Free Childcare for 3 and 4-year-olds

Tuesday 12th July 2016 Westminster Hall

16:15

[Karin Smyth (Bristol South) (Lab)]

I beg to move,

That this House has considered free childcare for three and four year-olds.

It is a pleasure to serve under your chairmanship, Mr Walker. I am grateful for the opportunity to hold this important debate, the background to which is the Government’s plan to double the number of hours of free childcare that working families with three and four-year-olds are entitled to from 15 to 30 hours per week from September 2017. Pilots are due to begin this September. That builds on the introduction six years ago of an entitlement to 15 hours’ free childcare per week, which, in 2013, was extended to include two-year-olds from disadvantaged families.

There are matters on which I profoundly disagree with the Government, but I firmly believe that when their record meets the needs of people in my constituency, credit is due. I very much welcome the Department’s good progress towards ensuring that all three and four-year-olds benefit from 15 hours of free early education and childcare. In 2015, 94% of three-year-olds and 99% of four-year-olds had taken up a funded place.

My work on the Public Accounts Committee has helped further develop my understanding of a range of issues, and childcare is no exception. The Committee’s recent inquiry and subsequent report—a copy of which I have with me, in case the Minister has not managed to peruse it in detail—helped me in this area. The report’s conclusions and recommendations are numerous, but probably chief among them is the danger that the Government may not deliver on their pledge to extend the childcare offer.

I will highlight some specific concerns. They fall into four main areas: the availability of quality information for parents; workforce planning and the supply of enough qualified early years staff; the high cost of childcare in some areas, and what I call “reverse means-testing”; and monitoring the impact to ensure value for taxpayers’ money, which is very much what the Public Accounts Committee’s work is about.

The first of those four areas is the availability of quality information for parents about the childcare available close to where they live. I have welcomed the Government’s progress on free childcare, but there are concerns throughout the House about unacceptable local variations in the amount of information that is available to parents about access to free childcare.

[Simon Danczuk (Rochdale) (Ind)]

My hon. Friend is making an important speech. I recently met members of the Rochdale branch of the National Day Nurseries Association, who had real concerns about provision and the low funding available for places, to the point where they thought that they would not be able to make the provision. They also have concerns about things like quality and who will pay for meals. Does she share the concern of those businesses?

[Karin Smyth]

I do. In the Public Accounts Committee, we have found that the situation varies across the country, and many hon. Members will be able to tell the Minister about their local experience. I will discuss quality later.

Local authorities have to provide the family information service, which gives parents details not only about childcare providers that offer free entitlement but about how to claim it. I know from my own constituents that navigating the processes can be as big a barrier to claiming entitlements as knowledge of the offer itself. That extends, incidentally, to other entitlements such as pension credit and income support.

[Julian Knight (Solihull) (Con)]

The hon. Lady is making an important contribution. The challenges are multifaceted. A couple of weeks ago I met the YMCA, which runs a local nursery, and it told me that it felt that some local authorities take very high administration charges when it comes to allocating per-pupil funding to children in their care. Does she agree that local authorities need to do all they can to ensure that free childcare is spread as widely as possible?

[Karin Smyth]

I do, and I will come on to the need for local authorities to abide by the statutory direction given by the Government. That was one point that the Public Accounts Committee picked up on.

Information for people in my constituency is generally good. We have 1 Big Database, a searchable database of 1,000 childcare providers that is a collective effort of Bristol, Bath and North East Somerset and South Gloucestershire Councils and enables parents to locate the providers nearest to their home or workplace, although it lists only provision, not vacancies. However, it is clear that the quality of information varies between authorities nationwide. Shockingly, the Public Accounts Committee heard that only 30% of parents are even aware of family information services. If there is an offer but most of those who are eligible for it do not know about it or how to access it, its value is diluted to say the least. I hope that the Minister will outline how his Department will improve the quality and consistency of information for parents.

My second area of concern is workforce planning. As a former governor of a nursery and children’s centre, I recognise the importance and difficulties for providers of such planning. The Public Accounts Committee found that the Department lacked robust plans to ensure that there are enough qualified early years staff for providers to continue offering high-quality childcare. The sector has become increasingly professional, and there has been an increase in graduate recruits. That raises quality but brings challenges for providers, which now report that they are struggling to recruit. As the Department has set funding rates until 2019-20 based on 2014-15 costs, many providers are also concerned about the impact of the national living wage on their costs. The Department does not have a workforce plan for the early years sector.

There are also concerns that there is a real risk to the delivery of the pledge to provide 15 additional free hours from September 2017, due to too few providers being able to deliver that pledge because many will be minded not to become involved in the offer. I find that alarming, and it raises serious questions about the process of making pledges when deliverability appears not to have been properly assessed.

[Julian Sturdy (York Outer) (Con)]

The hon. Lady is making some powerful arguments. I point out to her that one of the pilot schemes is in York. I have worked closely with the nursery providers in my constituency. Because of the funding stream and the hourly rates, there was a lot of concern among those providers to start off with about whether they would opt in to provide the second 15 hours, but the local authority and the Department for Education worked together closely and have now persuaded 60% to 70% of those providers to opt into the scheme. Does she not agree that we can persuade providers to opt in as long as there is good will from the Department and local authorities to deliver the scheme?

[Karin Smyth]

I certainly agree. That shows the importance of good pilots and good working nationally and locally, and we want to see that with the other pilots, which will start this year.

Private and voluntary providers reported to the Public Accounts Committee that the amount they are currently paid for providing free childcare is not enough to cover their costs, so in some cases they feel the need to charge parents for additional hours or obtain other sources of income to meet those costs. Providers can of course choose whether to offer parents free childcare, so there is a genuine risk that many businesses will simply choose not to offer the new entitlement because doing so could reduce their opportunity to charge parents for hours outside the entitlement. As hon. Members have said, it is important for that issue to be looked at, because different situations exist across the country.

Maintained settings—nursery classes and nurseries run by schools—tend to operate fixed morning or afternoon sessions and are less likely to offer additional chargeable hours, so their ability to offer the new entitlement is limited. That disproportionately affects children in disadvantaged areas, simply because those settings are more likely to operate in such areas. I hope the Minister will be able to outline how the Department will address the challenges of ensuring that there are enough people with the right skills to work in the sector in the years ahead. I also hope that he can reassure me that the Department will be able to use the pilots that will begin this year to test providers’ capacity to meet the expected demand for the increased entitlement. He may also want to explain how that will be done and how evaluation will be carried out, given that there is just 12 months between the start of the pilots and the scheduled full roll-out of the new entitlement, and I would welcome his thoughts on how the Department will ensure prior to the 2017 roll-out that the pilots have had genuine influence.

My third area of concern is the high cost of childcare. I know from my constituency that childcare fees present a real challenge for many working parents, as I am sure many hon. Members will agree. I have been contacted by parents who have been informed of some quite significant fee increases—up to 30%—being imposed by their private nurseries. Bristol already has some of the most expensive childcare outside London, as the Bristol Women’s Forum has highlighted, and I agree with the forum that childcare is an infrastructure issue and needs to be considered as part of our economic thinking. Indeed, the Women’s Budget Group in Bristol has indicated that 84% of the cost of universal free childcare will be recouped through taxes and reduction in welfare benefits.

High childcare fees are a key reason why the offer of 30 free hours is so important to so many working families and why I support that offer, but many parents have reported that some providers are offering the free entitlement only if parents also pay for the additional hours, and the charity Gingerbread receives calls from parents whose childcare providers have put conditions on the free offer. That contravenes the Department’s statutory guidance for local authorities, which states that they should ensure that

“if providers charge for any goods or services, this is not a condition of children accessing their place.”

The Department has acknowledged that issue, and I hope that the Minister will be able to explain what progress is being made on identifying the scale of the problem and how the Department plans to address it to ensure that those who are least able to pay do not miss out through such reverse means-testing.

My fourth and final area of concern is about measuring the impact of the offer to ensure that the taxpayer is getting value for money, which is why the Public Accounts Committee held an inquiry on this subject. As someone who is passionate about the value of investing in early years—I am a firm believer in the Labour Government’s Sure Start programme, for example—I am concerned that the Department’s most recent evaluations of the effectiveness of early years education and childcare are based on the academic outcomes of children who started early years education in 1997. I was surprised and alarmed to find that the Department had no routine data to assess the impact of its investment in the early years. That must be remedied, since such data must play a key role in helping to shape future policy. If the Department does not know what works well and how to get the best bang for its buck, taxpayers could be left short-changed. Since the Department appears to lack sufficient current data to measure the impact of free childcare, I hope the Minister will be able to explain, along with his responses to the other issues that I have raised, the steps that he is taking to bring its assessments up to date.

14:00

[The Parliamentary Under-Secretary of State for Education (Mr Sam Gyimah)]

I thank the hon. Member for Bristol South (Karin Smyth) for securing this important debate. Successful implementation of the extended free childcare offer is a key priority for the Government. Childcare was included in the Queen’s Speech for the first time after the last election, and the Childcare Act 2016 shows how much of a priority our manifesto pledge on childcare is for the Government.

At a time when there is austerity and a lot of other Departments face budget cuts, the Government have made a strategic decision to continue to invest in childcare, as a result of which an extra £1 billion investment will be made in the three and four-year-old offer from 2019-20, taking the amount going into the early years free entitlement to £6 billion a year. That is more than we have ever spent on childcare in this country. I reassure the hon. Lady that delivering on our pledge continues to be a high priority for the Government, and the passage of the 2016 Act shows that we are well on our way to turning that pledge into a full commitment for parents.

The hon. Lady mentioned the availability of information for parents about the offer. The high take-up rates for current three and four-year-olds indicates that parents are already highly aware of the free entitlement, but it is worth mentioning that we are not necessarily increasing demand but extending an offer. A lot of parents already use 30 or more hours of free childcare. The Government offer encourages those who do not get it to do so, but those who are already using the 30 hours of free childcare will get a subsidy from the Government rather than having to pay for it all themselves.

That principle is particularly important to understand because a lot of the criticism of the 30-hour entitlement, whether it is about workforce, places or whatever, seems to assume that somehow no parent in the market is already taking 30 hours of childcare and that, suddenly, from 2017 every parent will do that. The truth is a lot of parents already take more than the free 15 hours of childcare. By giving them an extra 15 hours, the Government are subsidising the additional hours they buy. We are therefore not necessarily increasing the demand, but extending the entitlement.

That principle is particularly important because it has a bearing on information and how we need to make parents aware of it. A section in the Childcare Act, which the hon. Lady will be aware of, asks local authorities to publicise information about the childcare available in the local area. The new statutory duty in the Act requires local authorities to publish information about childcare services in their local area, which will increase the information available to parents.

We have not stopped there. The Department has provided funding to the largest website in the country on childcare places—childcare.co.uk—to develop an innovative digital solution that will make it easier for parents to find information. Further, in my experience, generally when something that is otherwise quite expensive for people when they pay for it themselves is free, they tend to find out about it. I am very confident that, given the statutory duty, the innovative solutions we are taking and the fact that 98% of four-year-olds and something like 94% of three-year-olds already take 15 hours, parents talking to early years settings will realise that they can get that extended entitlement.

There will be a communications campaign before launch. I chair a cross-Government taskforce with the Minister for Employment, and at the right time we will launch a campaign alongside a new Government website to alert parents. I hope I can assure the hon. Lady that parents will be able to find out about this fantastic offer, delivered by a Conservative Government.

The second issue the hon. Lady raised was about workforce planning. As I said, the Department will launch a workforce strategy later on this year alongside the introduction of the 30-hour commitment. The quality of the workforce is already good and has been improving. Between 2008 and 2013, the proportion of full-day care staff with at least a level 3 qualification—equivalent to A-level study—grew from 75% to 87% and the proportion with a degree or higher increased from 5% to 13%. However, we are not complacent. We want to continue to attract quality staff into the early years and support those already working in the sector to progress. That is why we will publish the workforce strategy to which I alluded—it will be on how the sector can attract and retain people. That is something we are focused on.

When the hon. Lady made the point about workforce, she also talked about places, and places in maintained settings in particular. One thing to be aware of when we discuss childcare is that no one size fits all. It is easy for us in Government to think that every parent should do this, but some parents want only the 15 hours of early education for their children. That is free, and they can continue to get it. Some might want 20 hours and some might want 30-plus hours.

The strength of the childcare sector is that there are different providers to deliver different types of childcare. We have full day-care nurseries that deliver all-day childcare; nurseries in schools that, as the hon. Lady mentioned, will do three hours in the morning and three hours in the afternoon, which are focused on early education; childminders who deliver excellent childcare; and sessional providers operating from, say, church or village halls that offer 15 hours a week.

The strength of the sector is that there is diverse supply to suit different parents’ needs, which is important. We should not try to impose one model of childcare on parents. However, for parents who have been using a nursery in a school, for example, that currently offers only the first 15 hours, there is capital available to enable those schools that want to expand their provision to do so. One of the interesting things we have seen in innovative local authorities such as York, as my hon. Friend the Member for York Outer (Julian Sturdy) mentioned, is the bringing together of childminders and school nurseries to offer a one-stop shop for parents, so that the child can be in the school nursery for a time and then be picked up by a childminder if that is what works for the parent. We will look for a number of different solutions to be available not just to increase the supply of places but to ensure that parents get the childcare solution that fits their working lives.

[Karin Smyth]

I am grateful for that assurance. I agree that diversity of provision is important and valuable—I took great advantage of that when my three children were younger. Will the Minister comment on the security of income for providers? Although I do not have data to verify his assertion that the people who take 15 hours are the same as the people who might take 30 hours—I would be interested in such data—income that gives struggling providers security is important. Choice for parents is welcome, but equally providers need security of income.

[Mr Gyimah]

That is an important and relevant question. We want the childcare sector to be sustainable and we want providers to be able to deliver this offer. That is why in November we published the most comprehensive review of the cost of childcare ever. In order for the Government—we will become the biggest buyer of childcare in the UK—to set a price for the sector, it made sense for us to work out what the unit cost of providing childcare was and set a price that allows providers to deal with increased cost pressures such as the national living wage, which the hon. Lady mentioned, and, given that 80% of the sector is in private and voluntary settings, to enable the sector to make a profit. That was the purpose of the review, which was described by the National Audit Office as “thorough and wide-ranging.” Those are not the Department’s words, so I hope she is reassured that the detailed work that underpins how we will decide the funding rate for providers is there.

That is what underpinned the spending review settlement. The Government’s commitment of an additional £300 million a year to increase the national average funding rates paid for the free entitlement was based on that research. We are also committing £50 million of capital funding to create an additional 4,000 early years places. More money is going into the system than ever before, but we need to ensure that it is distributed fairly. That is what we saw in York. The issue is not just the quantum of money. Because the funding formula is based on local authorities and history, we have a situation where some local authorities are getting £9 an hour per child and others are getting something like £3.50 a child. There is therefore no point in increasing the funding pot without reforming how the money is distributed to local authorities and, in turn, how it goes from local authorities to providers.

[Thangam Debbonaire (Bristol West) (Lab)]

I am grateful to my hon. Friend the Member for Bristol South (Karin Smyth) for securing this important debate. The Minister has made several references to the need to be sure about such and such, and my hon. Friend mentioned that the full roll-out will take place soon after the pilot, so will the Minister comment on how lessons will be learnt in time for the full roll-out?

[Mr Gyimah]

What I can say firmly is that the Government will bring about funding reform imminently to create a system that is transparent to local authorities and fair to all early years providers. Part of the package introducing the 30 hours will be wholesale reform of early years funding. That was mentioned in the spending review and the autumn statement, and that reform is imminent. We will consult on that to seek views on our proposals from across the early years sector. We already listen to the sector in a number of other ways to ensure the funding works. Our red tape challenge is looking at bureaucracy and barriers. We have consulted on ensuring that providers are paid on time, which has been raised specifically by childminders in many areas, and on making local authority contracts with providers more consistent across different parts of the country.

We are looking at the local authority role in building on the success of the existing 15-hour entitlement. Rolling out that manifesto commitment is an opportunity to improve the way the system works on the ground. We received over 1,300 responses to our recent consultation on key elements of the operation and delivery of the extended 30-hour free entitlement from a wide range of childcare providers, local authorities and parents. Crucially, those views will help to inform how the 30-hour entitlement will be delivered at local level. We will publish our response to the consultation in the autumn ahead of affirmative debates in the House and the other place on the regulations of the Childcare Act 2016.

I hope I can assure the House first that a record amount of funding is going into the sector. Secondly, in terms of how that funding is distributed, we are looking at wholesale reform and will be publishing our intentions, on which we will be consulting the sector, imminently. Thirdly, we are looking to reform how local authorities work with providers and will consult on that as well. Much of the disquiet around the 30-hour commitment and its implementation is from a number of people who are assuming that we will be following through with the system as it is, but we are going to reform the entire system to underpin the fact that, if the Government are going to be the biggest buyer of childcare, the old system will not work. That is because it was based on just 15 hours a week, which was a limited offer. If we are to move to 30 hours a week, we need to ensure the system we are operating in is fit for purpose.

The hon. Member for Bristol South also mentioned the high cost of childcare. The Family and Childcare Trust is the guru when it comes to childcare costs. I look forward to its childcare costs report with a degree of trepidation every year because I know I will have to tour the TV studios if the report says the cost of childcare is getting out of control. The most recent report showed that childcare costs, which had risen for the best part of a decade, are stabilising and only rose in line with inflation in 2015.

The principle here, and the reason why the Government are introducing the 30-hour commitment, is precisely to help parents with the cost of childcare, but the available support to parents does not only come in the form of the 30 hours. We will be introducing other childcare measures such as tax-free childcare, which will give parents 20% off the cost of childcare up to £10,000. If they spend £10,000 they will get £2,000 off the cost of childcare, so a parent buying in excess of 30 hours of childcare will get 30 hours free and 20% off for anything over those 30 hours—obviously, that is for three and four-year-olds. Other parents on the lower end of the income scale will get additional support through universal credit.

I hope the hon. Lady will appreciate that a substantial amount of support goes to parents for childcare, but she is right that we need to make it simple for parents. The issue is that there are multiple areas of support for childcare that are parented by different Government Departments and there is a need to stitch those together. That is what the cross-governmental childcare taskforce is looking at, so that parents do not have to go to three or four different places to try to figure out which childcare offer works best for them. There will be one portal and one port of call from which they will be able to access childcare.

The issue of cross-subsidisation was also mentioned and it is particularly important from the provider perspective. A lot of providers have been content with the free 15 hours almost as a lead generation aspect of their business, so parents get 15 hours free and then have to buy additional hours for which the providers can charge a lot more. One of the things the funding reform will specifically look at is to price this in such a way that there is every incentive for providers to actually offer parents free hours, rather than thinking that they will opt out of it. The truth of the matter is that providers do not have to offer that, but parents will be looking around for providers that can. The Government have to set a price that brings the buyers and sellers in that market together and the cost of childcare review gives us a strong basis from which we can and, I am sure, will, get that right when the funding review is published. It is an issue that we are alive to.

Another point is that, with so much subsidy going into the sector—

[Mr Charles Walker (in the Chair)]

Order.

16:45

Motion lapsed (Standing Order No.10(6)).