Baroness Andrews (Lab)
My Lords, this debate could not be more timely. I am extremely grateful to noble Lords who have put their name down to speak this afternoon, despite the hour and the weather.
In the spring Budget, the Government made £4.3 billion of new investment to expand entitlement to childcare. For children between nine months and three years, who will be offered 30 hours of funded—not free—childcare per week from April 2024, this was extremely welcome. I want the Minister to know that we are grateful indeed for, and acknowledge the significance of, that investment. Why was this new funding therefore received by the childcare sector with more alarm than joy? Briefly, it is because it has become clear over the past seven years that the sector is simply too fragile to deliver additional places at the price that the Government are prepared to pay for them, without putting even more providers at risk and adding to the potential erosion of the service. Since the Government are actually purchasing about 80% of all childcare hours the providers, especially in the poorer areas, will be made even more vulnerable because there will be less scope for asking richer parents to pay more.
At the heart of this issue, therefore, is the chronic and cumulative underfunding of the existing provision for three to four year-olds, which led the Institute for Fiscal Studies to estimate yesterday that funding was 10% below that which it was in 2012, and that funding will simply not reach many of the poorest families at all. It is that which is raising the alarm now among providers and parents, and that alarm is shared by the Select Committee on Education, which reported in July that without every effort, the extra places cannot be delivered—and possibly cannot be delivered without risk—and that the existing places may become more vulnerable.
Yesterday, the Government announced that £400 million would be available for the policy. Again, that is welcome news but, in a complicated funding environment, I have to ask the Minister for further clarity. Can she tell me whether this, or a proportion of it, is new money? What and who, and exactly how, will it be funding? Can she just give us those details for greater clarity? How will it improve the situation for the many existing providers who provide just for three to four year-olds? How will it incentivise those who want to expand the service to the younger children?
When there is such huge investment at stake, it is really dispiriting that we cannot be certain that, with the best intention, extra places can be provided, that objectives will be met and that there will not be such perverse outcomes. Those perverse outcomes were baked into the Childcare Act 2016. It gives me no pleasure to say this but I and many others, informed by the childcare networks, warned in this House then that unless places were fully funded, there would be an exodus of providers that could not afford to bear the burden of expansion. It turned out that the funding provided was a quarter of what was estimated to be needed.
I also make the point that the Government’s own objectives short-changed the children involved. While the emphasis was on getting parents back into work, there was no equivalent urgency or assurance on quality or educational outcomes, especially for those with special needs. The child, it seemed, had been left out of the policy—so it still seems, but it is so much worse now after Covid. In the short term, we can already see the impacts: the sustained loss of language, learning and socialisation in very young children, which is of course worse in disadvantaged areas; a wildfire of absenteeism in secondary schools; and a breakdown of some basic trust between parents and schools about the value of attendance. Then there is the ultimate broken environment: the crumbling concrete, which puts children and teachers at risk.
I have enormous respect for the Minister. This policy is not of her making but I know that she and her colleagues, like us, want it to succeed. She will also know that when I say that childcare provision has been knowingly underfunded, I am referring to the information obtained directly from her department, revealed by a freedom of information request from the Early Years Alliance, which shows that in 2015 DfE officials were already worried about a funding gap and had already estimated that, by 2021, the hourly costs for funded-hours entitlement for three and four year-olds would reach £7.49. In 2021, however, providers were receiving only £4.89 for each place.
The foundations were being undermined from the start, because the original gap between what the Government were prepared to pay for and what it actually costs to care for and educate a young child has widened every year, accelerated by inflation, the cost of living increases and minimum wage increases. In 2024, providers will get £5.62 per place. The sector estimates that the real cost is over £9.
What is clear is that, across all comparisons, the UK is still the third most expensive of all OECD countries for childcare. This bears down most on families who earn less than £45,000; they do not qualify for universal credit but cannot afford the £14,000 now estimated as the annual cost of one child in full-time preschool care. Parents and children are falling through the cracks. But the present crisis is not just about financial shortfall; there was another gross failure in 2015. Staffing accounts for 70% of costs. What was crucially needed was a workforce plan in place dedicated to building the childcare workforce of the future, with provision for training and professional development and a clear focus on learning outcomes. That did not happen.
Instead, funding was grafted on to a service which was already struggling with retention and recruitment. Ofsted has shown that the service has shrunk from 85,000 providers to 60,000 since 2015. According to the Early Education and Childcare Coalition and the University of Leeds, 57% of nursery staff and 38% of childminders are considering leaving the service in the next 12 months. A workforce plan is more urgent now. We cannot start soon enough. I urge the Minister to go back to her department and urge her colleagues to put in place the beginnings of a workforce strategy, because it is in the poorest areas that we have the greatest impacts as it is where children’s preparation for school and attainment in school is lowest.
I am afraid I have a few more statistics. Half of providers exist just on the margins of profitability. The National Day Nursery Association estimates that the average setting has lost £32,000 as a result of those 15-hour places for three to four year-olds, and 96% of those were good or outstanding; these are not poor providers. Ofsted’s latest figures—from August 2022—up to now show a loss of 3,200 additional providers. The fastest exodus from the profession is by childminders, who are becoming an endangered profession. Of all these statistics, the most alarming I have seen is an estimate that by 2035 there will be only 1,000 childminders left in the UK.
To be graphic, what we are watching is a system which has been unequal from the start become more unequal, more unfair and more inefficient. Women are still being held out of the workplace and we need them to be as fulfilled and as productive as possible, particularly in the poorest areas. The Early Years Alliance is a good example. It is one of the largest community-based providers. It has 132 settings four years ago in the most deprived areas; now it has 42. It is in the childcare deserts that childminders have left at the fastest rates. They are the areas where the pressures on preschool settings are the greatest because there are so many fewer high earners who can help cross-subsidise the system. When 80% of those places are funded for poor families, you do not have the scope to borrow and cross-subsidise. You have two choices; cut the hours of your staff or cut your staff entirely. Perhaps the Minister will say that a low take-up reflects lower birth rates or that women are choosing to work from home more. If she does, I urge her to give us the evidence for that.
We can all agree that we will never deliver for children unless the Government deliver for the early years’ educators, who feel “undervalued” and “under-respected”, in their words. We really need a review of pay and conditions. Nearly half of them survive on benefits or tax credits. The Sun recently put out an article with the 20 least popular jobs in the country. At the bottom of the list, earning about £22,000, were early years educators. What does that say about the value we put on children? It is estimated that it would take five early years educators pooling their resources to afford an average-price house.
I have a few related questions. Why was there no reference at all in the Autumn Statement to the impact of higher minimum wages on those caring for three to four year-olds? Exactly how many new places are expected to be created for younger children with the new money? How many new staff will be needed, and how will they be found and retained? What is the plan?
What is the estimate of the number of younger children under the new scheme who will come from families on universal credit? How will that be evaluated? Has DfE made any estimate of the amount of dead weight—parents who are presently paying but who will move, by different means, on to the funded places? How is that being evaluated? Why have the Government rejected all the evidence from the sector and parents about the change in the ratio from 4.1 to 5.1 staff, which is going ahead despite all the evidence that this will cause retention to deteriorate further? Why, in the spring, did the Government not consult or even inform the sector regarding the planned expansion before it was announced? It read about it in the newspaper.
Why have the Government rejected Select Committee’s arguments on the need for sustainability by rejecting recommendations on the right rate of funding for all ages and the abolition of business rates? This is a unique sector with a unique national public service to offer, and it would make a massive difference if business rates were removed. Is the Minister prepared to meet with the Early Education and Childcare Coalition and the Early Years Alliance to listen to their shared concerns?
There is no need to rehearse the importance of early learning: we have decades of evidence on how and why these years have the most profound impact on what people make of their lives—speech and language, curiosity, relationships and behaviour. A threadbare, uncertain and stressful environment holds every child back. These are the same children who suffered so badly by being locked out because of Covid, and whose parents could not provide the books, the companionship, the conversation, the outdoor play, the stimulation.
The evidence is piling up. Ofsted has charted the continuing impact on child development, such as language and learning loss, and more children needing specialist help and waiting longer. The Education Policy Institute has said that according to the evidence, the disadvantage gap between poor children and the rest, which has been much reduced over the past decade, has been “reversed”. In June this year, the Public Accounts Committee noted in relation to older children that Covid had wiped out a “decade of progress” in reducing the attainment gap. This is really serious. The Children’s Commissioner told the Covid inquiry that children and the child’s perspective were entirely left out of Covid planning. It is worth reading all 130 pages of her evidence.
One of the most conspicuous failures has been not following the powerful and expert advice of Sir Kevan Collins. What was wanted for secondary and primary school children was a properly funded, coherent, active-learning programme that was not simply tutoring, but which brought enrichment, motivation and an appetite to learn. I know that because I spent much of my life in that sector.
No one in the Chamber disputes the link between children in poverty and school failure, nor how the number has grown. No one disputes that putting the childcare sector on a stable footing and making that investment work properly is as much about expanding the minds of children as it is about expanding the economy, and the care economy in particular, which underpins it all. It is about ensuring that the future is in safe, intelligent and courageous hands.
This why the current situation is so profoundly frustrating and dispiriting, and I have some sympathy with Ministers in this respect. We seem to have ended up with a Treasury model focused on childcare, not children. Children are invisible and their value is commodified into the cost of places, rather than optimising the benefits to them. Although the additional funding this spring and the announcement yesterday are of course welcome, they do not put right the profound structural problems that will make it so difficult to deliver this policy, which we all want to see—indeed, they could make it worse.
If the evidence in the next few months shows that there is an issue with delivery, I urge the Government to listen to what the sector tells them and not to short-change providers, parents and children. We need to assert that every child matters, and we need to see this at the centre of every government policy, in bold caps. Otherwise, after years of failing to provide, this will be the generation that was promised more but given less.