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  1. The Staggers
15 March 2023

Why free childcare isn’t as good as it sounds

Lack of funding for Jeremy Hunt’s pledge could leave children worse off and nurseries out of business.

By Sophie McBain

On paper, the Chancellor’s pledge to spend £4bn on Britain’s beleaguered childcare sector looks generous – it is certainly a more generous provision than most people expected. Jeremy Hunt’s Budget is expected to extend the current scheme of 15 to 30 free hours of childcare, which covers three- and four-year-olds, to those aged one and two.

As a working mother, whose youngest child is seven months old, the prospect of extra help with childcare costs is desperately welcome. As a journalist who has spent the past few weeks speaking to experts and researching childcare policy, I can see that Hunt’s proposals could – paradoxically – have a disastrous effect on the sector, by forcing more providers out of business and increasing early years’ inequality, while simultaneously pushing up fees and suppressing workers’ wages. 

It is hard to understate the current childcare crisis. Parents in the UK have the highest childcare costs in the developed world, and providers say they expect to raise fees by an average of £1,000 this year. Already, three quarters of working mothers say that keeping their job does not make financial sense, according to the charity Pregnant Then Screwed, and almost half a million women have quit work because they cannot find affordable childcare

In January the Early Years Alliance warned that a third of nurseries were at risk of closure due to financial difficulties; the closures are concentrated in poorer parts of the country, where parents cannot afford the fees. In richer parts, many nurseries have instead been bought up by private equity firms. These for-profit nurseries charge parents more and pay staff less. The average childcare worker currently earns less than the living wage.

The cause of this disaster is massive underfunding – and, especially, the underfunding of free provision for three- and four-year-olds. The response to a freedom of information request submitted by the Early Years Alliance shows that the government has known for years that it is underpaying nurseries for offering these “free” hours, leaving providers with a stark choice: go bust, decline to offer the free-hours places, or let parents pick up the costs elsewhere, through large supplementary charges and higher fees for younger children.

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The Confederation of British Industry has estimated that extending the free-hours scheme to one- and two-year-olds would cost £8.9bn a year, more than double what is expected in the Budget. Hunt looks likely to suggest relaxing minimum staff to child ratios as a way of reducing nursery overheads, which is both unworkable and unfair.

A parliamentary briefing by Pregnant Then Screwed and the Early Years Alliance reported that 85 per cent of parents didn’t want there to be more children for each staff member, and pointed out that plans to loosen ratios were based on a misunderstanding of other countries’ systems (in France and Norway, which apparently have a lower staff to child ratio, ancillary staff aren’t counted) and would not ultimately reduce costs.

Most likely, in less affluent areas parents will be forced to send their children to nurseries that have loosened their ratios, where underpaid, undertrained and rightfully demoralised staff are stretched too thin to care for children safely, while wealthier parents will notice less difference. Almost certainly, the current landscape will look worse, rather than better, if Hunt tries to expand free-hours provision on the cheap: childcare deserts will expand, parents’ costs will still rise, and childcare workers will shoulder the biggest burden.

[See also: Spring Budget 2023: NHS leaders concerned over lack of funding]

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