Thirty-hour free childcare offer will have to add up for providers

Surprisingly, the Conservatives outbid Labour and promised 30 hours a week free childcare to parents with three- and four-year-old children. This was on top of the childcare tax breaks that take effect this autumn.

Chancellor of the Exchequer George Osborne has clearly identified that improving childcare is key to supporting the workforce, increasing productivity and reviving the British economy.

The big question now is how the new government will deliver this childcare pledge for 2017. As things stand, the criteria and logistics of the scheme seem to have little flesh on the bone. There are more questions than answers.

Childcare providers have long been concerned about how they are currently funded to deliver 15 hours a week free childcare. They argue that government has consistently underfunded the hourly cost of providing free childcare.

Childcare providers say that as a result, they can't afford to pay staff the wages they deserve, making it difficult to recruit and retain early years practitioners. In addition, as local authority support declines, providers struggle to meet the costs of training and continuous professional development for their staff.

Recent research undertaken by Ceeda and the Pre-school Learning Alliance revealed a 20 per cent funding shortfall, with the government money covering only the cost of four out of five private, voluntary and independent places funded under the free entitlement scheme. It found that a quarter of local authorities haven't increased the base rate of the free entitlement in the past three to four years. Can this really continue without disastrous consequences for delivering quality childcare and early years provision?

This argument will now gather pace as the government prepares to implement its latest pledge, aided by a new childcare taskforce chaired by employment minister Priti Patel. Will it find the funding to increase the hourly rate to a level that the providers say meets the real costs of delivering quality childcare? If the government doesn't do so, will we see more providers opt out of providing free childcare? Many will say they cannot run a viable business without adequate funding by government of free childcare for children aged three and four.

The 30-hours-a-week free childcare promise was a popular vote winner with families. As details emerge, parents may be less pleased with some of the conditions attached to the offer. Parents will have to be working to qualify - although the bill does not specify the number of hours needed - and the offer is only for 38 weeks a year, which is less than most parents work.

Most families will also have no idea about the logistics or mechanics behind delivering the promise. They will no doubt believe that the 30-hour offer should be deliverable, but the reality is quite different. The 30 hours was also a vote winner with some childminders who have fewer overheads than group providers.

With the current 15 hours a week, childcare providers have a chance to cross-subsidise the free provision by charging parents a higher rate for the other hours they use. But with 30 hours a week, few parents will buy a significant number of extra hours and certainly not enough to make up for the underfunding of 30 hours (it is estimated that working families currently use childcare for an average of just 25 hours a week).

Unlike the current 15 hours offer, which is universal, only working parents will be entitled to the extended offer. This will make it much harder for providers and local authorities to plan. The figures simply don't stack up for most group childcare providers and some businesses will inevitably go to the wall - or simply opt out of providing the free childcare.

Some providers may then focus on the market for children under three, where parents will need to make the most of the new tax break (or childcare vouchers if they continue to use these). This may exacerbate the two-tier nature of childcare provision, with those who can afford it driving up prices for provision for children under three.

Interestingly, similar market problems are growing in care of older people. A number of homecare providers are saying they will no longer bid for and deliver contracts where the local authority pays below the rate required. Instead, they will only serve private fee paying clients.

The recent election proved again that politics is increasingly about the personal. And there is nothing more personal than getting the care you need for your family. The next five years will be a real test for the government as it battles to balance the books and meet the growing expectations of families.

It already feels as though the wheels are coming off in the childcare sector. Let's hope ministers agree to a full review of the funding of the free offer as soon as possible to make sure all players in the sector can help make the 30 hours free offer deliver a quality service for children and parents.

Denise Burke is chief executive of Smallsteps Childcare, The Netherlands