Why England’s new childcare funding is a backward step for social mobility
Dr Antony Mullen
From April 2024, parents across the South-West and other parts of England will be supported by the roll out of a funding plan intended to reduce the upfront cost of childcare. The primary focus of this policy is to free up parents – mothers in particular – to get back to work and be economically productive, whilst also (the government hopes) paying electoral dividends ahead of this year’s general election. But there are also significant implications for social mobility given how important early years support is in shaping children’s future life prospects.
The policy, which applies only to England, will be phased in as part of a staged implementation. In April 2024, eligible working parents of 2-year-olds will receive 15 hours of funded childcare. In September, this will broaden out to include the working parents of eligible infants aged between 9 months and 3 years. Then, from September 2025, eligible working parents will receive 30 hours of funded childcare for children from the age of 9 months to the point at which they start primary school.
The reason that the Chancellor, Jeremy Hunt, saw this as a priority is unsurprising. As figure 1 demonstrates, the cost of childcare increased by 171% between 2000 and 2021: only electricity (+210%) and house prices (+189%) increased by a bigger percentage, according to the Office for National Statistics.1
Figure 1: UK Price Changes, 2000-2021 (Source: Office for National Statistics)
The unaffordability of childcare has made headlines, with the Daily Mail (2023) citing childcare in Britain as “the least affordable in the West” (joint with Czechia) whilst the Evening Standard (2023) reported that childcare was unaffordable for half of London parents, pushing them into debt.
These claims are backed up by more rigorous analysis.
The OECD suggests that, in the UK, childcare costs amount to 25% of the average wage. This percentage is higher in just 5 other countries in the world: New Zealand, the USA, Ireland, Czechia and Cyprus. 2 The Centre for Progressive Policy (CPP) has documented the impact on the UK economy of unaffordable childcare. They estimate that 1% of the UK’s GPD (equivalent to £27bn) was lost due to parents being unable to work additional hours. This disproportionately affected women: 880,000 are reported to have reduced their working hours since becoming a parent whilst 470,000 have quit work entirely.3
It is clear that, for many parents, childcare costs have become unaffordable and the impact of this is substantial.
Expanded Underfunding
Early years provision in England is a patchwork quilt of different types of settings, in terms of size, scale and purpose. Some nurseries are run by local schools or multi-academy trusts; some are private businesses which operate to make a profit; some provision is offered on a charitable basis or offered by local volunteers; and there are individual childminders operating as sole traders. Our interviews included representatives of each of these settings and all were concerned about the lack of state funding for childcare.
As part of research on the early years for the South-West Social Mobility Commission, I have spoken to many experts and practitioners in public health and education roles. From Directors of Children’s Services through to Family Hubs Managers and childminders, the consensus view is that the government’s policy is a double-edged sword.
On the one hand, it is widely recognised that financial support offered by the government is both (a) substantial as an overall financial package during difficult economic circumstances, and (b) helpful to parents who are concerned about the cost of childcare. The 2023 CPP report confirms the latter point: its survey found that 64% of parents would use more childcare if their upfront costs were lower.4
However, most interviewees were concerned that this leads to what we have termed as ‘expanded underfunding’: the expansion of free childcare is financially damaging for providers because they are funded by government (for free places) at a rate that is not sustainable. The expansion of free hours means that the amount providers will receive is less than it costs them to operate (when salary, pensions and energy costs are considered) and their scope for charging parents for additional hours is lessened, because parents are entitled to more government-funded (or underfunded) provision.
This had led providers to pass on to their customers the maximum possible charges for ‘additionals’. Government policy allows providers to charge parents extra for meals, consumables and additional activities with the caveat that they should be mindful this doesn’t impact on disadvantaged parents.5 Indeed, the Local Government and Social Care Ombudsman criticised this approach to top-up fees in 2021.6
The reverberations will be felt differently across the sector. School-run nurseries can address the ‘expanded underfunding’ scenario by using money elsewhere in a wider school trust. A not-for-profit nursery operating in a deprived area often accepts children whose parents cannot afford to pay – and so the small amount of government funding, whilst insufficient on its own terms, is better than nothing.
Yet for most of the sector, there are stark warnings that this will impact negatively on social mobility: if providers cannot afford to take on government-funded infants, they will only accept children of parents who can pay 100% of the costs themselves, leaving children from deprived families without provision.
This is particularly worrying amid an alarming rate of nursery closures. In 2023, the National Day Nurseries Association (NDNA) reported a 50% increase in the rate of nursery closures in 2022. Most closures were in places of deprivation: 37% of closures occurred in the 30% most deprived areas.7
In February 2024, Plymouth MP Luke Pollard led a Westminster Hall debate on the closure of nurseries in the South-West of England. The Local Government Association noted, in the same month, that the South-West (along with London, the West Midlands and the North West) had seen a net loss of 40 nurseries in the 5 months leading up to September 2022 (according to Ofsted).8 Pollard claimed that 886 childcare providers in the South-West had closed in the 12 months prior to February 2024.9
These comments resonate with our own research: unless funded places enable childcare providers to build a sustainable business model, then the future of nursey provision in England could be that only those infants whose parents can afford to pay private fees are properly looked after.
Staff Recruitment
Beyond funding difficulties, the sector is also facing challenges in the recruitment of staff.
Every single interviewee during my research – from health visitors to childminders, via policy experts – identified this as the primary or secondary challenge facing the sector. The Early Years Alliance (EYA) suggests this is a problem for all regions of the country: the South-West is ranked fifth in terms of the greatest difficulty to recruit into the sector.10
This problem is not totally separate from the financial challenges facing the sector because, in large part, it relates to pay. The TUC indicates that 63% of early years practitioners earn less than £10.90 per hour. Many of the professionals responsible for delivering childcare in private nurseries or as sole traders are on low pay and businesses operating in the sector often struggle to make ends meet, meaning that pay increases are uncommon and unaffordable. This, in turn, means that childcare roles are associated with uncertainty and challenging work for low wages.
One qualified teacher I spoke with is working in a charitable nursery setting on National Living Wage pay. Whilst her earnings in a school environment would be substantially better, she is committed to her work helping the children of parents who cannot afford childcare. This is an atypical story of someone who tolerates pay far lower than she might expect relative to her qualifications: most people are leaving the sector to be paid more elsewhere. A common refrain among interviewees was that one could work in a supermarket stacking shelves and be paid more than someone in a childcare role.
There are wide consequences of the sector’s professionals being low paid: it leads to a sense of worthlessness, being undervalued, and a strong perception that early years is not ‘proper’ education (unlike primary schooling). This wider culture seen as a reason that people do not wish to enter the profession – and why some are leaving it.
Aside from pay, two interviewees said that routes into the sector, with the right qualifications, were not always straightforward. One interviewee, based in a childminding recruitment agency, said that often people interested in the role do not have the right qualifications, as they will undertake self-directed learning online for a qualification that they do not realise is irrelevant to the posts they wish to apply to. Another noted that local authorities should do more to set out the step-by-step pathway into a career in the sector, because those who are interested – typically new mothers themselves – often meet a wall of bureaucracy. These, though, are minor issues in comparison to the broader problem of pay and perception: to attract qualified professionals to provide a quality service within the sector, there is a clear need for better pay and conditions.
Conclusions
Even with the Chancellor’s extensive financial package for more free childcare places, our research suggests that this will not save the EY sector from its wider challenges.
Firstly, the funding coming from government is not enough for organisations within the sector to meet basic costs (even when paying staff at the minimum wage). There is a real risk of a decline in early years provision – and it will be children from under-resourced backgrounds who are hit a) first and b) hardest.
Secondly, any early years strategy must include an increase in pay for the professionals who play an important role in a child’s development. To counter the perception that the sector is under-valued and seen as secondary to ‘proper’ educational roles, the salary must reflect the value placed upon early years professionals.
The government’s policy has been designed to support parents back to work, reduce upfront costs to them and to help mothers who would typically have been expected to stay home and look after their child. But whilst this policy is an attractive retail offer to parents in a general election year, the unglamorous, behind-the-scenes work to ensure the long-term future of childcare provision – with better pay, greater certainty and resolved retention issues – is the only way to meet the government’s own aim of getting people back to work. If the sector collapses, parents on the lowest incomes will have to stay at home either because they cannot afford childcare – or because the once local options have ceased to exist.