MPs call on government to increase 30 hours childcare funding

Tristan Donovan
Monday, March 26, 2018

The amount the government gives providers to fund the 30 hours free childcare entitlement is based on "outdated" information and needs to be increased, the treasury select committee has concluded.

Treasury select committee chair Nicky Morgan said government figures on 30 hours funding are "misleading and out of date". Picture: UK Parliament
Treasury select committee chair Nicky Morgan said government figures on 30 hours funding are "misleading and out of date". Picture: UK Parliament

In a report examining the government's childcare policies, the cross-party committee of MPs said the Treasury's calculations are based on data from 2012 and 2013 and fail to account for the impact of the national living wage, pension auto-enrolment and rising business rates.

The committee warned that the gap between what government provided and the cost of delivering childcare was causing providers to shed qualified staff, increase child-to-staff ratios and restrict the times when parents can use their free hours.

"The government's own figures on how much it provides per hour to fund 30 hours free childcare are often misleading and out of date," committee chair Nicky Morgan, a former Education Secretary, said.

"One estimate suggests that there would be a total sector-wide shortfall of over £157m per year from 2017/18. As a result, some childcare providers are altering their services, potentially redistributing resources away from low-income parents towards higher-income parents.

"If the government wants to avoid these consequences, it should pay a higher hourly rate to providers that more accurately reflects their current costs."

The committee's report advised the government to ensure the hourly rate is updated annually in line with cost increases faced by childcare providers.

"Setting the funding level with reference to wage and overheads data that is more than five years old is unsatisfactory," it added.

The committee also criticised the way that the entitlement only becomes available in the school term that follows a child's third birthday rather than being available immediately.

"Entitlement to 30 hours free childcare should begin as soon as a child turns three," said the committee's report.

"There is no justification for delaying entitlement, which unreasonably disadvantages parents of children who happen to have been born early in an academic term."

Early years sector organisations welcomed the committee's call. Neil Leitch, chief executive of the Pre-school Learning Alliance, said: "The report makes clear that the government's current calculations of how much it costs to provide high-quality childcare are way off.

"And, while the alliance has been saying this since before the 30 hours policy was rolled out last year, there's little satisfaction to be taken from the committee's agreement when every week we hear of more passionate providers being forced to close."

Elsewhere in its report the committee criticised the government's handling of the introduction of its tax-free childcare scheme, which was billed as a replacement for childcare vouchers.

It noted that the uptake of tax-free childcare is 90 per cent below what the government expected and blamed this on a failure by the government to make parents aware of the scheme.

The committee's report also said the government should remove the "short-sighted" age restrictions on access to childcare support for parents in training. At present only parents under the age of 20 who are on publicly-funded training courses can access the support, which is worth between £160 and £175 per week.

The committee also said this support should be available to parents on all types of training courses, not just those funded by the taxpayer. This, the committee said, would help parents who need to retrain before returning to work after having children.

The report also noted that during its inquiry the committee heard no evidence that the government's efforts to help parents with the cost of childcare would improve the UK's productivity. "More research by the Treasury on whether the cost to the taxpayer of childcare support is outweighed by the economic benefits would be welcome," said Morgan.

The 30 hours free childcare entitlement was introduced in September 2017 to support working parents with children aged three and four.

A government spokesman said: "We are spending more than any previous government on childcare, set to rise to £6bn per year.
"Through introducing tax-free childcare and delivering 30 hours free childcare, we are helping working families cut thousands of pounds from their childcare bills.
"The increasing numbers of self-employed parents can now access support, unlike vouchers and it is also fairer to lone parents.
"We will consider the committee's recommendations carefully and respond in due course."

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