Raising children, rising profits

An increasing chunk of $2.3b a year in taxpayer funding is collected by for-profit providers – including $450m to just four entities. Investors are cashing in, but as Michelle Duff reveals, families and workers are paying a heavy price.

Preschool education was once seen as a public good. Now an increasing chunk of $2.3 billion a year in taxpayer funding is collected by for-profit providers and passed on to investors. Michelle Duff asks how we allowed children to become big business – and who is paying the price.

The shelves, they say, were empty of toys. There were no ingredients for play-dough. The play areas were dilapidated and dangerous, with inadequate gates, fake grass and sandpits filled with smelly water. Staff took home maggotfilled rubbish bins, after bills for collection weren’t paid.

The children walked around listlessly, with teachers either too busy or unskilled to know how to engage them.

‘‘The kids were rioting because they had nothing to do. I didn’t feel comfortable staying, ethically I had to leave,’’ said former teacher Amber Sky-Wilkes, 25.

‘‘I think that’s so normal at chain ECE [early childhood education] centres, parents don’t know what quality looks like.’’

Now, the teachers at national childcare group Rainbow Corner are begging for help, as auditors have been brought in to investigate the group’s operations. At least one centre in Hastings was forced to close on Friday when teachers walked off the job, with some saying they haven’t been paid for a month.

‘‘Hand on heart I would not send my kids here. It’s not safe, and it’s boring,’’ said Jasmine*, one of seven current and former teachers and staff who spoke to the Sunday Star-Times.

Academics and educators are now calling for an urgent overhaul of an early childhood education (ECE) system they say allows businesses to prioritise profit over children’s wellbeing, as a Star-Times investigation reveals millions of taxpayer dollars are sunk into private enterprise.

An increasing chunk of the entire government ECE budget goes towards for-profit providers, data received under the Official Information Act shows, with $450m a year going towards the four biggest entities alone.

While these booming childcare chains serve the biggest number of children, critics say they also have some of the highest parent fees – and little oversight.

‘‘There’s a significant amount of government money going into the sector, but we don’t know how it’s being spent, and we don’t know the proportion that’s going in to maintain and improve services. The lack of transparency is a major problem,’’ said associate professor Sue Cherrington, director of the Institute for Early Childhood Studies at Victoria University of Wellington.

‘‘It encourages centres to maximise the number of children they can fit in, because it can help them to bring in more money.’’

Larger centres had economies of scale and aggressive tactics which made it ‘‘incredibly hard’’ for small, not-for-profit centres to compete. Over time this meant families were worse off, she said.

‘‘In some communities, unless you can afford it, there is now no choice at all.’’

New Zealand spends around $2.3b in early childhood education every year. It is meant to provide accessible, affordable, quality care for 195,000 children.

It’s one of the highest funding rates per capita in the OECD, yet childcare here is the least affordable in the developed world.

There are black holes in access particularly for Ma¯ ori, single parents and those in poorer areas, while many community-run centres are being forced to close.

The majority of ECE spending is in the form of government subsidies, paid to providers for children who attend on a perhour, per-child basis. This changes depending on how qualified the teachers are, the age of the child and the type of service.

Within this system, depending on your outlook, children are economic units.

Three years ago, Jesse Greenslade, then curriculum and quality assurance coach at Rainbow Corner, wrote a proposal to the Ministry of Education to allow centres to open longer each day.

The company wanted to optimise its earning potential, he said.

But Greenslade, a recent university graduate, felt discomfort at his bosses’ plans to expand. The daycares he’d visited were under-resourced, he told the Star-Times. The teachers had no professional support, and no budgets.

‘‘A lot of the [centres] were rundown, there was more of a focus on building than maintaining. They were big and open but barren, and the staff were struggling,’’ Greenslade said. ‘‘It was like ‘why are you trying to get occupancy up when there’s nothing for the children to play with?’ ’’ He left after eight months.

When Greenslade started working for Rrahul and Bhavini Dosshi in June 2019, they were acquiring and building multiple new daycares, partnering with property investment funds run by PMG Funds and Erskine Owen.

They seemed to target poorer areas, offering 30 free hours of care at sign-up, he said. One centre in 2014 grew into more than a dozen nationwide, licenced to care for 860 kids.

In 2022, Rainbow Corner claimed $8m in government funding for childcare provision. Yet since 2020, documents show nine of its centres have had licences downgraded for not meeting minimum safety standards, including putting children at unacceptable levels of risk.

Centres have been placed on provisional licences for having no budgets for resources, hazardous environments, no space to clean soiled children and linen, and no or inappropriate emergency plans and sleep and acci