The government’s policy document More Great Childcare has many excellent ideas, particularly on improving staff qualifications and salary levels.
But I fear any potential savings changes in adult-to-child ratios will be swallowed up in the higher rates of pay better-qualified staff will require and if there were any additional financial savings they will have little or no impact on childcare costs and the fees nursery have to charge.
The restrictive regulations talked about in More Great Childcare are not the major cause of increased childcare costs or poor staff pay rates.
It is the low level of funding the government provides to pay for the free hours of early years education.
The value of this funding has been allowed to fall over the past six or seven years to such a low level that, according to the NDNA Business Performance Survey January 2013, 84 per cent of their members report making a loss on funded places for three- and four-year-olds, with the average shortfall of £500+ per child per year.
Changes in regulation and measures to ensure providers receive more of this funding from local authorities will not make up this shortfall.
Providers have been forced over these six or seven years to “cross subsidise” these funded places by increasing the fees they charge for hours they can sell over and above the free hours and to families of children not eligible for funding.
This has been the major cause for increased childcare cost and continued low wage levels, not restrictive regulations, even though these do not help.
The government is the biggest purchaser of early years places but is the worse payer, according to 84 per cent of settings, as it is not paying the economic cost for providing those hours.
In the past 12 years the value of the free hours funding (per hour) has only increased by approximately 33 per cent and at the same time minimum wage rates have increased by about double that. And in an industry where over 70 per cent of the costs of operation are staff costs we can see that the increase in funding has not kept pace with minimum wages rates.
Changing regulations at best may create minor cost savings for a few settings that embrace all the changes in adult to child ratios in More Great Childcare but the answer to affordable childcare for working families is not there.
It is accepted that at times of economic difficulties asking the government to radically increase funding of the free entitlement will not be well received but without bringing this funding back to the value it had six or seven years ago providers will be forced to continue to cross subsidise these funded places.
The government talks about fairness and that benefits should be fair to all. Most providers of free early years places are only asking to be treated with similar fairness.
The government must pay the “going rate” to providers for these hours. They are meant to be “free” but when the vast majority are saying that they are losing money on these places, that is not free or fair.
It is also not fair that families that need more hours than just the free hours or working parents of children not eligible for free hours are being forced to pay increased fee rates to subsidise the government’s free places.
If the government is committed to fairness and these funded hours being “free” with no “top-ups” then it must change to funding system and rates to ensure it, too, is being fair to providers and fee-paying working families.
Ken McArthur is owner of Polly Anna's Nursery in York
