Is childcare too expensive?

When it comes to the cost of childcare in the UK the only thing that every vested party - from parents and providers to social care experts and politicians - can agree upon is that no one can agree. This lack of consensus, combined with its emotive subject matter, means that, unsurprisingly, the debate is catnip to the national media, which rarely paints our sector in glorious technicolour. Over the next six-pages, Early Years Childcarer’s Jim Butler delves deeper

In recent cash-strapped years, parents have become accustomed to reading headlines that point out the rising cost of childcare. Only last month the Trades Union Congress (TUC) published its latest report that found that childcare fees for working parents had risen three times faster than wages in the past decade. TUC analysis showed that childcare in England costs parents an average of £236 a week for a child under the age of two in nursery, compared with £159 in 2008. The calculated cost was £232 a week for a child over two, compared with £149 10 years ago.

The vexed issue of the government’s current 30 hours of free childcare provision is never far from the headlines either. Last month, the education secretary Damian Hinds was forced to defend this policy in the face of widespread disgruntlement among providers who claim there aren’t enough funds to cover the full cost of delivering this flagship policy. More research, this time by one of Europe’s largest online care platforms, Yoopies, demonstrated that the reality of delivering the 30 hours provision has seen childcare prices rise by 4.1% in the last year.

These pieces of research are just two of many with alternating perspectives, but in among the claims and counter claims, what’s the truth? We’ve spoken to a number of experts to try and measure the real temperature.

Is childcare actually too expensive? A quick perusal of the media would suggest it is. But childcare professionals are notoriously low paid. So what are the rising prices paying for? Does it represent good value for money? What has been the affect of the 30 hours policy? Has it made people wrongly question the cost of childcare that isn’t provided for free? What about the cost of holiday childcare - an annual dilemma for parents?

Is childcare too expensive in the UK?

Dr Eva Lloyd, Professor of Early Childhood, University of East London

“To deliver good, quality childcare is expensive. It’s expensive in every country that attempts to deliver a childcare system for parents. So the big question is how do you divide up the costs of that expensive childcare? How much do parents pay? How much does the government contribute? How does it contribute its money? Does it give the money to parents or directly to providers?

“The problem is we don’t have this conversation in the UK. We don’t really talk about these essential issues around what is the role of childcare in society? Never mind the economy and how should we divide the costs and what is it worth to all of us. In other countries there is much more of a debate about this. In France, in Germany… not just in the Nordic countries.”

So even before we talk about costs, should we be talking about the value we put on childcare in the first place? If we were to have this debate - how childcare helps the economy and society - would we be able to address these other issues more efficiently?

Dr Eva Lloyd: “Certainly talking about the distribution of costs is key. If the childcare market started collapsing as the social care market is collapsing here and there then that really would have an impact on the economy. And not just people with small children. Women in the workforce fulfil a very important role.

“The other thing we don’t really talk about is whether the system we’ve got, the way the government offers 30 hours free to parents who meet certain income criteria(and we put free between quotation marks), whether that actually matches parental needs for childcare. And we know that it doesn’t. So we urgently need to have a debate about the extent to which the government will support a system.

“And the extent to which the government should look at other aspects of bringing up children. Almost everyone that has a child uses informal childcare anyway to cover the various hours that are not covered by 30 hours childcare. So we need to be upfront about what it is reasonable to expect the government to cover with childcare subsidies and what it is reasonable to expect with other policies.”

Do we value childcare in other ways than just something that enables parents to work? Do we value it in terms of educational value? Or is it just glorified babysitting to some people?

Dr Eva Lloyd: “Parents voted with their feet when universal early education was introduced. It was a huge success in terms of uptake. It still is. There are still children who don’t get it. When I did some research with a team from the National Centre for Social Research about eight years ago now, to see which families were not using the 3- and 4-year-old entitlement, we found the primary reason was that people didn’t know. It wasn’t so much the negativity.

“It’s different when you talk about the younger children. The only really authoritative sources of information around parents’ attitudes and so on are these surveys the government commissions every two years; a survey of parents’ use of and views on childcare in early-years services and the provider survey. So, yes, there’s definitely an enthusiastic embrace of the developmental opportunities offered by early education. That this enables children to socialise in their communities and make friends is very important.”

Are childcare costs rising?

In September, the aforementioned TUC report that showed working families’ childcare costs had outstripped wages rises caused consternation across the early-years sector. With government funds not covering the cost of implementing this policy, the Preschool Learning Alliance charity said nurseries and childminders were facing real hardship. It pointed out that half were raising fees to cover the shortfall, and in some cases providers were charging extra for additional things like lunch or trips.

Jonathan Broadbery, Head of Policy and External Relations at National Day Nurseries Association (NDNA)

“This research will be a real cause of worry for parents and nurseries. For years we have been warning about the pressures caused by the government’s funded childcare policy, with not enough money being made available to pay for the hours promised.

“Our own research has found that almost 90% of nurseries aren’t covering their costs with the hourly rate paid by government. With wages, rates and inflation rising each year, the gap between stagnating funding and childcare delivery costs keeps increasing leading to an average shortfall of £1.90 an hour for every child. Parents and nurseries end up paying the shortfall, which results in higher fees for paid-for hours, particularly for younger children.

“The TUC is calling for free childcare to kick in from maternity leave which would be a great help for new parents. However, the government needs to address the concerns of providers with the current system and any new schemes would need to be thoroughly costed to ensure sustainability.”

The government response

In September, to mark the anniversary of the national rollout of 30 hours free childcare, the Department for Education issued its findings from an independent evaluation of the scheme.

The report, ‘Evaluation of the First Year of the National Rollout of 30 Hours Free Childcare’ enthusiastically states that nearly 70% of parents are spending less on weekly childcare. However, early-years professionals have complained that scant regard has been shown to the funding shortfall.

Purnima Tanuku OBE, Chief Executive of National Day Nurseries Association (NDNA)

“The government wants to paint a rosy picture but this evaluation of its 30 hours policy highlights a number of alarming challenges, some of which work against the government’s own social mobility aims.

“NDNA is extremely concerned that current childcare policy is extending the gap between disadvantaged children and their peers. Local authority teams have been reduced to ‘critically low levels’ and their budgets already inadequate to support children with SEND or assist low income families to take up the offer. Our members tell us that there is little or no support available to them locally for children who need the most help and for whom high-quality early years education is the most beneficial.

“The report itself highlights that the childcare offer is not “completely flexible or free for parents” due to restrictions put in place by providers trying to deliver places sustainably. Three quarters of private nurseries say that their parent fee is higher than the funding rate they receive and 47% reported their delivery costs had increased as a result of offering the funded places. What we see is that despite these challenges the private and voluntary providers are better placed to offer the flexibility parents need with the majority reporting that they could take up funded places on times and days that suited them.

“Nurseries will be really worried that a comprehensive evaluation of the policy fails to mention the negative impact that rising delivery costs coupled with stagnating funding rates. If the funding is unsustainable then providers won’t be able to offer the places that the policy needs, putting the whole project at risk.

“Although it was drawn from a relatively small sample, some of the provider statistics echo NDNA’s own research. We know that the average nursery in England makes a £1.90 loss on funded places. As 80% of places are delivered by private, voluntary and independent providers, it’s crucial that the Government listens to our concerns and those of the people we represent or risk the policy failing completely.”

Lisa Lambert, spokesperson for Yoopies and a working mother of two

“It’s clear that the 30-hour scheme has really not delivered in reducing hourly childcare costs for working parents. The scheme has put so much financial pressure on early education providers that they are having to close or will only offer funded places on limited days. Parents have no other choice than to turn to the more flexible option of a nanny, which comes at a cost. If the trend continues then hourly rates are likely to get higher and higher. Nanny care is currently not part of the 30 free hours scheme but this needs to change if the government want to support working parents.”

The shortfall

Independent research company Ceeda launched the research programme, ‘About Early Years’, last year. Over 1,900 nurseries and nearly 450 childminders have joined the research panel to date. Its annual report found:

• PVI nurseries and pre-schools face a funding gap of £616m in 2018/19

• On average a provider’s costs are 46% higher for under 2s than 3-4s, yet fees differ by an average of just 7%

• Funding rates for 3-4s have increased by just 1.8% in real terms since 2013/14

• Funding rates for 2-year-olds have been cut by 8.5% in real terms since 2013/14

• If funding levels remain fixed until 2020, funding shortfalls will inevitably increase

Dr Eva Lloyd: “There is no doubt from the evaluation of the early-years implementation and early roll out of the 30 hours that for a substantial number of parents the policy made a huge difference. Especially if they were lucky and the providers weren’t going to charge for these additional extras, the tautological description I believe that we owe to Caroline Dinenage when she was Early Years minister.

“What we have seen from the two published evaluations - early rollout and early implementation - is that primarily it did not attract new parents into the system. It was parents who were paying over and above the 15 hours, paying less because suddenly all of those hours or a substantial proportion of those hours also became free.

“There is also evidence for additional extras going up. Parents are finding it hard to work out what they’re paying for and what is being subsidised.”

Holiday childcare costs

The Family and Childcare Trust’s 17th annual ‘Holiday Childcare Survey; found that the summer holiday comes with an average price tag of £800 for six weeks of holiday childcare per child.

The Family and Childcare Trust found that shortcomings in financial support could pile on problems for families. Universal Credit helps low income families to pay for childcare, but it is often paid too late to help them manage the higher holiday costs. It is paid in arrears, meaning that parents have to pay their holiday club bill before claiming back support, rather than getting the extra support when they actually need it.

The Holiday Childcare Survey also found that increasing costs are only part of the problem. It found that many parents struggle to find childcare places as just one in four local authorities in England reported having enough holiday childcare for all parents working full time, dropping to one in eight for children with disabilities. The survey acknowledged there had been small improvements to the availability of childcare, but large gaps still remain.

Ellen Broomé, Chief Executive at the Family and Childcare Trust

“Now is the time to urgently address childcare policy for school age children. For too many families, the long summer holiday is a time of stress and expense as they try to patch together a solution despite the gaps in availability and financial support.

“Current government policies, including the new ‘right to request’, are not working to help families to deal with school age childcare. This price rise is another blow for families already struggling to find and afford childcare over the long school holidays.”

Purnima Tanuku OBE: “Holiday childcare continues to be a challenging issue for families. Many nurseries already work with parents, schools and other providers to offer services for holiday childcare.

“Many nurseries are struggling with recruiting and retaining high quality staff due to low wages which is because they are paid inadequate funding rates for ‘free’ childcare hours. This becomes even more of a problem during the holiday season as many qualified staff are on leave themselves.

“Due to these staffing shortages, many settings are forced to secure new recruits from agencies which pushes up the cost. It is evident that this will impact on parents financially.”

Is childcare good value?

Tanya Richardson, Senior Lecturer in Early Years at the University of Northampton

“When considering the question “Is childcare in England good value for money?” we have to think what we are actually paying for when we pay for childcare. Our youngest children are often in a day care setting from 7.30am until 6pm and throughout the day children are provided with:

• Breakfast, a nutritious morning and afternoon snack, and a home-cooked hot dinner and tea, all planned and prepared by a cook who has been trained specifically to cater for young children’s nutritional, cultural and health requirements

• Planned and purposeful play and learning experiences, explicitly provided by staff using extensive child development knowledge, many of whom have trained to a high standard to ensure that children are given the best educational start in life

• An environment that is enabling, comfortable and stimulating, both inside and outdoors

• Personal care: nappies, toilet training, clothing changes, first aid administration

• A record of their wonderful experiences throughout the day, through copious paperwork

• Additional support as needed, often requiring engagement with other professionals such as health visitors, social workers, family support workers

“If each of these individual aspects were itemised we could well be faced with a bill that was much higher than the daily rate that is currently charged. An hour at a trampoline park can cost around £15 and although it could be argued that this was within an enabling environment, this does not include most of the things that a childcare setting includes. So is childcare in England good value for money? I would say, wholeheartedly, most definitely.”

Zarja Cibej, founder of myTamarin, a company that offers AI-powered personality matching for childcare

“The answer is most definitely yes. We see parents do very short-term calculations. For example, if the cost of a nanny is close to what the lower-income parent would be earning (typically a mum), they would conclude that it's not worth it.

“Mum would quit her job, just to find three years later, when the child goes to school, that she's having a very hard time going back to work because she feels she's lost touch and lost confidence. Many then never return back, but are not happy about it.

“Also financially, they remain a family with one income for a long time. Considering five-to-ten, or even more, years of lost income once a child is in school, the cost of that is typically much higher than that the cost of hiring a full-time nanny for three years.

"Equally importantly, people forget that parenting is the only 24/7 job legally allowed without breaks until children are teenagers. It truly takes a village to raise children, and parents, especially mums, need help with children, or else they cannot, physically and mentally, enjoy parenthood fully."

Dr Eva Lloyd: “That is a very awkward question - is it value for money? We’re at a point in the economy where we couldn’t think it away. What is difficult for parents is that, yes it is too expensive, but that is changing.

“But the government has got to get more of a grip on this in terms of strings attached to public funding. They shouldn’t continue to introduce policies that might lead to increases in fees. In the Treasury’s report on childcare that came out in March it confirmed they had not factored in rising costs that providers faced such as the changes in pension arrangements, the introduction of the national living wage and business rates going up everywhere. So it was a very disingenuous calculation of costs. Those costs all have to be found somewhere and they will often translate into fees to parents.”

The future

Dr Eva Lloyd: “A 2016 report from the Women’s Budget Group, of which I am a proud member, came to the conclusion, recently quoted by Larry Elliot in the Guardian, that a free childcare system - free at the point of delivery - would pay for itself in making employment easier for men and women. Women’s role in the economy is absolutely crucial.

“However, I think that we’re nowhere near a free childcare system. That might overstretch public finances. I think my argument would be that income-related fees would be a fairer way of doing it.

“But because we started with free early education we can’t really scramble back and start charging for that - politically that would be very difficult.”

“I think we have to go back to my earlier point. We have to have the debate about childcare. There are lots of questions to ask. Instead, what we’re doing is piecemeal. We have to look at the bigger picture. The early-years sector can only respond to what is on the table. We have to pause to think.”

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