Coronavirus: Multimillion-dollar subsidy for childcare centres slammed

Wednesday, 6 May 2020

Health Select Committee chair Jeremy Hunt has described the UK coronavirus death rate as 'shocking' - but maintained that international comparisons of mortality rates are complex.

Childcare heavyweight BestStart is under scrutiny for the multimillion-dollar wage subsidy it received, despite having millions in the bank.

The Wright Family Foundation, which runs BestStart, among others, claimed $26.9 million in subsidies, of which $25m was for the childcare chain, which has 260 centres around the country.

That is more than the amount claimed by SkyCity, The Warehouse and Fisher & Paykel Appliances.

Michael Gousmett, adjunct fellow at the University of Canterbury and an independent researcher, said he was “gobsmacked” by the amount paid to the Wright Family Foundation.

“There was no scrutiny of the ability of entities to support themselves for a short period.

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BestStart has not been charging parents whose children are not attending.

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'The question is, to what extent have their revenues been diminished by Covid-19? They will have no trouble in generating income given the demand for their services nationwide. After all, with profits of $46m in the past two years they will hardly be disadvantaged although their profits over this period may be diminished a little.

“How on earth is that justifiable?”

While parents have stopped paying fees while children are not attending, the organisation is still receiving government early childhood education funding.

As of January 1, all-day teacher-led centres with more than 80 per cent certificated teachers were receiving $12.53 per hour for each hour an under-two-year-old was enrolled, $6.93 for those aged two and over, and $11.82 for those in the 20 hours subsidised ECE scheme.

Husband and wife Wayne and Chloe Wright of the Wright Foundation charity, which owns BestStart childcare centres.

As a not-for-profit, BestStart does not pay tax. It has also negotiated rent relief with landlords of its 260 centres, although one said she felt that was unfair.

Its most recent annual report showed that it had $10.43m in cash and short-term bank deposits and had surplus of $20.15m in the year, with equity of $115.9m and total assets of $410.4m.

BestStart deputy chief executive Fiona Hughes said its revenue was down “on the border of” the 30 per cent required for the subsidy.

The report showed personnel expenses of $163.5m for the last full 12 months.

That would put the wage bill for the level 4 lockdown period at about $15m. Parents are also not paying fees in level 3.

Hughes said her organisation’s position was no different than any other childcare provider and it would make no further comment.

But Gousmett said the subsidy scheme was badly flawed. “The Government has done a fantastic job with the public health side but this is open slather, every man and his dog is in there.”

He said while small businesses were suffering and would need more help to survive, huge organisations with millions of dollars in the bank were able to bank more.

Jayne Russell, group general manager employment at the Ministry of Social Development, said a business was eligible to the full 12 week wage subsidy if it had experienced an actual 30 pe cent decline in revenue due to Covid-19 in any month from January to June 2020, compared to the same month last year.

'However, if a business applied on the basis of a predicted 30% decline in revenue and didn’t experience this they may find they didn't need the wage subsidy. If this is the case, they can repay it.'

Other businesses have been criticised for taking the subsidy, too. There were concerns about $550,000 paid to two liquor store 'barons', and kiwifruit companies were criticised for claiming during a 'bumper' season.