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  • Writer's pictureMaeve Cohen

A Revolution in Childcare?

It was promising to see childcare reform as a central component of last month’s budget – at last some acknowledgement of the importance of childcare infrastructure from Westminster. The Social Guarantee has long called for universally accessible childcare, so how far towards this goal do these new reforms bring us?


At a mere 0.1% of GDP public expenditure on childcare is one of the lowest among developed nations. Unsurprisingly childcare fees for parents are some of the highest in Europe with 22% of parents having to spend more than half their household income. This is having a serious impact on the well being of parents (particularly mothers), on efforts to close

the attainment gap between children, and on national economic prosperity. Research from campaign group Pregnant Then Screwed has shown that extortionate fees mean that working does not make financial sense for three quarters of mothers. Staying at home to care for children has a long-term impact on women’s career prospects, future earnings and contributes significantly to gender employment and pay gaps. The economic impact is immense. A recent study estimates that dysfunctional childcare cuts UK output by between £27bn and £38bn of economic output.


After long and sustained campaigns from many women’s organisations and the labour shortage in the UK reaching a critical point, it seems like the government is finally taking childcare seriously. Chancellor Jeremy Hunt put forward a host of reforms in last month’s budget to expand the free childcare offer and make it easier for those on Universal Credit to access. The new reforms include:

  • Parents working more than 16 hours a week and earning less that £100,000 a year will have access to 30 hours of free childcare for children from 9 months to school age. This is an extension of the current scheme which provides 15 free hours to children aged 3 and 4.

  • Parents on Universal Credit will be able to access childcare funds upfront, rather than claiming these back. The amount of funds available for childcare will also increase for these parents.

  • Child ratios (the amount of children who can be looked after by a single childcare worker) will increase to one staff member per five children (an increase from the current one to four ratio).

An increase in the number of free hours available to parents is welcome, as is upfront payments to Universal Credit claimants who will now find it significantly easier to access the childcare they need. However, the amount of money pledged to these reforms is significantly lower than needed and the focus solely on demand side measures only addresses one side of the story. That the childcare offer is only available to working parents also means that children in the lowest income families will not benefit.


How much will these reforms cost?


The Chancellor has pledged £4.2bn in 2024/25 when the expansion of hours to younger children comes into force. This is £5.2bn less than the £9.4bn that the Women’s Budget Group have projected the true cost of delivery. Sustained underfunding is not new. In 2021, the Department of Education estimated that the cost per hour of childcare on average is £7.49. However, the average payment from government was £4.89, a shortfall of £2.60 per hour. With historically high inflation and rising costs, this shortfall will have increased markedly over the subsequent two years.


This funding gap has caused significant problems for the supply side of the childcare sector. Poor recruitment and retention, low pay and long hours have meant a haemorrhaging of staff from the sector. Staff earn almost £4 per hour less than the average female wage and work longer hours. In the two years to June 2022, the number of childcare providers in England fell by more than 11% largely due to a sharp decline in the number of childminders who can earn higher wages working in supermarkets than looking after the next generation.


The scale of underfunding is also putting a large strain on nurseries and parents. To make up the shortfall in revenue, nurseries are forced to cross-subsidise from fee-paying parents creating the second most expensive childcare places in the world. The outlook is particularly grim for nurseries in more deprived areas due to higher numbers of state-funded places limiting nurseries ability to make up losses from fee-paying parents.


The recent announcements in the budget will make this problem acutely worse, increasing the pressures on childcare providers and disproportionately impacting parents, nurseries and children in the most deprived areas. Though it is true that increasing child to staff ratios will lower the cost of provision, it is likely to reduce the quality of care provided and will increase the workload of already overworked staff.


What would a Social Guarantee for childcare look like?


A Social Guarantee for childcare would mean;

  • Access according to need, not ability to pay

  • Power devolved to the lowest appropriate level

  • Services delivered by a range of organisations with different models of ownership and control

  • Decent pay and conditions for workers

  • Coproduction between people who use services and those who work in them

Decades of underinvestment has created a patchy network of providers and a declining workforce. The first priority must be to increase funding to the levels necessary to ensure universal, high quality childcare. IPPR estimated the cost of increasing funding rates to adequate levels on the current provision of 15 hours a week for 3 and 4 year olds as £2.4bn. The cost would be significantly more to meet the Chancellor’s commitment of 30 hours to all children from 9 months.


High quality, sustainable childcare requires a credible workforce plan. The Women’s Budget Group estimate that providing adequate childcare for children aged 9 months to school age would require an additional 38,119 more workers, IPPR propose a much larger increase of 130,000 additional staff. They recommend that pay be increased along with more opportunities for progression by establishing new national pay scales, similar to those of teachers.


Service workers, users and local governments are best equipped to know what kind provision is needed in their localities. IPPR have called for the Department for Education to work with unions and workforce representatives to develop a new regulatory framework and care standards. Local authorities could play a larger role in shaping childcare provision if given powers and resources to increase the numbers of publicly owned nurseries and regional care cooperatives. These more inclusive forms of ownership could facilitate the co-creation services with staff. A system of social licencing could be used to ensure certain social and environmental standards are upheld.


On the demand side, greater steps could be taken. Childcare provision should be design so that meeting the needs of children and parents is its goal, rather than incentivising parents into work. All children should have access to the care they need. This could be done by increasing free entitlement of 30 hours to all children – removing the condition that parents must be in work – as recommended by IPPR. Alternatively, prices could be capped to ensure that they are truly affordable and measures taken to provide free care to those who can’t afford the subsidised fees. For example, in Denmark, parents cannot be charged more than 25% of the facility’s operating costs for their child’s care, alongside regulation adjusting fees according to parental income level and further conditional public subsidies, such as a sibling discount.


Conclusion


Childcare is a fundamental human need. Children who have consistent, high quality care have better health, educational and well-being outcomes. Childcare jobs exist in every town, village and city in the country. They are low-carbon jobs, and if renumerated properly are rewarding and secure. Investment in the childcare sector means creating sustainable jobs for childcare workers, enabling parents to return to work, and increasing tax revenues overall. It is also investment in the future workforce – increasing childhood attainment and wellbeing. The measures taken in the latest budget – while an improvement on current provision – do not go nearly far enough. While steps have been taken on the demand side, the lack of supply side reform means putting significantly more pressure on providers who are already at breaking point. Childcare is not a luxury, it is essential infrastructure and must be treated as such through proper investment, workforce planning and fair pay and conditions for workers.


Maeve Cohen is Project Lead at the Social Guarantee

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