Speaking before the London Assembly yesterday, several experts from the early years sector outlined concerns they have ahead of the planned expansion of free childcare from 15 hours a week to 30 hours a week next year.
Jill Rutter, head of policy at Family and Childcare Trust, said current uptake of free childcare for three- and four-year-olds is significantly lower in London than anywhere else in the country because many providers have opted out of the 15-hour offer, blaming insufficient funding.
She added that the sector in general is quite economically inefficient due to a high number of small providers, and savings could be made through economies of scale.
“I think it would be a good idea if there were more mergers or business collaborations to enable the sharing of back-office costs,” she said.
Rutter said another issue facing early years providers in London is a lack of space.
“You’ve got sheer physical space constraints, most acutely in inner London. Many providers are unable to expand,” she said.
She added that school nurseries in particular will be unable to expand when 30-hour free provision is introduced.
"The reality of London, even after 2017 with the 30 hours, is that you will have children receiving their 15 hours in a state nursery class and then having to go for the other 15 hours elsewhere.
"Whether the childminder sector will be able to offer that additional 15 hours is debatable because in London we've seen a nine per cent decline in the number of childminders working between 2013 and 2015.
She advised the panel to “use public buildings to get over some of these space issues”.
Penny Kenway, head of early years and childcare at Islington Council, agreed.
“Space is a real issue in inner London," she said.
"It is particularly an issue in boroughs like Islington, Camden, Westminster possibly, where there is little room to expand.”
An increase in prices in London above the rate of inflation is another issue, Rutter said, including higher staff costs and rent rates.
The panel agreed that the introduction of the 30 hours will make nurseries across the country, not just London, financially worse off because they will be less likely to be able to plug their funding gap.
Currently providers use the money charged to parents for additional hours to plug funding gaps for the free 15 hours. However, with the doubling of free childcare, parents will need fewer additional hours of provision.
“If parents are only taking up the 15 hours, and it does happen, then you have that funding gap,” said Shannon Hawthorne, press and public affairs director at the Pre-school Learning Alliance.
“Say parents are taking 30 hours already, it’s an issue if the amount government is paying for the additional 15 hours is less than what parents were paying for it.”
These "cross subsidies" have been a “saving grace” for providers, Hawthorne said.
“Once they start offering 30 hours, that’s completely gone, and it has been relied upon very heavily.”
Claire Schofield, director of membership, policy and communications at NDNA said being less able to make up the difference by charging providers more for additional hours will be a deterrent for some providers.
“In practice they will have to make sure enough parents are buying additional hours to balance the books.
Another issue is the recruitment of qualified staff.
Allison Jones, service manager for early years, childcare and children’s centres at Merton Council, said: “The workforce is starting to expand, in terms of recruitment of quality early years practitioners. It is a national trend but London is worse, the pressures in London particularly tough.”
The government announced plans to expand the free childcare entitlement from 15 to 30 hours in June last year. A trial is set to launch later this year, before being rolled out nationally in 2017.
The government announced in the spending review last November that it would be increasing the average hourly rate it gives providers from £4.56 to £4.88 for three- and four-year-olds.
It also announced there will be a funding review this year to look at how the hourly rate is determined for providers across the country.