Free Childcare

Daniel Zeichner Excerpts

Monday 9th March 2020 Westminster Hall

[Daniel Zeichner (Cambridge) (Lab)]

My hon. Friend is making a powerful case. Does she agree with me that the current system is under huge pressure? In my city of Cambridge are two nurseries: one maintained and one private. One is slashing services and the other is telling parents that services will stop within weeks. Does she agree with me that the current system is not financed properly by the Government?

[Catherine McKinnell]

I absolutely agree with my hon. Friend. I will come on to make that very point in more detail.

The issue is not only a problem for individual families; it is critical to our whole economy and productivity levels. Early years education has proven to be a positive benefit to our children, too. The Department for Education’s study of early education and development—SEED—longitudinal study, published in 2018, found that increased hours per week spent in formal early education, such as day nursery, between the ages of two and four resulted in non-verbal development and better socio-emotional outcomes. The Education Committee’s inquiry into tackling disadvantage in early years found that early years education for children below the age of four has a positive impact on the life chances of disadvantaged children. However, it also found that disadvantaged children currently spend significantly less time in pre-school than children from more affluent backgrounds.

Britain has long had a publicly funded education system because successive Governments have recognised that such a fundamental service should be provided by the state and be available to all. Just as we accept the principle that family income should never be a factor in whether children receive a good school education, the same must be said of early education, which is equally as crucial. We often look to Scandinavia for ideas on effective family policy; countries there have long recognised the value of early education and have invested in it extensively.

Finland provides free universal daycare from eight months until the start of formal education at age seven. In Sweden, parents have a universal entitlement to a guaranteed childcare space, and the fees for using it are capped. The system is so accessible that 85% of children under five years attend pre-school. Parents are entitled to 16 months’ parental leave, with the first year paid at 80% of their salary. They also receive a monthly child allowance that can be used to significantly reduce the cost of pre-school. In Denmark, the cost of childcare to parents is capped at 30% of the actual cost for nurseries. Norwegian parents are entitled to a flat-rate child benefit allowance. The result is that Scandinavian countries consistently rank among the best internationally on all the indicators of children’s wellbeing. Rates of child poverty are also among the lowest in the world.

The provision of free part-time childcare places for all three and four-year-olds in England was introduced in the early 2000s. Tony Blair’s Labour Government recognised that the modern welfare state needed to adapt and do more to support parents to raise young families and balance home life with work. The introduction of free childcare, alongside tax credits, was part of a package to give parents—particularly mothers—more choice over returning to work and having more children. I am pleased that the principle of investing in early years support has received cross-party backing. There have been some positive developments from Governments in recent years. Working parents of three to four-year-olds now receive 30 hours of free childcare, and those of disadvantaged two-year-olds can receive 15 hours on a means-tested basis.

However, although the headline picture is of a Government that continued Labour’s investment in early years, beneath the surface services have been squeezed and vital early intervention support has been cut. Across the board, spending on Sure Start and early years services in England has decreased by 39% since 2014-15, and almost £1 billion was slashed from Sure Start spending between 2010 and 2018. Free childcare, as my hon. Friend the Member for Cambridge (Daniel Zeichner) has pointed out, has been underfunded; additional funding has not been allocated to cover the cost of minimum wage rises for nursery staff. Take-up of the two-year-old offer among children who receive free school meals varies significantly across the country, with analysis showing that in major metropolitan areas they are among the key disadvantaged groups. Access to places and differences in the types of placement on offer varies a lot, too, and can limit take-up in some areas. That is why, in 2018, the Treasury Committee conducted an inquiry, which I was pleased to be part of, into childcare policy and its influence on our economy.

I was really pleased to see the Committee—for the first time chaired by a woman—investigate the economic impact of childcare as a key aspect of our national infrastructure, in recognition of the fact that our economy is driven not only by trains, roads and IT, but by parents’ ability to go to work knowing that their children are happy and well cared for in high-quality settings. We therefore looked at the overall package of Government initiatives in this area and their effectiveness. Our cross-party review found that the Treasury had made little effort to calculate the economic impact of the Government’s childcare interventions. However, the evidence available suggested that the biggest impact of the Government’s childcare schemes may be to make childcare more affordable to those who receive support, rather than bringing parents back into the workplace.

The Committee also found that parents may need to retrain in order to return to work, but the free childcare scheme did not support that. We recommended the removal of age restrictions on childcare support for parents undertaking training or education, which would have the greatest impact on productivity. We also identified design flaws in the current schemes. The requirement in the childcare element of universal credit for parents to pay childcare costs up front before seeking reimbursement is really unhelpful to the lowest-paid parents. Moreover, the fact that the entitlement to 30 hours of free childcare only begins the term after a child turns three means that if a parent is offered a job in January, their entitlement will not begin until the summer term; that can make a critical difference to some parents’ livelihoods and decision making. If the current system of support is the starting point, the flaws need to be addressed for free childcare schemes to support people into work effectively.

Another area that has proven to be a challenge is the way in which providers are funded to deliver the schemes, and any uplift in free childcare must be accompanied by the additional funding required to make it viable. Coram’s childcare survey found that around a third of local authorities thought that the 30-hour extended entitlement had caused prices to rise for those aged three to four outside the funded entitlements. Half thought that there had been a negative impact on the financial sustainability of childcare providers. Purnima Tanuku OBE, chief executive of the National Day Nurseries Association, has said:

“High quality early education positively impacts on a child’s development and therefore their lifelong education and opportunities—it cannot be done on the cheap...By short-changing childcare providers, the Government is selling families short on their promises. Parents are seeing fees for additional hours and for under threes go up as a result.”

The Treasury Committee report estimated that the average cost per hour of providing childcare is £4.68, but the average rate that the Government passed on to providers for 2017-18 was £4.34. Some providers are left with insufficient funding to cover their costs and therefore have to cut back on the service provided, including by restricting times, reducing child-to-staff ratios and charging for services such as food and activities. In this situation, providers in higher-income areas can mitigate those funding shortfalls much more easily than can providers in deprived areas, who have much more to gain from these schemes. That undermines the potential for early education to reach disadvantaged children, who are in the greatest danger of falling behind.

The Education Committee’s inquiry into tackling disadvantage in the early years made similar observations. It found that rather than closing the gap, the Government’s 30-hour childcare policy was entrenching inequality by leading to financial pressures on nurseries, providing more advantaged children with more quality childcare and putting stress on the available places for disadvantaged two-year-olds. The Government must pay providers a rate that reflects the full costs; otherwise, the full benefits for those who are eligible will not be realised, particularly in our most disadvantaged communities, and the overall cost of childcare will be pushed up further.

Of course, investing in childcare costs money. Any policy proposals, however effective they would be, are shaped by the available financial resources. The cost of funded childcare places for three and four-year-olds stood at £3.3 billion in 2018-19, which is equivalent to £3,650 per eligible child. Overall, the Government now spend about £6 billion on all funded childcare, despite the limitations and restrictions in the current model. If free childcare were to be expanded to all children from nine months old, as the petition requests, there would clearly be significant cost implications. Labour’s manifesto proposals to reform childcare provision and make high-quality early years education available to all, regardless of income, would amount to a £4.5 billion investment. We know the value of investing in early education to tackle entrenched disadvantage and gender inequality, and there would be longer-term cost savings and a productivity boost from targeting this investment at the early years. Although this would involve a significant cost, politics is the language of priorities, and measures that tackle poverty, support families and boost the economy should be at the top of the list.

There is clear cross-party support for improving childcare, as evidenced by commitments in the manifestos of the three main parties at the last election. Labour pledged the extension of paid maternity leave to 12 months; the introduction of 30 hours of free pre-school childcare for all two, three and four-year-olds; and the extension of provision for one-year-olds. The Conservatives pledged a £1 billion fund to help to create more high-quality affordable childcare, including before and after school and during school holidays; and the Liberal Democrat manifesto included a commitment to offer 35 hours of free high-quality childcare to every child aged two to four, and to children aged between nine and 24 months whose parents are in work.

It remains to be seen whether the current Government have the political will to deliver the support that is needed. Childcare is an issue that affects families right across our country, and there is a widespread belief that the Government could be doing much more to support people to work while also raising a family. I thank everyone who signed the petition that led to today’s debate, and I thank all members of the public who have been in touch to share their views. I hope that by the conclusion of the debate, we will have represented their views and experiences effectively, and that the Government will reflect on this discussion and have a serious think about what support they can provide, particularly given this week’s Budget, which is very timely.

I will finish by asking two questions that I hope the Minister will pledge to consider. First, will she commit to a review of the economic and social impact of various levels of free childcare, so that its effectiveness can be independently verified? Secondly, will she commit to exploring the expansion of free childcare as requested by the petitioners, including the benefits of such a scheme and how it might practically be delivered with sufficient childcare places and funding to make it viable? Today, the Government have the opportunity to give a clear expression of their commitment to supporting families, supporting social mobility and supporting women and families in the workplace by pledging to investigate this issue. On behalf of the petitioners, I urge the Minister to do so.