Guest post: “Our investigation found that ministers knowingly underfunded childcare - and parents have been paying the price.”

[JuliaMumsnet]

Last week, news broke that the government had been knowingly underfunding childcare provision. Childcare is naturally an issue that we at Mumsnet have long been active on, running surveys on childcare costs as a barrier to working, the 30 hours childcare scheme, and family friendly childcare. So what does this latest piece of news reveal and what does it mean for parents? Shannon Pite, Communications and External Affairs Director at Early Years Alliance which led the investigation into this revelation, explains:

"I was speaking to a friend about our respective finances last week, and the conversation turned to the cost of childcare.

“I should start a nursery,” she said, laughing. “I would make so much money!”

Though her comment was obviously tongue-in-cheek, it highlighted a not-uncommon misconception about the early years sector. When the cost of childcare accounts for the majority of your monthly wage, why wouldn’t you think that those working in the sector were making huge profits?

As the mother of a two-year-old, I know the impact of high childcare costs all too well.

But having worked at the Early Years Alliance, the largest early years membership organisation in England, for nearly a decade, I also know the other side of the story.

First and foremost, what we so often talk about in terms of childcare is much more than that. The service offered by nurseries, pre-schools and childminders is not just care, but Ofsted-registered high-quality early years education.

And yet despite the fact that research shows that the first five years of a child’s life are absolutely critical for their learning and development, years of government underfunding has meant that we have seen the sector lose nearly 13,000 early years providers over the past six years, with over 2,000 in the last year alone. Those working in the sector, despite being education professionals, receive some of the lowest wages across any industries, according to the Low Pay Commission.

So where is the money going?

The problem lies in the government’s so-called ‘free childcare’ schemes for two-, three- and four-year-olds. We in the sector have argued for years that the funding that the government provides for the delivery of these places is not enough, and that this is forcing early year providers to keep staff wages low and charge parents extra – either for things like meals and snacks, or, for younger children, higher fees – to make up this shortfall.

Of course, the government has always denied this – which is why back in 2018, we at the Alliance filed a Freedom of Information request to the Department for Education asking them to show us exactly how they calculated early years funding rates.

It took us more than two years to get this information – and looking at what it reveals, it’s easy to see why the government didn’t want to release it.

What we now have are private government briefing documents from the 2015 Spending Review which reveal that:

• The government believed that fully funding the early years sector was “unaffordable”, predicting an annual cost of £2 billion, and an hourly funding rate for three- and four-year-old funded places of £7.49. In the end, they gave us just £300 million per year and a funding rate of £4.89 – a shortfall of £2.60 per hour.

• The government knew that the level of funding they were providing, alongside the introduction of the 30-hour offer, would push up prices for the parents of younger children, as well as leading to additional costs for consumables like food and nappies.

• Ministers expected early years providers to work to the absolute maximum child-to-adult ratios allowed by law to make the inadequate funding levels work.

The government claims that these figures are old and that they have subsequently increased funding rates. And they have – by 8p an hour in 2020 and 6p an hour in 2021. But if they think an extra 14p makes up for a £2.60 shortfall, I have some serious concerns about their maths skills.

While none of this will come as a huge surprise by anyone who is familiar with the early years sector, it should still make us all angry. The government gave providers the impossible task of delivering quality care and education on woefully inadequate funding, and then sat back and let the sector take the blame when parents – understandably – raised concerns about high prices.

We are determined that the findings of our two-year investigation are a catalyst for change – but the sector needs the support of parents to make that happen.

That’s why we are asking all parents to contact their MPs (template email here)- whether that’s on twitter or via email - and call on them to write to the Chancellor to demand a fair funding settlement for the early years sector at the upcoming Spending Review. Only this will ensure that the sector is able to continue delivering the affordable, quality care and education that children and families need.

Because all of us, providers and parents, deserve so much better than what the government has gotten away with giving us so far.

For more on the Early Years Alliance’s investigation, and to find out what you can do to support our call for fair funding for the sector, and more affordable care and early education for parents, visit: www.eyalliance.org.uk/fullyfundearlyyears

Shannon will be coming back onto the thread at 11am on Thursday 1st July for one hour to answer all your questions - so get posting below.

Honestly, I would rather they means test even the 15 hours to a max salary cap per person of 50k or something, instead of giving it to people like DH and I who seriously do not need it.

That doesn't win votes, or make a good headline. Sadly most higher income earners will vote for what gives them more disposable income, not what benefits society as a whole.

I don't think that childcare should be means tested.

Someone may have a rich spouse, but could be being financially abused. Cheap/free childcare would help them be able to get a job and save up some money so that they can leave.

Also someone can look like they are on a good salary, but could be struggling to pay high rent and childcare onto could easily put them in debt. We can't force everyone with children to live in cheap microhomes miles away from where they work. If nothing else, it would drive up the prices.

My DD's pre-school folded because it couldn't afford to run when they introduced the 'free' childcare. That was great for working parents

This government consistently and persistently underfunds any provision for children, be that childcare or schooling. They do not give a shit about kids, that much is obvious. And it's such short-term thinking, they're then scrabbling around trying to do 'catch-up' for SATs in Y6 or for Y7s who can't read. Investment in early years would solve a lot of later problems.

The nursery I worked at folded as it couldn’t plug the gap any more even by paying highly qualified staff minimum wage. The nursery had been in the community for 30 years

Childminders are leaving in big numbers as they too can’t plug the gap. How they were treated throughout the pandemic was awful

My friends nursery said the "hourly rate"
Only covers so much and they charge another £1-2 per hour as it doesn't cover their overheads and so the 30 hours doesn't cover it all there's still a need for parents to top that up which isn't great but demand for childcare round here is high and patents had no choice but to pay the extra.

However my childminder who is considerably cheaper says she's about 50p an hour better off with funded children.

It's a difficult one but people shouldn't have to top it up that defeats the object

That's not quite true, scaredycatmoo76

It is term-time only funding (it always was), but it is also short of the hourly rate charged by most provider. That is something they knew - have you read the report by the Early Years Alliance?

Even if you haven't, we Early Years providers have been telling Mumsnetters for years exactly what the report has now confirmed. The funding rate for Early Years provision is inadequate, and has been for years. The Government knew full well it was inadequate and did nothing about it.
From all I can see, they still propose to do nothing about it.

@Scaredycatmoo76

It covered 100% for term time only But zero for holidays

This is why the amount provided didn’t sufficiently cover nursery costs.

It’s wasn’t a conspiracy on the gov sidd

That’s incorrect @Scaredycatmoo76 I charge £4.50 per hour. My local funding rate is £4.10. This is why it doesn’t sufficiently cover the cost of the place. Why should I make a loss because the government want some extra brownie points from preschool parents? Funding is term time only and I do offer term time only contracts and am lucky I am in a Good financial position to do so (due to dhs job). I charge a ‘consumables fee’, which strangely is 40p an hour, the difference between what the council pays and my normal fee. Who would have thought it! It’s like that’s how much it costs per place! The amount of parents who believe the government when they say it’s 30 hours of free childcare for 3 year olds is massive. And when I try to explain my situation, it’s like they don’t believe me.

Here is a post from April 2015, just before the 2015 election. During the discussion, providers again and again pointed out that the 15 hours funding was already inadequate and reacted in horror at the election promise to increase it to 30 hours.
We really have been raising the alarm on this for years.

www.mumsnet.com/Talk/in_the_news/a2361328-Conservatives-announce-30-hours-free-childcare-per-week-what-do-you-think?

@Scaredycatmoo76

It covered 100% for term time only But zero for holidays

This is why the amount provided didn’t sufficiently cover nursery costs.

It’s wasn’t a conspiracy on the gov sidd

My daughters nursery is £9.25 per hour, I can't find our council's rate quickly but Kensington and Chelsea's is easy to find and it's £6.85. That £2.40 per hour short fall needs to be made up somehow, so they charge for "extras". I don't really mind this because it will take our bill down a lot but it's silly calling it "free"

Forgot to add my daughter IS term time only, I'll still need to pay over £900 a term when she's 3.

I agree that nurseries are underfunded, however if funding does increase, how do we ensure parents also benefit by paying lower fees? My guess is the nurseries will absorb all the funding and parents won't benefit financially from lower fees at all.

I'm puzzled by the lack of free hours for kids aged 1-3. Parents are getting into debt to have a family. This isn't an issue for my friends in European countries as the sector is well funded and much more affordable for parents.

Just like the NHS and Education, then.
Everything is so underfunded.

“ I agree that nurseries are underfunded, however if funding does increase, how do we ensure parents also benefit by paying lower fees? My guess is the nurseries will absorb all the funding and parents won't benefit financially from lower fees at all. ”

There’s a Providers Agreement that we sign up to each year. It draws up the agreement between the setting and the Local Authority and includes the rules we must abide by.
When the funding was for 15 hours, one of the rules from our LA was that we must not request top ups. The entitlement must be free to the parent at the point of delivery.
In other words, we could not charge for any extras at all, nor charge in advance for the whole term, then refund when the funding was paid to us (it was always 6 weeks or so late) and, at one point, we weren’t even allowed to state on invoices how much the funding actually was (so the parent would not realise we were subsidising it).
If we broke those rules, we risked losing the funding.
As providers increasingly struggled to make ends meet, our LA turned a blind eye to infringements and even removed some of the rules.

We were able to absorb the shortfall when it was 15 hours, but 30 hours just wasn’t possible and we began to charge for extras - the LA now allows certain charges to be made.

If the funding is increased to cover our costs and fees, as it once did, I would expect more rules to be introduced in the Providers Agreement and more strict enforcement.

That’s just the funding, of course. The only way you’re going to ensure that childcare is more affordable for parents is to raise parents’ wages. That is the hidden issue: not that childcare is too expensive, but that wages are too low in this country.
The choice is to properly subsidise childcare, to increase parents’ income or to accept a lower quality childcare provision.

When I went to look around DDs nursery they were very clear that the funding for the free hours wasn’t adequate and we’d have to top it up, but they couldn’t ask us directly to top it up so we’d be billed for “extras” which I thought was fair enough because they were upfront about it and it’s an excellent nursery so we’re happy to pay the difference.

I don’t think it should ever have been promoted as “free” hours, it should’ve been £x per child to use per week however is best for each family

But it really was free when it was introduced! When I first offered it, I remember it was actually higher than my hourly rate to reflect the extra work needed to provide education and the associated paperwork required.
That was in 2003.

They should have just introduced a voucher scheme. You get a voucher for a certain amount towards childcare and the rest needs to be paid by the parent rather than lie and say it's free. Government also introduced rules to make it really awkward for providers to try and recoup the loss by charging parents a top up.

The amount paid in each local authority also seems to be way off. I lose over £1.50 an hour with funding whereas some areas the funding is more than the usual hourly rate. I live in a huge commuter area, housing prices are astronomical yet we get one of the lowest funding rates. It just doesn't make sense.

Some parents are great and will offer to pay the shortfall in any way they can. Others think that because they're entitled to the hours all settings should provide anything they want, at the times that they want and literally want the Earth without putting their hands in their pockets

@Scaredycatmoo76

It covered 100% for term time only But zero for holidays

This is why the amount provided didn’t sufficiently cover nursery costs.

It’s wasn’t a conspiracy on the gov sidd

But it's never covered 100%, even just for term time only. I get over £1.50 less per hour. It's severely underfunded and there will soon be a childcare crisis as so many settings are closing permanently

It did cover 100% when it was first introduced.
It originally covered 2.5 hours of Early Years education - not childcare - per day, 5 days a week during term-time for all 4 year olds.
It was extended to all 3 year olds, then the hours were increased to 3 hours per day. Vulnerable 2 year olds were added to the scheme around the same time.

With our LA, our fee was covered up until the increase in hours. Then, they told us we were to offer 3 hours, but would not increase funding.
Austerity further cut bursaries, grants and funding to Early Years - children were the very first to be affected by the cuts.

Fees have had to rise to account for the loss of grants and subsidies brought about by Austerity cuts. Parents were expected to pay the true cost of childcare. A lot of parents don’t realise how much it actually costs to provide good quality care to their young children.

That’s why providers reacted with such despair at the proposal to increase the hours to 30 a week. It wasn’t thought out at all: it was simply an attempt to “trump” the 20 hours offered by Labour and the 25 hours offered by the LibDems in the run up to the 2015 election.

If the government would just say it was funded instead of free, no one would complain, because all the extras could be billed without question.

Thank you for explaining Tanith. I did wonder what the process was.

My son's nursery is brilliant, but at close to £60 a day I feel some children are priced out of an early years education in the first couple of years of their lives. Even when hours are funded we will still pay £300 for extras for a three day week, so I imagine some people just give up work in years 0-3 as they are financially better off this way, at least until the 30 hour entitlement kicks in. People will argue the 30 hours are about education and not helping families, but it is sad that some parents have to give up their careers and deny their children nursery in years 0-3 as it is unaffordable. Nursery's tend to get blamed for this too.

@VodkaMargarineAndExplodingCarr

Thank you for explaining Tanith. I did wonder what the process was.

My son's nursery is brilliant, but at close to £60 a day I feel some children are priced out of an early years education in the first couple of years of their lives. Even when hours are funded we will still pay £300 for extras for a three day week, so I imagine some people just give up work in years 0-3 as they are financially better off this way, at least until the 30 hour entitlement kicks in. People will argue the 30 hours are about education and not helping families, but it is sad that some parents have to give up their careers and deny their children nursery in years 0-3 as it is unaffordable. Nursery's tend to get blamed for this too.

I forgot to add that the £300 for extras is per month, not per week. That would be eye watering!

@VodkaMargarineAndExplodingCarr

Thank you for explaining Tanith. I did wonder what the process was.

My son's nursery is brilliant, but at close to £60 a day I feel some children are priced out of an early years education in the first couple of years of their lives. Even when hours are funded we will still pay £300 for extras for a three day week, so I imagine some people just give up work in years 0-3 as they are financially better off this way, at least until the 30 hour entitlement kicks in. People will argue the 30 hours are about education and not helping families, but it is sad that some parents have to give up their careers and deny their children nursery in years 0-3 as it is unaffordable. Nursery's tend to get blamed for this too.

It's why so many of us have tried to absorb the shortfall and why we are still offering the funding.

Free Early Years education is a good policy. It was when it was first introduced. The issue now is that it has been underfunded for years.

It infuriates me that Ministers have cynically allowed parents to believe that Early Years providers are swindling them when, in fact, we have struggled to provide it at all.

@Orf1abc

Honestly, I would rather they means test even the 15 hours to a max salary cap per person of 50k or something, instead of giving it to people like DH and I who seriously do not need it.

That doesn't win votes, or make a good headline. Sadly most higher income earners will vote for what gives them more disposable income, not what benefits society as a whole.

So single parents lose out again?

In most developed countries it's subsidised for everyone on the basis that it's helpful for children to have access to the same high quality care, for adults not to end up out of the workforce (including higher earning, higher tax paying jobs), it saves admin and waste based on earnings and that in the long run both those things benefit everyone via a stronger economy.

In Australia they actually subsidised childcare further during the early months of lock down to keep providers open - and that is under a right wing government. Here they can't even cover a real hourly cost.

If it was unaffordable in 2015, it's sure as heck definitely unaffordable now!

The money is not there. Unless funding is taken from another area to make up the shortfall, it ain't going to happen.

Which area would you like it to be taken from? Health? Education? Social care? Policing?

What needs to happen is that the government needs to come clean and stop this ridiculous notion that parents can access 15 or 30 hours of "free childcare".

Calling it "free" is grossly misleading. It's a subsidy - and providers should be allowed to show the amount of subsidy received for a child as a credit on the parents' invoice.

Why all the secrecy? Why are providers forbidden from telling parents how much funding they actually receive per child, per hour? It's because the government wants to perpetuate the myth of free childcare, that's why! They need to start telling the truth!

@80sMum the money is there for the PM and ministers to pay their chums and chums wives for failure.

Sorry but your argument is trotted out every single time, and particularly now without looking too hard all the media shows us examples of how many billions of pounds the government has wasted and is continuing to waste.

Early years education is to help set children, particularly those in lower socio-economic groups, off to the right start in life and it should be properly funded.

(Then again I've worked in countries with more comprehensive and interventionist policies to identify families that need help, and keep kids on the straight and narrow from a very young age. )