Plans to reduce cost of childcare: pros and cons of five proposals


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James Hempsall, director of childcare consultancy Hempsall’s

Tuesday, July 26, 2022

The government has put forward five proposals for reducing the cost of early years provision including changing child-to-staff ratios and flexibilities for childminders, but expert says just two of the measures have any real merit.

In early July, ministers from various government departments launched a well-intentioned drive to support parents by reducing the direct costs of securing childcare. Some of the ministers did not retain their posts by the end of what was a turbulent week in UK politics. Those distractions aside, we must consider these proposals in the round.

I agree that the burden of the costs of childcare for working and disadvantaged families is hugely significant, particularly now all families are noticing the effects of the rising costs of living.

The government’s drive contained five main proposals, following the principle of achieving much needed support without extending departmental budget spending. After listening to the responses of providers, I have concluded that one of the five might just work – a bit, another might work – eventually, and the other three…

1. To change the regulatory framework by increasing adult to child ratios for two-year-olds, from 1:4 to 1:5.

The intention, at best, is to give settings flexibility in the construction and delivery of their business offer. The expected outcome is that with more productivity, the cost savings will be passed to the customer to the tune of an estimated 15 per cent. It won’t, for three reasons. First, the consultation response, I predict, will be massively in favour of protecting current ratios. Second, the vast majority of settings won’t easily or readily take the opportunity to deploy the flexibility on offer. Third, that 15 per cent reduction in costs, if it is indeed realised, will be retained by settings and not passed on to parents. Why? Because their rising costs of delivery and the need to support the sustainability of their businesses is the bigger issue.

Additional funds are needed from somewhere to resource a workforce where supply is currently lower than demand. Settings will need to continue to up their terms and conditions to attract, retain and develop their workforce at this critical moment, and keep up to speed with the velocity of increases in all delivery costs, alongside what can be described as a stagnant early years funding rate. For childminders, this proposal runs the risk of them delivering for more families for the same income, hardly a win-win for them. Not to mention that a reduction in ratios is a cost-to-quality compromise. Not palatable while we all do our best to grapple with the well-documented effects of the pandemic on the sector and on our youngest children’s learning and development. This is a further risk to quality and safety, regardless of how a setting is able to protect these pillars of practice.

Likely chance of reducing costs for families: 2.5/10 (it may help some settings at a push).

2. Measures to boost childminding.

Childminders are a valuable component of the sector and it has been regrettable to watch how their numbers have dwindled. The proposals are many, including: the reduction of upfront costs to become a childminder, with financial support (grants I hope, like we used to have); flexibility on where they can operate in community buildings (I am unsure what demand there is for this, but it does build upon some flexibility that already exists); rethinking approaches to ratios when including their own children and siblings of other children (a risk of blurring of important professional boundaries); reducing the Ofsted inspection of childminders (which is already a reduced service – I listened to a childminder this week who told me her last inspection was 6.5 years ago, all in the year when Ofsted announced its priority would be early years); and slimming down the Early Years Foundation Stage (EYFS) by one-third for them (a step in the wrong direction when we need sector unity and parity).

Will these achieve the aim of reducing costs? I am not convinced for the same reasons outlined in the points about ratios. I predict the impact will be more on the sector’s morale, motivation and status – which are already too low. I think many established, professional, and experienced childminders will leave the profession completely, or move to find work in group care settings and schools, all perhaps able to offer better terms and conditions. Some may be picked up by childminder agencies (CMAs), which have been slow to gain momentum. The goal is to do more with CMAs. There are exciting pioneers out there and I hope their ambitions take flight. However, the impact upon quality and perceptions of quality being slimmed down in childminding will be felt by parents who prioritise that above all else, and this will in turn reduce demand, which inevitably will reduce supply. It will be a vicious circle that even the best agencies may struggle to counter. How do you think a parent will compare a full day-care nursery delivering the full EYFS, with a childminder delivering a bargain basement slimmed down version?

Likely chance of reducing costs for families: 3.5/10 (and it will take too much time).

3. Make it easier for more providers to register with Ofsted, with the aim of increasing the amount of supply registered and eligible to receive additional financial support via universal credit and tax-free childcare.

It is clear there are many providers who need to be motivated to register and unlock the potential for families to access often under-claimed additional financial support. The registration process is not too onerous – it is about meeting the national minimum standards, and this is good for quality, safeguarding and for bringing a sector together under common goals and objectives. Providers though will need to be motivated to make these changes in other ways through other incentives. It will need to make business sense for them.

Likely chance of reducing costs for families: 6/10 (where it boosts supply in areas where it is insufficient).

4. £10m for maintained nurseries.

This will be welcomed by many, but not all. There is always a place for excellence, and we must be able to afford it. But continuing to fund maintained nurseries at a higher rate does not address their role now, and their place in the childcare market alongside private, voluntary and independent provision. We all need to agree their aim and purpose and what we want from them. Instead, the issue could again be kicked into the long grass for the foreseeable future without answering these very important questions. They are not widely considered to be the most flexible of childcare providers for working families, but better for quality interventions for relatively small numbers of disadvantaged families. These proposals do not appear to include enough change or reform for a modern maintained nurseries service.

Likely chance of reducing costs for families: 2/10 (this is more about maintaining the status quo).

5. A renewed campaign for driving up take-up of tax-free childcare.

This is the proposal with the most potential. But the campaign must reach the parts previous national campaigns haven’t reached. There needs to be a strong balance of new and differently presented, clear and accessible information, awareness raising, myth-busting, and support, interventions and motivations for providers and parents alike to take another look at this scheme. More radical reform of the scheme isn’t on the cards here, but anything to reduce the labyrinth of process it contains would be very welcome indeed.

Likely chance of reducing costs for families: 6/10 (it will help some families, but it could be more wide reaching).

An alternative approach

Currently, the least advantaged two-year-olds can receive 15 hours early learning a week. Then all three- and four-year-olds can receive 15 hours. Alongside that, if your parents are working and meet the criteria, 30 hours childcare is available for three- and four-year-olds. Seems simple enough. However, the reality is the number of two-year-olds eligible has declined as the economic criteria used to assess eligibility has not kept up with wage inflation over the 10 years since it was introduced. I would like to see more children being eligible, not fewer. Also, it can take great efforts and investment to find and reach and enable two-year-olds to take up their place.

Things should be simpler.

This is good government investment, but what risks are the myriad of schemes seeking to mitigate? If young children access good-quality learning before they start school they will benefit. We should not be afraid of that. Low- or no-income families typically experience all sorts of barriers to accessing and navigating complex systems of applications, checking and reconfirming.

Streamlining will help enormously and enable us to redirect much-needed resources to providers instead.

Basic entitlement

I would like to see all children receive at least a basic entitlement of early learning and childcare from the age of two. I think 25 hours is a reasonable goal, in line with typical need and demand. That gives a good, easily understood and generous offer. It also falls in line with research that found 25 hours is enough to impact on learning outcomes at that age.

If there is an extended childcare need, beyond a universal entitlement, we should be doing whatever we can to support and subsidise it including through universal credit. All funding rates need to reflect the investment required and outcomes aimed for, and to grow the profession, rather than the unambitious and imperfect attempts at covering average costs of current delivery, which in reality was some time ago.

The early years pupil premium and other add-on funding for special needs should be automatically applied, not another thing to find out about, apply for, and evidence, as is current practice. Tax-free childcare could be paid at higher levels which would help those who feel the effort to apply is not worth the bother, with the need to reconfirm removed – like the two-year-old entitlement – so that once approved it cannot be taken away.

All this is affordable. In fact, we cannot afford not to. The investment is returned in spades. There’s plenty of research that shows that.

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