Disadvantaged children will miss out on childcare expansion plans, unless support is targeted – report

Catherine Gaunt
Thursday, May 25, 2023

Government plans to increase childcare will mean that a low-income parent stands to take home just £4 an hour after childcare costs and changes to universal credit are taken into account, according to research by two major charities.

PHOTO Adobe Stock
PHOTO Adobe Stock

A new joint report by Coram and the Joseph Rowntree Foundation shows the Government’s £4 billion plans to invest in childcare will disproportionately benefit families on higher incomes, unless the money is targeted to help the most disadvantaged children.

The plans revealed in the Spring Budget to increase funded childcare for working parents ‘risk entrenching an even less fair system’, and lead to many children missing out on high-quality early years education, the researchers say.

The Government is phasing in an extension to younger children of the current 30-hour entitlement for three-and four-year olds of working parents, starting with 15 hours of childcare for eligible working parents of two-year-olds in April 2024.

From September 2025 working parents will be entitled to 30 hours of childcare for children from the age of nine months.

The charities note that affordable childcare is essential in ‘making work a route out of poverty’, but many low-income families do not use childcare because working longer hours means that they would lose out financially through the benefits system.

The report is calling for 15 funded hours per week during term time for all two-year-olds and 30 hours for all three- and four-year-olds, regardless of income.

The report says, 'The government has signalled an appetite for much higher public investment in the formal early years childcare sector, but the proposed changes do not tackle disadvantage and risk worsening outcomes for disadvantaged children. The current proposals to expand childcare prioritise the provision of more care to support working parents but do not support disadvantaged children or improve childcare quality. Funding is spread too thinly to enable the step change in quality that is needed and is unfairly targeted towards higher income families.'

Low-income families – impact of Universal Credit 

The research finds that a low earning parent takes home around £4 per hour worked after childcare costs and once the Universal Credit taper rate has been applied, effectively eroding over half of their earnings.

The report states, 'The extension of government funding to younger children in England, combined with changes to Universal Credit (UC), mark significant progress in making childcare affordable to working parents. However, complexity prevents a theoretically affordable system from working in practice for all parents and families.

'For example, even when claiming all the support available under the new proposals, a second earner with a two-year-old whose partner is working on the minimum wage (£10.42 per hour) would take around £4 per hour after the Universal Credit taper has been applied and once they have paid for childcare and housing.'

This means that a low earning single parent will find that they are only £60 per month better off if they increase their working hours from four to five days. 

The calculations are based on average nursery costs for England, and assume that families have one child aged two and are receiving 30 hours free childcare stretched across 48 weeks of the year, without any additional charges being made.

They also assume that the announced changes to Universal Credit have taken effect, so that UC covers higher childcare costs. The report models a two-parent family with both parents working on minimum wage, one full time and the other for different numbers of hours. Depending on the number of hours the second parent works, they will take home between £3.45 and £4.53 per hour once they have paid for housing and childcare. The researchers also modelled a single parent earning minimum wage on different working hours and found that they took home an additional £685 per month from working four days and £745 from working five days.  

Abby Jitendra, JRF principal policy advisor for care, family and relationships, said, ‘Families deserve childcare that’s high quality, affordable and easy to access.

‘But the childcare system we have now is failing disadvantaged children - parents don’t take up the services they are entitled to because, in doing so, they’d lose out financially. The only option many have is to reduce the hours they work in order to stop being penalised.  

A childcare system that works doesn’t just help parents, it improves our economy, our communities and our society. We know the UK Government is up to this challenge otherwise it wouldn’t have proposed an expansion but their plans risk entrenching an even less fair system which would become very difficult to unravel.’ 

'Need to rebalance the system'

Megan Jarvie, head of Coram Family and Childcare, said, ‘Disadvantaged children are falling behind before they even start school. A well designed and functioning childcare system can be a key tool in tackling this disadvantage. But instead, families are stuck in poverty and children are missing out on early education that could better prepare them for school. We urgently need to rebalance the childcare and early years system to better serve the children who stand to benefit the most. We have set out a reformed system to better meet the needs of all families and children, and to level the playing field for disadvantaged children.’  

The research also finds that the Government’s plans will not improve the quality of childcare provision, despite evidence that children from disadvantaged backgrounds are starting school behind their better-off peers and that high quality childcare can narrow the achievement gap.

Currently, childcare is ‘not of consistently high enough quality to make a real difference to children’s outcomes’, the researchers say. 

The report calls for complete reform of the system including: 

  • investment in and focus on improving quality of childcare, including better pay for professionals and higher levels of qualifications 
  • Government directly funding childcare places, as they do for school places 
  • a simple, affordable, means-tested payment system for parents 
  • 15 hours per week for all two-year-olds and 30 hours for all three- and four-year-olds to make sure all children get equal access to free early education 
  • integration with wider support services
  • partnerships between parents and childcare professionals to help spread learning between the home and childcare setting 

'Disadvantaged families pushed to the side lines'

Purnima Tanuku, chief executive of NDNA said, ‘While the extra investment is clearly welcome for working parents, there are rightly questions about the levels of support for those children from disadvantaged backgrounds. We don’t want to see the attainment gap grow wider.  

‘We know that many nurseries who are expected to deliver the additional sessions from April next year already have waiting lists and do not have sufficient staff to expand their offering. We urgently need investment in recruitment, progression pathways and qualifications to boost the early years workforce.

‘We also agree that the funding system urgently needs reform and have suggested the Government puts childcare funding into online accounts for each child which parents can use to pay their choice of provider directly. This simplifies the system for parents and providers and cuts out the problem of councils moving unused funding into their reserves or paying off other deficits in schools budgets.’

Neil Leitch, CEO of the Early Years Alliance, said the report was ‘deeply concerning’ and showed that ‘England's early years system is fundamentally broken.

‘Families from disadvantaged backgrounds should be at the heart of any early years policies but for years they have been pushed to the side lines and, as the research shows, this oversight is having and will continue to have serious repercussions on their development, unless proper action is taken.

‘Now, when the government is looking at how it will implement the 30-hour-offer expansion, it is essential that it communicates, listens and funds the sector to ensure that, at the very least, the capacity is there to ensure that every child, no matter their background can access and benefit from early education.’ 

A Department for Education spokesperson said, 'We are introducing the largest ever expansion of free childcare in England, worth up to an average of £6,500 per child per year for a working family.

'We recognise the cost pressures that childcare can create for parents, and low-income families already qualify for 15 hours free childcare for two-year-olds, a year before all children become eligible. We are also increasing the childcare costs that parents on universal credit can claim back by around 50 per cent, up to £950 a month for a single child and £1,629 for two children.'

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