Childcare Costs: How the Government Is Failing Both Parents and Providers

by Lily Canter

25 August 2017


This September a flagship government scheme will be rolled out across the country with the promise of providing 30 ‘free’ childcare hours a week to all three and four-year-olds. But in reality, early years providers and parents will be left to plug the gap due to a massive funding shortfall to support the provision. Worse still, nurseries are closing down or opting out of the extended free provision because they cannot make the scheme work financially.

What should be a positive initiative to help parents work has turned into a confusing, unviable offer which has misled parents and let down childcare providers. In some instances, families have been left paying thousands of pounds a year for this ‘free’ care as nurseries are forced to charge additional fees for meals, nappies and activities which were previously provided at no extra cost.

Yet the government profess that the new initiative – which increases funding from 15 to 30 hours – will save parents around £5,000 per child. Minister for Children and Families Robert Goodwill also claims the doubling of the offer is “taking huge pressure off families’ finances” despite evidence they are giving with one hand and taking away with the other. Parents eligible for the free hours may lose the vital childcare element of their tax credits, meaning they are no better off overall.

The devil is in the detail. Although parents have been promised “30 hours of free childcare per week”, the government funding only covers this for the 38 weeks of the year which is during school term time. The ‘free’ entitlement is actually 1,140 hours of childcare per year and childcare providers can offer this in any pattern they like, such as spreading it across 50 to 52 weeks of the year.

For a parent wanting to send their child to nursery 10 hours a day for three days of the week – the equivalent of 30 hours – their bill may actually be around £75 a week rather than free. This is due to the free hours being capped at 22 per week as they are spread across the year.

There will also be a huge discrepancy across the country causing a postcode lottery with nurseries being able to implement their own flexible or rigid system. Some providers are allowing children to clock in and out, and if less than 30 hours are used they are rolled over into the following week. Meanwhile others are capping the free hours at 4.5 a day meaning parents have to pay for all the additional hours even if their child attends less than 30 hours a week.

The government themselves don’t even expect the hours to be ‘free’, even though they have been marketed as such. Operational guidance says that parents can “expect to pay for any meals offered by the provider alongside their free entitlement” and “can also expect to pay for other consumables or additional activities such as nappies or trips”. However these have to be offered as optional choices, and it is between the parent and the childcare provider to decide how this is managed. But with 150 local authorities across the country, it is difficult to see how these optional extras will be policed given the vague guidance.

The problem for providers is that the rate they receive from government via local authorities does not match the cost of care. The government often cites an average funding rate of £4.94 in relation to the 30 hours, but this is the average funding rate given to local councils, not childcare providers. A Pre-School Learning Alliance Freedom of Information Act request to all local councils in England found the average funding rate to childcare providers is actually £4.27 per child per hour – and in reality, this varies considerably from area to area, and provider to provider, with some providers receiving less than £3.60. In some cases this has caused nurseries rated as outstanding by Ofsted to close down as they cannot afford to offer the free hours but do not have enough custom without it.

What’s more, the HMRC run childcare service website has been plagued with problems all year, meaning parents have been unable to sign up for the ‘free’ childcare in the first place. Neil Leitch, chief executive of the Pre-School Learning Alliance, said: “We recognise that HMRC are working hard to rectify the problems with the website, but the fact remains that thousands of parents and childcare providers have been adversely affected by these glitches. Both 30 hours ‘free childcare’ and Tax Free Childcare were key Conservative manifesto promises, which the government seem wholly unprepared to deliver.”

With less than half of providers actually offering the scheme, thousands of parents are losing out as they cannot even access the hours in their area. The £1bn scheme which has been used as a political tool by the Conservatives to demonstrate they have made good on their election promise to extend free childcare for working parents is in reality an unfunded system which is damaging early years providers.

The hours are not free – they are a subsidy. It’s time the Tories admitted this so a sustainable funding structure can be put in place.

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