Early years sector calls for funding changes

Tuesday, July 1, 2014

Early years organisations are calling for a complete overhaul to the way childcare is funded, in response to a report by the think tank IPPR, which calls for universal childcare to be made available for all parents of young children.

The report, No more baby steps: a strategy for revolutionising childcare, makes a number of recommendations, including extending the two-year-old offer to all families and funding places for three-and four-year-olds for 48 weeks a year, up from the current 38 weeks.

Similar recommendations were made in a report earlier this month from the IPPR, but the new report sets out the financial measures needed for the plans.

The IPPR has costed its proposals at £2.5 billion to be carried out within the next Parliament and says they could be paid for through scrapping the marriage tax allowance, capping tax-free pension lump sums and freezing child benefit for children over five.

However, sector organsiations say that unless the funding system is reformed the proposals would be unsustainable.

The report argues for a shift to the way that childcare is currently funded through credits and tax relief to supply-side funding, but with price controls to put a cap on parents’ fees.

This would enable more parents to work and improve children’s development, the think tank says.

The report says that by 2020 £750m could be saved in extra taxes and lower benefits because 150,000 more mothers would be able to work.

Under the plans, the IPPR says that a family with two children aged one and three, using 35 hours a week of childcare and currently paying £1,042 a month would receive £313 a month towards the cost - £105 more than under the Government’s plans for tax-free childcare.

The IPPR also proposes extending support for families on Universal Credit so that 95 per cent of their childcare costs are paid up from 85 per cent.

Families claiming tax-free childcare would have 30 per cent of their costs paid for.

Dalia Ben-Galim, IPPR Associate director, said, 'Reforming our childcare system would help many more families with the cost, improve the quality and allow families to decide how they want to balance work and care. A universal system also brings families across income groups together, strengthening bonds in local communities.

'Without any price controls, simply extending tax relief is unlikely to make childcare more affordable for families. We also need to raise the quality of childcare on offer. Politicians of all parties should be aiming for something more radical and transformative in their manifestos.'

National Day Nurseries Association chief executive Purnima Tanuku said, ‘Providing 48 weeks a year funded childcare for all children from the age of two up to school age would be unsustainable in the current system.

‘Providing more funded hours has been at the top of the agenda for all political parties as we move toward the election. It is a policy which will be welcomed by parents, but for nurseries however, an increase in funded hours would be an increase in losses unless a radically reformed funding system is put in place.’

NDNA says that nurseries are currently losing an average of £900 per child each year on three-and four-year-old places and £600 on two-year-old places.

Ms Tanuku added, ‘These shortfalls mean an increase in funded hours is unfeasible and consequently pushes up the cost of hours bought by parents.’  

‘Funding should be simplified and go directly to the provider of the parent’s choice, but we would be wary of a price capping policy as suggested in the report, without clear guidelines as to how it would work.’


The report calls for all staff working with two-year-olds to be qualified to a Level 3 minimum and for 30 per cent of staff working with twos to be graduates.

It also proposes raising qualifications for all existing staff to Level 3 and to level 6 for 30 per cent of staff.

Ms Tanuku said that while this was something everyone in the sector wanted, it was also dependent on funding.

‘Well qualified staff need to be properly rewarded but while funding remains low and nurseries are making losses on each place tight budgets can make this unsustainable.’

Liz Bayram, chief executive of the Professional Association for Childcare and Early Years, said, ‘Crucial to any extension of the free entitlement will be appropriate funding levels, so that settings can invest in qualified staff to deliver this improved offer to families. A clear childcare and early years workforce development plan, such as that set out in the Nutbrown Review, would be needed to underpin this expansion. This would help all childcare settings invest in graduates, support staff to achieve a relevant Level 3 qualification and to have clear, funded progression routes to graduate level. Without this there is a risk there may not be enough high-quality places to deliver the increased hours that the IPPR are proposing.’

‘We know that currently there are difficulties in finding good and outstanding providers to deliver the free entitlement, especially in disadvantaged areas. We also know that not all current providers, especially childminders, are being used by local authorities.’

4Children chief executive Anne Longfield said, ‘The current childcare system comprises various component parts with different eligibility criteria which do not work very well together and are difficult for parents to understand when they are trying to decide who will look after their children. 

‘However, where we don’t agree with IPPR is that this needs to be paid for by freezing child benefit for school age chilldren. Support for families needs to be increased across the board, and we shouldn't be looking to pick and choose by cutting funding in one area of family policy to pay for another.’


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