The report by think-tank Localis says because of concerns over the cost pressure of the free hours on providers, consideration should be given to an alternative sustainable method of allocating free childcare to help relieve the pressure and target those most at need.
It proposes the Government scrap the planned 30 hours of free childcare for working families of three- and four-year-olds and re-invest the money into providing free childcare on a means-tested basis to the most disadvantaged families, based on the current criteria for the two-year-old places.
Under the alternative model, which the think-tank says would cost £64 million less than the Government’s policy, disadvantaged one- and two-year-olds would be eligible for 15 hours of free childcare and three- and four-year-olds, 30 hours.
In Targeting Affordable Childcare, the think-tank claims that its model of free childcare would ease the burden on childcare providers, with an estimated 24.1 per cent of children eligible for means-tested childcare for the 30 hours, compared to 42.9 per cent in the Government’s planned expansion, providing more scope for providers to make ends meet through cross-subsidisation.
Childcare providers would also receive more funding through the Early Years Pupil Premium (EYPP). It says that although local authorities retain a proportion of the EYPP, providers would receive much closer to £5.47 per hour, per child, rather than the current average funding rate of £4.94.
Liam Booth-Smith, chief executive of Localis, said, ‘Government are right to want to make childcare more affordable but it’s irresponsible to overheat the childcare market by placing an additional financial burden on providers. The risk is you create a similar situation to the one we face in social care, where providers aren’t able to make ends meet because the subsidy the Government provides doesn’t cover the cost of care.
‘Our new report takes the principle of expanding affordable childcare but offers an alternative proposal which focuses on the lowest income families. Not only does this target the benefit to those most in need and expands the age range at which it is available, but it also saves the Treasury £64 million in the process.’
The Pre-School Learning Alliance has welcomed the report.
Chief executive Neil Leitch said, 'We know that early years provision is about more than just childcare – it’s about delivering high-quality early education and supporting children’s learning and development in their most formative years.
'As such, we agree that Government needs to re-examine its approach to early years funding and ensure that, at a time of limited resources, money is being spent where it will have the most impact. Most would agree, for example, that funding early years provision for families with a joint annual income of nearly £200,000 – as is the case with the 30-hour offer – is not an effective use of tax-payers’ money.
'That said, we recognise that the 30-hour scheme was a key Conservative manifesto pledge and so the wholesale changes proposed in this report are highly unlikely to be adopted by Government. What is needed, therefore, is an approach to so-called ‘free childcare’ that ensures that funding actually covers the cost of delivering places. This would not only enable early years providers to deliver quality, sustainable care and education, but also remove the need for cross-subsidisation, meaning lower costs for parents of children of all ages.'
The Department for Education has been contacted for a response.