Budget 2023: How government can boost funded childcare take up

More support for the two million households with young children is overdue and there is widespread agreement that our current system needs to work better for young children and hard-pressed families. 

More funding is necessary but there is a difference between making money available, and making sure it is used. Government schemes almost universally suffer from low take-up, and existing childcare offers are no exception. Only around 40 per cent of eligible families currently use their tax-free childcare allowance. Free childcare hours do better but even the 15 hours of government funded childcare offer is only taken up by 72 per cent of eligible families.

More money for childcare needs to be matched with an equal commitment to making the system work, for all parents. There are five things government can do to increase uptake:

First, we desperately need to simplify a vastly overcomplicated system. There are currently seven different childcare offers available to parents. Each offer depends on the parent’s circumstances and the child’s age. It’s not surprising that many parents don’t know what they are eligible for. There’s no need for seven programmes and it’s a barrier for busy parents. We’d do better to have just two: one for families on universal credit and one for those who are not. This makes it easier for parents to identify the support they’re entitled to and reduces drop off when their children ‘age out’ of different offers.

Second, we should just tell parents what they’re actually eligible for. This is an easy win but the information is often confusing and hard to find. The government’s Childcare Choices website is clunky and needs improvement. It doesn’t ask about key eligibility criteria, like whether parents receive universal credit. And it doesn’t clearly distinguish between schemes a child is eligible for now and their eligibility at some point in the future. These are easy fixes to reduce time, stress, and confusion.

Better still, don’t ask parents to use a tool at all, just give them tailored information. Letters might feel old-school, but they are cost effective, and they work. Letters to parents about new Tax-Free Childcare offers increased applications by 55 per cent (albeit from a very low starting point). With HMRC data on earnings and children, and DWP data on universal credit, the government could go a long way to working out what parents are eligible for and letting them know. It might be easier than creating a sophisticated website, and it would almost certainly be easier for parents.

Third, simplify the application process. The Department for Work and Pensions already identifies families eligible for free education and childcare for their two-year-old. But families still need to apply. Even when financial benefits are large, application processes like this substantially reduce uptake. Auto-qualifying families through DWP would increase uptake and give parents some much needed time back. Some local authorities have already led the way, sending eligible families ‘golden tickets’ that they can take to childcare services and immediately claim their free allowance. Dorset County Council reported that take up improved from 81 per cent to 87 per cent the following year. 

Fourth, if you are going to require parents to fill out an application form, prepare them for it. Revising communications with eligible families so that they spell out exactly how much time is required has been proven to improve uptake. Across five different letters encouraging families to take up tax-free childcare, the most effective one wasn’t about why they should apply, it just told parents what they would need to hand (such as their National Insurance number) and encouraged them to set time aside. This approach increased the number of completed applications by 12 per cent. 

Some barriers are even more material: there is a free childcare allowance for universal credit recipients, but the cost is reimbursed the following month through their UC payment. As most parents are painfully aware, childcare costs a lot. For many parents this isn’t money they have to spare, and the Government support available, is discretionary, unevenly applied, and can require yet another set of applications. So fifth, the Spring Statement should remove upfront costs for free childcare. 

Finally, while better access and uptake is part of the picture, it is quality that matters in the long term. Higher quality early years education improves children’s attainment at age seven, but simply increasing the number of hours does not. Right now, the political focus is on helping parents to return to work. But in the long-run, making sure children are ready for school will provide the biggest benefit. The drive for quantity now should not come at the expense of quality and whole system reform that benefits families, the early years workforce and the economy is long overdue.

Lucy Makinson and Fionnuala O’Reilly are part of Nesta’s behavioural insights team.