase their choice of child care services from this child care market.

In 2001, a listed company, ABC Learning Ltd (ABC) emerged and grew

rapidly to dominate the child care sector. Child care prices spiraled, government

subsidies for parents became a regular election issue, and government funding

of parents’ child care costs grew. Before ABC collapsed in 2008, it was

the world’s largest listed child care company, with operations in the United

Kingdom, United States, Canada and New Zealand as well as Australia. ABC

was the operating arm of a structured business model called an ‘opco-propco’

(O’Connor, 2011). Under this model, property companies (propco) held the

property required to provide the service (in this case child care) and leased it

to the operating company (opco) (in this case ABC). ABC replicated the opco-

propco business model as it grew, extending it to other property and aspects of

child care. When ABC collapsed, the Commonwealth Government spent $100

million to keep the child care centres open during an orderly disposal, avoiding

the disruption to families of sudden closure.

This Australian experience is of international interest. ABC’s international

expansion meant that it received government subsidies in other countries

besides Australia and the opco-propco model has emerged elsewhere – in the

UK, for example, where there was concern about private operators’ ability

to meet growing demand for residential aged care (Lapsley and Llewellyn,

1992). The financial difficulties of a similarly structured major residential care

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