Tougher regulation needed to tackle ‘excess profiteering’ in early years, says charity

Through its proposed tougher regulatory framework the charity wants to see better standards of care for staff and children as well as a requirement of receiving public funding.

Its report warns that private providers who dominate the early years market are currently overseen by “lax financial regulation” and the sector is blighted by “well-documented issues like variable quality and poor worker pay and conditions”.

• The Big Debate: How could government-funded childcare be more sustainable?

• Sustainable Childcare Special Report

This situation will continue unless “robust and ambitious standards, controls and sufficient funding” is in place to ensure quality early years is being delivered by privately run settings.

“This means taking seriously the fact that childcare is a market and regulating it like one, in the interest of parents, children and workers, and creating a new framework of obligations and incentives for private providers to be real partners in delivering a crucial public good,” said the charity.

It is calling for a “new social licensing model” in early years “where ambitious standards for all providers are a condition of receiving public funding”.

This tougher regulatory system should focus on improvements around worker pay and conditions, quality of support for children and ensuring families receive value for money.

It wants requirements in place for providers around ensuring they are supporting children with special educational needs and disabilities (SEND).

Profit caps could also be included, according to the charity, which wants to see Ofsted responsible for monitoring and enforcing tougher regulation of early years. This would see the regulator take on more financial monitoring powers.

Councils should also be more involved in shaping local markets and improving quality of provision locally, added the JRF.

It anticipates the changes would take five years to give providers time to comply and to “mitigate the risk of providers exiting the market and leaving unintended sufficiency gaps”.

The cost of ensuring early years workers’ pay is increased under the new regulatory system would be £2.3bn a year, estimates the charity.

A further £250m is needed to help councils better manage their local early years market and £10m would be needed to fund increased regulatory powers for Ofsted.

The charity adds that “many new conditions, like prudential regulation, will have no cost and will increase value for money as profits are ploughed back into the system”.

JRF principal policy adviser Abby Jitendra says the early years “is a wild west where the biggest providers cash in while others struggle and workers are on poverty pay” adding that “pouring billions into it without proper controls is utterly irresponsible”.

The charity as made the call amid an expansion of free provision for working families. Research released in February by think tank Women’s Budget Group estimates there will be a £5bn shortfall in delivering additional hours based on current government investment of £4.3bn.