New Childcare Centres and Childcare Fees

Mr Yee Jenn Jong asked the Acting Minister for Social and Family Development how the Ministry intends to prevent childcare centre operators from making excessive fee increases when higher subsidies for childcare and infant care are implemented.

Mr Yee Jenn Jong asked the Acting Minister for Social and Family Development (a) how many new childcare centres the Ministry plans for current and new anchor operators to open over the next five years; and (b) what will be the distribution of new childcare centres between the existing two anchor operators and the future new anchor operators.

Mdm Speaker, the eligibility criteria for the anchor operator scheme were set to ensure that the operators' programmes are accessible to children of all backgrounds, and that the Government's funding goes towards serving the public good rather than private profit. Anchor operators are required to demonstrate financial stability and commit to meeting the quality and affordability targets set by the Ministry. The scheme is currently being reviewed and the Implementation Committee for Enhancing Pre-School Education co-chaired by MOE and MSF will announce more details by the second quarter of this year.

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Mr Yee asked how we ensure that childcare centres do not raise fees excessively in response to the recent enhancements to subsidies. First, we have designed the enhancements to give more assistance to families who require more help. Lower income families will receive more subsidy, as well as larger families with a lower per capita income. As the enhancements are not universal, it is less likely that operators can raise fees across the board. Second, we will continue to facilitate the development of more centres in areas where there is demand, and grow the number of good quality, affordable places through the anchor operator scheme to help keep overall fees in check.

On the number and distribution of new centres by anchor operators, it would be premature for us to update on this as the new operators have yet to be chosen and to make their submissions for the new sites. We are committed to building as many centres as necessary to meet demand for good quality, affordable childcare services.

I thank the Acting Minister for the answers. I have three supplementary questions – one for each of the Parliamentary Questions I filed. The first is that I want to understand the policy ideas versus other Government policies. For example, MOE is quite generous in supporting schools that have religious affiliations. They are the Government-aided schools and they get very generous support. Also, in the transport industry, public transport is run by private companies with very generous Government support. There appears to be some inconsistency with the Government policies here and I would like a clarification from the Acting Minister.

The second clarification is whether centres do need to get MSF permission if they wish to raise fees. And if they still raise fees after all the monitoring by MSF and after all these generous grants have been given out, what is MSF's position on this? Does MSF impose certain curbs on excessive fee increases?

The third clarification is that I am rather concerned, looking at past data, because of the very few numbers of void deck centres that are available for private operators to bid for. It has resulted in centres being bidded up to $45,000 per month rental. Anybody who operates in the industry knows that this is definitely not a viable model. But if going forward, there are too few centres allocated for the other operators and all centres have gone to the Anchor Operators, then we will have another bidding war and we will see the rents of centres going up.

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Mdm Speaker, I thank Mr Yee for his three supplementary questions. On the first, different sectors have different characteristics. It is different for the transport sector and different for the pre-school sector. What we are most concerned with in the pre-school sector is to ensure that we have adequate and affordable services for the mass market. There will always be parents who will require niche services, and I think they are at liberty to pursue those services. But when it comes to Government funding, we would like to use Government funding, where we can, to support the mass market options so that most of our parents would have the quality and affordable options available to them. For all the Anchor Operators that take on Government subsidies, it is incumbent upon us to ensure that they make access available to children from all backgrounds, independent of religious affiliations.

The other thinking is this. When we spend what is public money, then we should ensure that the public money goes on to benefit the two groups of people. One, the families and children involved. The other is the teachers providing the services that are so important in this sector. We would be very careful to design a scheme such that the public money does not go into private profit. That has been our abiding principle.

On the second question about how and when the childcare operators can raise fees, we have guidelines in place to ensure that if the childcare operators raise fees, they are to give adequate notice to the parents such that the parents can make the necessary adjustments if need be.

For the Anchor Operators, we are more stringent. We ensure that they do not raise fees beyond the industry median. So, if we compare the fees of the Anchor Operators with the rest of the industry, generally, they would be below the industry median. For childcare, it would be $750 a month for the industry median; about $615 for the Anchor Operators in the HDB estates.

On the last point about the availability of spaces for various operators – be they Anchor Operators or non-Anchor Operators – my Ministry is working closely with MND and other agencies to ensure that we have as many available and suitable sites as possible for the operators. We know that, whether Anchor Operators or non-Anchor Operators, rental cost is an issue. To the extent that we can, we will want to provide affordable options to the operators of such childcare facilities. And hopefully, the operators, whether Anchor Operators or non-Anchor Operators, will not raise fees unnecessarily and use the rental as an excuse to do so.

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Mdm Speaker, I would like to seek Acting Minister's views on whether he would agree that there is a risk for childcare or pre-school education to go the for-profit route, mainly because we know that for-profit organisations are primarily driven by the bottom line. The public has voiced their preference for state-run or hybrid model childcare centres, so that this sector is not purely for-profit.

My second clarification is to ask if Acting Minister has heard that there are private operators – some from overseas – who are buying up smaller players here in the pre-school and childcare sector, possibly to monopolise the market to have a bigger footprint, and even to bring the merged organisations to Initial Public Offering (IPO). I am still very concerned that Acting Minister has decided to take the for-profit route for this particular sector.

Mdm Speaker, let me thank Ms Denise Phua for her two supplementary questions. Indeed, we share her concerns that people involved in the pre-school or the early childhood development sector should not try to do it primarily for profit and definitely not for the mass market sector. There are a few unique characteristics of this sector. One being that at such an early age, parents are justifiably concerned about their children's development. When you do not have a standardised test to check how much value-add a particular centre provides for the child, there is a danger that people might take price as a proxy for quality. There might also be a danger where people start to chase what they perceive to be quality programmes, which may or may not value add to a child's development.

In the entire sector, we would not be able to rule out that there will be some people who might be in this work because of profit. What we have to ensure is that where public money is concerned, that if we do give any subsidies, they go towards helping those families that require help most, and not to go into the pockets of people who are pursuing this for private profit.

We are also equally concerned about this potential of small players being bought up by a conglomerate that is essentially for-profit. This is a problem because it reduces the diversity of the players in the market. The greater concern is that if there is such a situation, then it might actually narrow the mass market options that we want to make available to the public. We are watching this very closely and we will certainly take this into account in the review of our Anchor Operator scheme. Part of the reason for us to have sufficient Anchor Operators is to provide the mass market options for the general public. There might be some for-profit operators that will provide niche solutions at one end of the market for those parents who desire such services. But, indeed, we are

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most concerned if this is to happen. When we announce the results of the review, we will be taking into account this particular aspect.

Thank you, Mdm Speaker, I have a couple of supplementary questions for the Acting Minister. I know it is still early days, but I would just like to check if the Ministry has received any feedback on fee increases at childcare and infant care centres operated by the Anchor Operators, as well as the commercial operators, following the announcement of the Marriage and Parenthood Package.

The second question is: given the high demand for such centres, the worsening crunch in manpower in this sector, rising rentals and the quest for us to get better teachers, what can the Ministry do to mitigate the probable fee hikes, which may negate the effects of higher subsidies?

Mdm Speaker, let me thank Mr David Ong for the two supplementary questions. On the first issue, it is still early days, because we have just announced the enhancement to the childcare subsidies, but we will certainly be watching closely to see if there are any operators who might be opportunistic in this and hope to raise fees. What we have done is this: we have tiered the level of subsidies to different income groups. There will be a smaller likelihood – not zero, but smaller likelihood – that they can increase fees across the board. That is one.

On the second issue, indeed, the longer term solution to mitigate some of these cost pressures is for us to expand the number of options available in the number of sites, but, more importantly, in the number of teachers. The other cost driver for the childcare and early childhood development industry is the quality of the teachers. We are going to spend more money and more effort to develop the teachers, to groom them, to train them, so that the pool of available resources in the entire sector will be bigger than what it is now. That will be an important way for us to mitigate the cost pressures in terms of salaries for this sector. On the other hand, we would also like to gradually upgrade the qualifications of our teachers and, with that, the kind of salary remuneration that they can command.

There is a multi-pronged approach for us to gradually expand this sector for early childhood development. We do have a bit of an opportunity at this point in time because the kindergarten cohort sizes are shrinking. There is potential for us to encourage some of the current kindergarten operators to

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expand their services to the childcare sector.

Mdm Speaker, I have two follow-up questions. The first is regarding the use of the subsidies to benefit the mass market. I definitely agree with the Acting Minister that the subsidies should benefit the mass market, but I have difficulty reconciling this to why religious and race-based groups cannot be supported because many of them have operated for a very long time. They have benefited the people with their programmes and, usually, at very low fees as well. MOE has been very comfortable dealing with them as long as they do not overly promote religious views. And even for private operators, if he can set certain criteria such that they be monitored to see how much they are charging, to compete with what the Anchor Operators are charging, then I do not see the fear of them over-profiting because they will profit as much as what the Anchors are profiting.

The second supplementary question is: the Minister said that for the Anchor Operators, the Ministry monitors their fees so that they cannot go above the industry median. We know that the industry median comprises of the private operators and the non-profit operators, and the private operators get very little support. They pay very high rents, so, obviously their fees will be very high. Would the Minister agree that it is better to compare their fees against the median of the non-profit operators rather than across the industry?

Mdm Speaker, let me clarify Mr Yee Jenn Jong's first question. Firstly, for public funds that are used to support any programmes in general, we ask that they be made accessible to people from all religious backgrounds. So, we have programmes run by various VWOs – they are religion-based organisations – but the programmes must be made accessible to people from different religious backgrounds. And we also ask that they do not proselytise or do not use that to promote any religious belief in any particular sector. I think that is just to be fair to everybody, because these are, indeed, public funds that we are talking about.

On the second issue about the private sector operators, our philosophy is that, as much as we can, we would like to use the public funds for public good and to minimise the potential possibility of profits going into private pockets. I think that people can generally agree with us.

On the third issue about benchmarking, it is not only just the industry benchmark that we have. Before they do any price increase, for the Anchor Operators, we have stringent criteria to ask them to justify the necessity to

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increase and what are the cost drivers. We actually drill down to the details. And, indeed, for other comparable non-profit operators, we also take them to account in our benchmarking. So, it is not just the industry median. But, of course, the industry median is one of the criteria that we take into account.

Thank you, Mdm Speaker. I would like to ask the Acting Minister what plans does MSF have in addressing the severe shortage of childcare centres in new estates, such as in Sengkang? One of the reasons I am asking is because I have received numerous emails from residents requesting assistance, and partly also because of the structure of some of the new BTO flats there that makes conversion of void decks to childcare centres extremely challenging. Will the Ministry consider putting up modular structures to house childcare centres to ease the shortfall, at least in the interim?

Mdm Speaker, I thank Dr Lam for the questions. Indeed, we are aware of the situation in some of the newer estates like Sengkang. We are open to exploring new ideas and we are also aware that because of the way the new HDB flats are constructed, they do have limited void deck space available for some of these social facilities. We are working with the grassroots advisors in the respective areas to see where we can find new sites. This may include incorporating some of these features into newly developed structures, like for example, multi-storey car parks and other open spaces. We are open to the idea of having modular structures if it is acceptable to the operators and also the parents who are sending their children there. We know that there are some open fields and open areas in Sengkang that can be studied. We are open to such areas and will be happy to work with the Member and the operators to bring those about.

The other thing that we can do, and we are doing, is to make sure that there is a better matching of the demand and the supply. Sometimes, the centres are there but they do not provide the classes at the appropriate level for the students of that particular area. We have to encourage the operators to open up classes that accommodate those students.

The last thing that we are doing is to also provide better matching because people generally send their children to three localities: near their homes, near their workplace or near their grandparents' places. So, there is quite a bit of flux in the demand but we are trying to do a better matching of the people's demand with where they want to site their children. We are encouraging various employers to try and take up the scheme to set up childcare centres within their workplace. This will provide more options to the parents who need such

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services.