Underfunding and Inequality: Unravelling the Two-Tiered Childcare Sector

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Children playing at a nursery
Image credit: Learning Policy Institute

By Sarah Presswood, Chair of Trustees – Early Years Alliance and Dr Anita Soni, School of Education

The education secretary Gillian Keegan has said that she can’t guarantee the government’s free childcare pledge will be met on time. The staggered pledge is due to start in April 2024, with working parents of two-year-olds able to access 15 hours of free childcare. From September 2024 this would be extended to all children above the age of nine months, and then doubled to 30 hours in September 2025.

The free childcare pledge highlights the Government’s preoccupation with babysitting and getting parents, usually mothers, back to work. Rarely are the needs of children mentioned or indeed considered. However, we argue that all children need a quality early education offer and the backtracking on this pledge will further reduce social mobility, inclusion, and participation for many already under-served children including those with special educational needs and disabilities (SEND).

It is not a surprise to the Government that this latest dabbling into early years provision has run into problems. They have known for years that the ‘free entitlement’ has been underfunded. In 2018, the Early Years Alliance filed a Freedom of Information request to the Department for Education asking for the thinking behind the early years funding rates that were announced in 2015, which came into effect in 2017.

The DfE finally made this information available to the Early Years Alliance stating that back in 2015, the government predicted that, by 2020, it would cost £2bn to fully fund the sector and that doing so would result in a three and four-year-old funding rate to local authorities of £7.49 per hour. In reality, they provided just £300m of funding and a three and four-year-old funding rate to local authorities of just £4.89 per hour on average. Therefore, the current government knew that the proposed funding levels, alongside the introduction of the 30 hours, would lead to increased costs for parents of younger children.

It is the years of underfunding that has brought the sector to its knees and in no small part led to both the recruitment and retention crisis and the soaring costs of childcare for parents. With the underfunding of the three- and four-year-old offer, providers had no option but to put up fees for parents of younger children and for the non-funded hours. Not only has the hourly rate paid by the Government, not been set at a realistic level, it has failed to keep pace with the increases in national minimum and Living Wage. This means the majority of the early years workforce are paid less than if they worked in retail and are not adequately rewarded for the demanding and important role that they do.

Back in October 2021, two years before this expansion of childcare was announced, the Early Years Alliance issued Breaking Point, a report into the recruitment and retention challenges. 84% of respondents were finding it difficult to recruit, over a third of respondents stated that were actively seeking to leave the sector, with the most common reason for people wanting to leave (77%) was lack of respect from the Government.

This policy will do anything but narrow the gap. There is already a two-tier sector; one for the working parents in more prosperous areas who can pay the high cost of the additional non-funded hours and the ‘top up’ fees disguised as a consumables charges, which although meant to be voluntary for parents, are in reality, anything but. The early years providers need this extra funding to make the sums add up. The second tier is for those who don’t qualify for the offers for working parents. These parents and children, already under-served, find themselves in ‘childcare deserts’ facing multiple levels of disadvantage.

There is much that is good about the early years provision in this country and the Government should have built on that and worked with the sector to co-construct something that works for everyone involved; children, parents and providers. This would have meant reconceptualising what childcare is and move towards quality early education and care for all children.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the University of Birmingham.

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