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.

@80sMum

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!

Yes they should call it subsidised not free. But why is it unaffordable, when we have the most (or is it now second most) expensive childcare system in the developed world? It has a negative impact on the economy to have so many families unable to save at what should be peak earning time due to childcare, to have many women reluctantly leaving the workforce or reducing hours and responsibilities because of the lack of available and affordable childcare. It affects the long term prospects (and economic impacts) on children who grow up in poorer families, or in poorer care, from underpaid staff at overstretched nurseries, to unlicensed providers, to grandparents who reluctantly step up but with limited time and energy, to exhausted parents who have taken on alternating shift jobs so they don't pay for childcare.

There's also a major equity issue that drives anger and social instability - because having children becomes harder and harder to afford for people on low to middle incomes, who can feel it's reserved for the very well off or those who are on benefits and home anyway and may qualify for a bigger house (before getting flamed, I do appreciate that scraping by on benefits with multiple kids doesn't actually work this way, but coming from a poorer part of the UK, this is certainly a common sentiment).

Hi everyone,

Thank you for all the question and comments - I'm looking forward to answering them!

Hey thank you for this - I grew up in France and my mum says everything is so much easier, cheaper and simpler there. What do other countries do? Does the state provide more subsidies - or does it actually run the nurseries itself?

I also found it so interesting what you say about these being professionals who are teaching our kids in some of the most formative times of our lives. it's so shocking yet unsurprising that such an important and highly skilled role is so underpaid - because it is done by women whose time and energy is valued less highly.

I have really changed my mind on this - and gone from thinking that childcare is the individual parents' responsibility to thinking that actually continuing humanity is a shared project that is core to who we are and is something we should be doing all together as a society rather than leaving to individual women to sacrifice everything for. I realised how individualistic/Thatcherite my thinking was before.

Please can you respond re the research that indicates a very heavy over diagnosis?

@CastleCrasher

Is there somewhere where the figures are clearly set out? I don't doubt them, but there seems to be lots of mixed messages. I've read several times that staffing costs account for about 70-80% costs in the childcare sector. If that's the case, then how is £7.50 an hour the breakeven point? Even with a ratio of 1:2 that would be a profit. Genuine question from someone who'd love to understand better!

Hi @CastleCrasher,

Thanks for your question - I can see that other posters have responded but I just wanted to share a report that you might find useful: back in 2014, independent research company Ceeda undertook a groundbreaking study of the cost of delivering childcare and early education back, and their report, Counting the Cost, provides a really useful overview of what is included when we talk about the cost of delivering an early entitlement place (not just wages and related costs such as pensions and national insurance contributions, but mortgages and rent, insurance, business rates, utilities, training, resources and equipment etc).

The report is here, with an overview of cost categories on page 11: www.ceeda.co.uk/media/1085/counting-the-cost_ceeda-oct-2014.pdf

@Scaredycatmoo

Knowingly underfund

But what’s the issue with that? Given there is a limit to what the government can spend money on - there must be many areas where they “knowingly underfund” simply because there’s a limit to what is available

Hi @Scaredycatmoo

The issue is that the government has not been open with parents and providers and said: “This funding will only cover some of the costs” – it has instead claimed that the offers are fully funded.

Early years providers are not allowed to charge ‘top-ups’ i.e. the difference between the cost of delivering a place and the funding rate they receive, which puts them in an incredibly difficult position when funding levels are inadequate, as our FOI investigation has demonstrated is the case.

@MildredPuppy

This is an interesting post.

There is a thread running about how difficult it is to attract staff to work in a nursery as they need level 3 qualifications but pay is minimum wage and hours are long and theres no progression.

Other than increasing the hourly rate the government pays are their other things that could help the sector such as business rates or VAT changes.

A lot of schools had a nursery class in my area but they have all shut as financially unworkable. This means its all private providers now.

Hi @MildredPuppy,

You are absolutely right that recruitment and retention is a real challenge for the sector at the moment. The demands on early years professionals are incredibly high, even more so now during the pandemic, and yet they are among the lowest paid workers in any sector, according to the Low Pay Commission.

On your next point, there have been a number of campaigns about the government making other changes such as exemption from business rates, and these would be fully welcomed - but without improvements in the funding rate, our view at the Early Years Alliance is that this would risk amount to little more than tinkering around the edges.

And on your final point, though the Alliance represents private, voluntary and independent (PVI) providers, we know that maintained nursery schools and primary school nursery classes are facing similar challenges, though generally PVI providers are paid lower rates than maintained nursery schools and often nursery classes as well. We believe that the government needs to invest in the whole sector to ensure that parents and families can choose the provider that suits them, and receive affordable, quality and sustainable care and education.

[quote Scaredycatmoo]Is this related to the campaign that mumsnet bas with the government?

www.mumsnet.com/Talk/mumsnet_campaigns/4279288-How-has-Covid-19-impacted-childcare-and-your-maternity-and-parental-leave-Share-your-experiences-with-MPs[/quote]
Hi @Scaredycatmoo76

This campaign relates to a petition specifically focused on the impact of the pandemic on parents, families and the early years sector. We at the Early Years Alliance contributed to the initial report and are continuing to call for greater support for the sector during the pandemic.

Our Freedom of Information investigation is slightly wider as it is looking at early years funding more generally, not just at the impact of the pandemic. There is a separate petition on this which is due to be scheduled for a debate over the coming months: petition.parliament.uk/petitions/586700

I hope that clarifies

@PicaK

This is hardly news though. It's been long needed that the government address this.

Hi @PicaK,

You're right that the early years sector being underfunded isn't new and as I say in my original post: "...none of this will come as a huge surprise by anyone who is familiar with the early years sector".

However, what is new - and very important - is that this is the first time we have hard evidence that the government is fully aware of what it costs to deliver childcare and early education, that it knows that it is not funding what's needed, and that it know that this is leading to higher costs for parents, and putting pressure on providers to work to maximum child-adult ratios.

So in terms of ongoing campaigning for better funding, it is a very important piece of evidence!

@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

Hi @Scaredycatmoo76,

You are correct that the funding is only for 38 weeks of the year (i.e. term-time) - the 30 hour offer is actually an offer for 1,140 hours of government funded care and education per year (30 hours x 38 weeks).

However, the issue of underfunding is separate from this. What our Freedom of Information investigation shows is that the government was aware that the hourly funding rate given to early years providers did not cover the cost of delivering places - so each of those 1,140 hours is still underfunded.

I hope this clarifies!

@NoIDontWatchLoveIsland

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.

It works out as being about £2,500 a year for DH and I, for 2 kids for two years each. that's a 10,000 state subsidy handed to a high earning couple, while they won't fund the hours properly for a lower earner. At least they did cap the tax free childcare.

Hi @NoIDontWatchLoveIsland

That's a very honest and thoughtful comment. We at the Early Years Alliance have often argued that if the government is arguing that fully funding the early entitlement offers is "unaffordable", then it should consider targeting the offers at those most in need.

@Juicyapple44

I was a childminder until April this year, and have now left the sector as I could no longer afford to stay open. I was paid £3.85 from the government for the funded hours and charged £4.50 normally. Parents would not pay for consumables and wanted it all for free, some even expected me to supply all nappies, food etc for free. The local authority took 5% of the money the government gave them and then rather than pay all providers fairly the pay was based upon, levels of qualifications within the settings, living in a deprived area, having send and children in additional languages. so all providers offer the same care and education but get paid less if you don’t live in a deprived area etc.

Hi @Juicyapple44,

I'm so sorry to hear this. Your experience is unfortunately all too common - recent Ofsted statistics have shown that we have lost 27% of childminders in the past six years, which is a travesty. At a time when the flexible quality care and education that childminders provide is going to be more important than ever as parents move to hybrid working models and later/earlier starts, it's also incredibly shortsighted for the government to continue to ignore this incredibly worrying trend.

I hope you have managed to find an alternative career that you are enjoying, and wish you all the best for the future.

@noblegiraffe

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.

Hi @noblegiraffe,

I'm really sorry to hear that your daughter's pre-school was forced to close.

We have repeatedly warned the government that underfunding the sector undermines what they say is the purpose of the so-called 'free childcare' offer - i.e. to support parents to be able to work - if it is forcing providers to close.

You are absolutely right that investment in the early years has been shown to reduce the need for spending in later years, and we would share your view that the current approach is incredibly short-sighted.

@Missteebeee

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

Hi @Missteebeee,

I'm so sorry that your nursery had to close - we hear so many stories of high-quality providers who have been open for decades who simply cannot make it work on inadequate funding levels any longer.

And you're right that we are seeing childminders leave the sector in huge numbers - 27% in the last six years, and I think we would share your view that the way they were treated during the pandemic is likely to play a significant role in the ongoing decline in numbers as well.

@omgthepain

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

Hi @omgthepain,

The level of funding differs from local authority to local authority, and is decided by what's called the National Early Years Funding Formula, which was introduced in 2017.

A few areas saw quite a significant increase in their funding rate as a result and so there may well be some providers who feel that their currently funding rate is more than sufficient. However, our research has shown that this is a very small minority indeed and that the sustained underfunding in the sector has meant that for most providers, the cost of delivering places is a lot higher than what funding that they receive from government.

@VodkaMargarineAndExplodingCarr

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.

Hi @VodkaMargarineAndExplodingCarr,

The government’s estimates for what it would cost to ‘fully fund’ early years places includes a component for providers to reinvest into their businesses so if the sector was funded properly, providers would be able to pay staff well and reinvest into themselves as well as providing low-cost places for parents (or in the case of funded place, genuinely free places). From a commercial perspective, it is in a setting’s interest to offer places at as affordable a rate as possible to attract and retain families.

@lilmoopoo

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

Hi @lilmoopoo,

We know that government underfunding puts providers in an incredibly difficult position, as many parents still aren't really aware of what is really happening in the sector.

At the Alliance, we have produced a number of resources to help providers explain the situation to parents, which you may find useful?

www.eyalliance.org.uk/sites/default/files/fff-parent-update-bw_1.pdf

www.eyalliance.org.uk/30-hours-interactive-explainer

@80sMum

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!

Hi @80sMum,

Our view is that when something is a government priority, the money is found (just look at what has been spent on HS2 compared to original budgets!)

In terms of where the money could be taken from, between 2017 and 2020, the government spent £1.7bn less on the tax-free childcare scheme than it had budget due to low take-up. Given that was intended for a scheme specifically to help parents to access childcare and early education, we can see no reason why this money couldn't be spent on increasing early years funding rates, rather than being returned to the Treasury.

You can read more about the underspend here: www.nurseryworld.co.uk/news/article/government-reveals-1-7bn-in-underspend-on-tax-free-childcare

@Muguruzafangirl

Hey thank you for this - I grew up in France and my mum says everything is so much easier, cheaper and simpler there. What do other countries do? Does the state provide more subsidies - or does it actually run the nurseries itself?

I also found it so interesting what you say about these being professionals who are teaching our kids in some of the most formative times of our lives. it's so shocking yet unsurprising that such an important and highly skilled role is so underpaid - because it is done by women whose time and energy is valued less highly.

I have really changed my mind on this - and gone from thinking that childcare is the individual parents' responsibility to thinking that actually continuing humanity is a shared project that is core to who we are and is something we should be doing all together as a society rather than leaving to individual women to sacrifice everything for. I realised how individualistic/Thatcherite my thinking was before.

Hi @Muguruzafangirl,

OECD data shows that public spending on early education and childcare is a lot lower here than in other countries like Sweden and Norway (and France). It's interesting to note that in the US, where current public spending is low, there are now plans to make a huge investment into the sector as it has been recognised that this benefits not only children and their families, but society as a whole (there is more information about that here: www.whitehouse.gov/briefing-room/statements-releases/2021/04/28/fact-sheet-the-american-families-plan/)

@Scaredycat87

Please can you respond re the research that indicates a very heavy over diagnosis?

Hi @Scaredycat87,

I'm not sure what research you're referring to but if you let me know, I'll certainly try and quickly respond!

I think that's all my time for today but I hope I covered the key issues. Thank you all for taking the time to comment on my guest post, and please do visit the Early Years Alliance website at www.eyalliance.org.uk for the latest on all our campaigning work.

Take care!

Wrong thread!

Your experience is unfortunately all too common - recent Ofsted statistics have shown that we have lost 27% of childminders in the past six years, which is a travesty.

It's been going on for a lot longer than that! When I started childminding, almost 20 years ago, there were well over 100,000 childminders registered.
Today, there are less than 40,000. That's a decline of around 60%. That's not just a travesty, that's a national disgrace. That organisations and authorities have been wringing their hands over those figures, yet doing very little about it, is shameful.

Childminders have jumped through all the hoops, strained every sinew to meet the ever changing goals and demands made of us, and received little or no recognition for it.
We achieve outstanding grades, all our own work as we meet an EYFS that is laid down primarily for nursery settings, yet are considered to be a second rate option.
If nurseries are not valued, then childminders are treated worse.

I see celebrations of nursery settings that have achieved their outstanding grades, sometimes more than once.
Did you know that, of the tiny proportion of Early Years settings that have achieved more than three Outstandings, most are childminders? Did you know that at least one childminder has five Outstanding grades?
Where is the recognition and celebration of their achievement?

And their reward?
To be told that they're only good enough to provide wrap-around care for the "Good" or "Requires Improvement" nurseries in town.
To be told they're "extortionate" and "cheeky" if they try to charge fairly for their services.

No wonder childminders have resigned in droves, and continue to do so!