Not for the first time and I suspect not for the last time, on behalf of the Australians Conservatives I am going to take the path less travelled, if I may put it like that. I may be the only person in this place who thinks that $8.5 billion per annum spent on child care in the last 12 months, rising to $12 billion by 2020, for the government to pay service providers to look after families’ children, is more than enough. As I said, already the figure is scheduled to rise to in excess of $12 billion in the next three years. That is $12,000 million that is being given to parents effectively to pay other people to look after their children.

It is another significant cost to the budget. It is absolutely created and sustained by delivering more debt that those very children, who all of us in this place want to help and bequeath a good, positive, healthy country to, are going to be forced to repay. Once again I come back to it. Our debt in this country is spiralling out of control and there does not seem to be any real determination to redress it. That is a moral obligation we owe to our children. So throwing another couple of billion dollars into child care here and there is not going to solve the problem, but it will indeed create greater problems, which will be magnified by the effect of interest and growth over time. Every child who is purported to benefit from this package will actually end up paying a very hefty price for it from the multibillion-dollar largess that is starting today, and I can promise you the demands will increase in the future for it to continue.

Australian Conservatives know that there is a better way. There are three key areas in which I can believe that this can be more effectively addressed. Firstly, we have to break this nexus between a government subsidy and a rise in the price of child care. It seems to be a catch 22 where every time the government puts more money into the system it creates more demands for the child-care operators and the prices go up and there does not seem to be that greater benefit for the Australian families under the current guise. Secondly—and I congratulate the government for its endeavours in this regard—there needs to be a determined effort to stamp out the significant rorts that are in this space. Thirdly—and this is very important to me and I have communicated it to the minister—we need to remove the mandated prejudicial policies that disadvantage so many families and effectively establish a pecking order of who is allowed into the child-care system first.

Let me deal with the subsidies and costs. From a person who seeks less involvement in government it is far better for us to stretch every government dollar by streamlining processes and deregulating the sector. Every time we add additional compliance, additional requirements, additional reporting or any other additional regulation the cost of administering and providing child care escalates, sometimes exponentially, and I will detail some of those figures in a moment.

We need to end the ‘money shuffle’, if you will, where we collect taxes from people, throw it through the bureaucracy where sometimes it returns 50 or 60 cents in the dollar—sometimes less, sometimes more—and then give it back to those we deem worthy of it to subsidise the care of their children. I think that is inefficient. It would be far more efficient for the government to allow tax deductibility, up to a maximum threshold, for childcare services. It would enable families to take responsibility for administering those costs themselves. It would allow families to claim it on a weekly or monthly basis with the ATO, as they do with other tax concessions, or on an annual basis. It would make child care more affordable. With no guaranteed government funding, people could distinguish for themselves the service they want and the hours they want. That would create a much more competitive environment.

You mentioned the link between subsidies and costs. I want to take you back briefly to some research by the Australian National University which demonstrates the runaway price rises attached to child care in recent years. Starting with March 2000 as our baseline, there was effectively parity between the market price of childcare services and the subsidy; in medical parlance, there was ‘no gap’. Soon afterwards, a couple of years later, there was a modest gap, which parents were expected to meet, but there was virtually no difference between the subsidy rate and the market rate. But then between July 2002 and July 2007 the gap expanded. By July 2007 the subsidy rate was 175 per cent of the March 2000 price. Not surprisingly, because of the additional onerous burdens on the childcare sector and the increase in subsidies, the cost of child care had risen by about 225 per cent. So there was about a 50 basis point difference between the subsidy rising and the cost of child care. So no matter what levels of money were thrown into it, families will pay more.

What happened then was that there were cuts in 2007 and 2008 but the regulations continued to load up on the childcare service providers and there became a huge gap between the subsidy rate and the market price. The market price has continued to track upwards. It has been higher than inflation ever since 2002, when, dare I say it, the sector recognised that by putting their prices up they could prompt demands in this place for more subsidies to be thrown at them and those demands would inevitably be met—just as we are discussing today. You cannot blame the sector for doing that. If they can get away with it, they will continue to do it. We have to consider not capping it or putting any other forces on them but putting market forces on them. We need to allow parents to make determinations about where they send their children so that the market itself will put pressure on the costs and prices.

So the gap—or gulf as it was then—went from about 50 basis points to about 150 points. It tripled in real terms. And then the subsidy rate returned to the March 2000 rate but child care prices keep going up and up and up. At last check, that gulf is still widening. The market rate is about 460 per cent of the March 2000 price. In 17 years it has gone up 4½ half times, well in excess of inflation, and it has been fuelled by the money that has been thrown at it from this place.

And it is because of compliance. Since 2008, compliance has become so burdensome that the gap between the subsidy and the cost has risen from 50 basis points then to 300 basis points now. That has a deleterious effect for every family and it is not going to be fixed by us throwing more money into the system. We have to take pressure out of the system. If we can reduce compliance, if we can reduce bureaucracy, if we can reduce regulations and red tape, child care will be more affordable and parents will have more choices. And that will be sustainable because it means we will not have to throw more than $12 billion a year into the system; every dollar will go a lot further.

The second area in which Australian Conservatives believes there can still be significant improvement is in the area of rorting. Lest anyone think I be uncomplimentary, I do want to congratulate the government and the minister for making significant efforts in this regard but, dare I say it, they are not enough. I think there needs to be more diligence and more application to stamp out the rorts that are ripping off the taxpayer. I want to give you a few examples. In 2015, an investigation in Albury in New South Wales revealed a $4 million family day care fraud. in August 2016, authorities swooped on an operation in Lakemba in Sydney. One of the accused was actually someone with alleged links to Islamic State. That did not stop them from profiting from and ripping off the childcare system. They stood accused of collecting over $27 million since 2012. A known Islamic State sympathiser has been involved in an operation that has gathered $27 million of taxpayer funds, rorted within the childcare sector since 2012, and there are suggestions that some of that money has found its way to funding Australia’s enemies abroad.

The information I have is that in New South Wales, where these rort occurred, there are 324 services in operation but only 19 of them have been audited. If the other 305 underwent an audit, imagine how much more of this rip-off money they might find. In 2016, at Point Cook in Victoria, authorities raided families in the Somali community who in 18 months had claimed almost $16 million in grandparent childcare benefits. Remember, these were additional payments brought in to assist grandparents who were looking after their grandchildren. But the $16 million worth of care was never provided— just the money was delivered.

Then the coalition government, to their credit, made the child swapping rort illegal on 12 October—bravo! Child swapping was where a childcare worker put their child in the care of another childcare worker and vice versa. Before that, an estimated 11,000 parents were receiving $8.2 million per week, swapping over 31,000 children. That is $8.2 million per week of people just saying, ‘You take my child and I’ll take yours, and we’ll both make money out of the operation.’ It is wrong, and congratulations to the government for stopping it.

In 2016 a Melbourne woman of Sudanese origin was accused of claiming $800,000 a fortnight in a western Melbourne system that allegedly took $15.8 million in false payments. That $800,000 a fortnight is not a bad gig if you can get it, unless you are the taxpayer having to fund it. That is what is going on in our current childcare system.

A woman running Aussie Giggles, a family day care centre, was found guilty in 2016 in the New South Wales District Court of 81 fraud and forgery offences designed to defraud childcare benefits to the tune of $3.6 million in special childcare subsidies for children from disadvantaged backgrounds. She claimed that as many as 14 of these children from disadvantaged backgrounds were in her care when they were not. And yet this was never picked up in an audit.

In 2016 the Queensland Labor government confirmed a trend in childcare rorting and noncompliance in ethnic communities. Nationwide, almost all the family day care services hit with restrictions or closure were run by Somali, Sudanese or other African migrants. One Sudanese migrant received $1.6 million in 16 months to run a family day care network which authorities could not confirm involved people he claimed were employed by him.

There is a problem here. The minimal audits that have taken place and the maximum exposure of rorts—I have highlighted just some of them today—says we can do much, much better and stretch every one of those $12 billion much, much further.

The final aspect of where my concerns lie I raised during estimates. It is that there is a priority list for allocating places in childcare. Some may defend that. I may describe it as prejudice. It was news to the minister and to the department when in estimates I quoted to them words from their own guidelines:

A child care service may require a Priority 3 child to vacate a place to make room for a child with a higher priority.

In simple terms, if you are a white, middle-class person and your child is in child care, and if the government says there is someone more needy—I will get to what neediness is—your child can be removed with 14 days notice to be replaced by that child they think is more needy.

In some of these areas there is genuine need. The first priority for allocating places is ‘a child at risk of serious abuse or neglect’. Instinctively, a child at serious risk of abuse or neglect needs much more than child care. They should not be put into child care for the day—the eight or 10 hours or whatever it is—and then returned to an environment where they are at serious risk of abuse or neglect. It needs to be dealt with at the very root cause of it. If they are not safe with their own parents they need to be taken out of that environment permanently.

The second priority is ‘a child of a single parent who satisfies, or of parents who both satisfy, the work/training/study test under Section 14 of the A New Tax System (Family Assistance) Act 1999’. To be honest, I do not get that. I do not understand why one parent working is more important or less important than another parent working or another parent choosing to study or undergo training. The idea is to provide this resource to Australians so that they can further their careers, their education or whatever the circumstances may be. I just do not buy it that we should all be paying and prioritising one person over another because of the job they are doing.

The third priority, of course, is ‘any other child’.

Within these categories there is even more entrenched prejudice. There is a priority list within the first priority group, the second priority group and the third priority group. If you are a child in an Aboriginal or Torres Strait Islander family, you get priority. A white kid can be removed from a childcare operation with 14 days notice to be replaced by an Aboriginal kid. I think that is wrong.

A child in a family which includes a disabled person gets priority. I am not making light of the difficulties that disabled people and their carers undergo, but I cannot come to terms with the fact that because you have a disabled sibling or a disabled parent you should have priority and someone should be removed from an existing childcare place because they deem you to be more worthy. I am not underselling the difficulties of it, but who are we to say: ‘I’m sorry, bad luck. Out you go and in you come.’ It is wrong. Even the department eventually admitted it was wrong.

Then, of course, we discriminate on the basis of income. Apparently, if you do not earn enough money or if you do not have a job you are actually a greater priority for child care than the person who is actually out there earning money, paying more taxes and maybe employing other people—I do not know. They can lose their place because they are earning above a threshold or they actually have a job—God forbid! Isn’t child care meant to be for getting people back into the workforce?

Finally, this is the one that really strikes me as odd, considering all the rorts I outlined before: children in families from a non-English speaking background get priority. I am not sure where they rank in the list, actually. I am not sure whether coming from a non-English speaking background trumps being a low-income earner, having a disabled or less abled sibling or parent or having an Aboriginal or Torres Strait Islander family. I do not know whether it is the colour of your skin or the language your parents speak. I cannot determine this. What I know is that any critical or reasonable assessment of it says it is wrong to remove someone in an existing place because of the colour of their skin, the language their parents speak or the income their parents have in favour of someone that a government of any stripe or persuasion deems more worthy.

Earlier, Senator Gallagher asked about deals that are done and things, and I have my doubts. I think that is very clear about the wisdom of throwing more money into this sector until other aspects of it are absolutely cleaned up. I made it very clear to the minister that I have an open mind with respect to this package, but there are some things I would like addressed. I really believe that if you are going to make child care available to every family, you are going to subsidise it to the cost of $12 billion-plus per year and more on the horizon, then it has to be available equally to every single family. There should not be a priority allocation. You should not be able to kick a child out because their parents happen to be the wrong colour, speak the wrong language or happen to be able-bodied and earn money. I think that is wrong.