The LGA has long highlighted that funding for early entitlements is insufficient, which is resulting in a recruitment and retainment crisis in the sector, impacting the quality of childcare provision and the availability of good support for children, particularly those with special education needs and disabilities (SEND).
- Good quality early education is essential to supporting children’s development and ensuring every child is given the best start in life. By the time disadvantaged young people sit their GCSEs at age 16 they are, on average, 18.4 months behind their peers and around 40 per cent of that gap has already emerged by age five. Pre-school has almost as much impact on a child’s education achievement as primary school does, and the impact is even greater for those at risk of developing learning difficulties.
- The Government’s proposals to change the ratios between staff and two-year-old pupils, from 1.4 to 1.5, will not address the structural challenges within the childcare system. The LGA has long highlighted that funding for early entitlements is insufficient, which is resulting in a recruitment and retainment crisis in the sector, impacting the quality of childcare provision and the availability of good support for children, particularly those with special education needs and disabilities (SEND).
- To improve access to quality childcare while reducing costs for families, it will be essential for Government to adequately fund early years entitlements to cover the cost of provision and enable providers to recruit and retain skilled early years practitioners.
- The Government has said that the proposed change to the staffing ratio for two-year-olds could reduce childcare costs by up to £40 for a family paying £265 per week. However, councils share the concerns of early years providers that the change from 1:4 to 1:5 in the 2-year-old ratio will not result in any meaningful savings for settings or lower costs for parents, whilst increasing difficulties for providers. This is because providers prioritise the needs of children in their care and work within the current ratios. This is even more important for children with additional needs who may require additional support. There is a risk that the expectation of lower costs could result in disquiet between providers and parents.
- An Early Years Alliance survey of early years providers in April - May 2022 found that just 2 percent of providers thought that ratio changes would result in reduced fees. This is primarily because the Government has estimated savings on the basis that all providers would increase their staff to pupil ratio to 1:5. However, half of providers (51 percent) currently look after fewer children than the maximum ratios, and only 5 percent would consider operating at the maximum ratio if it was increased to 1:5.
- A more accessible and affordable childcare offer would offer significant socio-economic benefits for families and wider society. The cost of early years provision in the UK is among some of the highest in the world, with fees now reaching £7,000 each year for a two-year-old on average. The high cost of childcare is placing significant financial strain on many household budgets, particularly in light of the rising cost of living. It is also contributing to poverty, gender inequality and economic unproductivity.
- To help reduce barriers to accessing childcare for households on the lowest incomes, Government should reform Universal Credit rules so that claimants are paid childcare fees upfront – rather than in arrears – and implement a long-overdue review of the cap on the childcare costs that can be claimed, to ensure they are representative of the average childcare costs in each area.
- The Department for Education’s (DfE) ran a consultation from July to September 2022, which sought views on a number of regulatory changes to childcare including the proposal to change the mandatory staff to child ratio for two-year-olds in early years settings from 1:4 to 1:5.
- The Government’s outlined that the rationale for changing the ratios is that it would help to increase access to childcare and allow providers to exercise greater professional judgement in deciding the way in which they staff their settings and meet the needs of children.
- The DfE is expected to respond to the consultation in Autumn 2022.
Quality of early years provision
- The LGA has long highlighted that funding for early entitlements is insufficient, which is impacting the quality of childcare provision, the sustainability of providers, and the availability of good support for children with special education needs and disabilities (SEND). Data from an Early Years Alliance survey in April 2022 found that for 86 per cent of settings, funding for three- and four-year-old early entitlements did not cover the cost of delivering places.
- Low rates of funding results in low pay for childcare workers. Childcare workers earn around 40 per cent less than the average female worker and almost half (45 per cent) of childcare workers claim state benefits. Rates of pay fail to recognise the vital work that childcare workers do and the important contribution they make to the future life chances of all children. Low pay is resulting in a recruitment and retention crisis in the sector, particularly for well qualified staff, which is impacting providers’ ability to provide the high level of continuity and care children need.
- Ofsted have identified that the pandemic continues to have a negative impact on children’s development. Fewer children are reaching developmental milestones and fewer children are ready to move up to Reception than would have been expected pre-pandemic. Practitioners are therefore needing to put in place additional support to help children catch up with their speech and language acquisition, and with their broader personal, social and emotional development. Reducing staff numbers and the support children receive at this time is therefore counterintuitive to the DfE’s education recovery efforts, as well as the ambition to drive up educational attainment and tackle the disadvantage gap.
- To improve access to quality and affordable childcare and provide a foundation for education recovery, it will be essential for Government to adequately fund early years entitlements to cover the cost of provision and enable providers to recruit and retain skilled early years practitioners that provide children with vital support.
Affordability of childcare
- While access to childcare is important for all families, it is particularly crucial for those on the lowest incomes, the most disadvantaged children, women and single-parent families. Childcare enables people to work; increase their hours or take on new opportunities; move out of poverty and improves families’ and children’s long-term life chances.
- The average cost of a part time nursery place for a child under 2-years old now stands at £137.69 per week, or over £7,000 per year. The funding the Government provides for early entitlements often does not cover the cost of providing places, resulting in the deficit being passed onto parents.
- The high cost of childcare continues to put significant financial strain on many families, particularly those on the lowest incomes. Analysis from the Social Market Foundation found that childcare accounts for 7 percent of household income among those paying for it, rising to 17 percent for those in the bottom income quintile. A third of those accessing childcare in the bottom quintile are in ‘childcare poverty,’ with childcare costing more than 20 percent of their entire household income. For households with an income of under £10,000, over half do not use formal childcare at all due to high costs.
- Women and lone parent households’ ability to work is particularly impacted by the prohibitive cost of childcare, which contributes to a high number of lone parent households living in poverty. An estimated 1.7 million women are prevented from working the hours they would like to due to a lack of suitable childcare, resulting in up to £28.2 billion of lost economic output each year.
- It is also important to note that due to current arrangements for 3- and 4-years olds families that earn higher wages are more likely to benefit from free early entitlements. This is because families who are working are eligible for an additional 15 hours of childcare support, whilst families who are not working do not benefit from this. This means that many families that need additional support will not benefit from it.
Reforming the childcare element of Universal Credit
- In addition to the universal offer of free childcare, working households who are in receipt of Universal Credit can claim back up to 85 per cent of their childcare costs up to a cap of £646.35 for one child, or £1108 for two or more children, per month.
- The cap on the childcare costs benefit claimants can claim has remained at the same level since 2005, even though childcare fees have more than doubled in that time. In 99 per cent of local areas, the average price of a full-time nursery place for a child under two-years old – who is not eligible for free childcare hours – is higher than the cap. Low-income families in areas such as London, where childcare costs significantly exceed the national average, are therefore particularly impacted by the cap. A review of the Universal Credit childcare cap is urgently needed to ensure that the financial support for childcare provided to low-income families through the benefits system is representative of the average childcare costs in each area.
- Claimants are also required to pay their childcare costs upfront, which continues to present a significant financial barrier to entering, continuing or increasing employment. can cause families to go into debt to cover the first payment.
- We therefore urge the Government to pay the Universal Credit childcare element before fees are required to be paid to the provider. There are several ways this could be implemented with mitigations against fraud, for example through a system of direct payments to childcare providers, similar to the system for Tax Free Childcare.