Call to scrap 30 hours free childcare and offer means-tested childcare

The government should scrap its plan for 30 hours free childcare, according to a think tank report published today.

The research paper Targeting Affordable Childcare: A sustainable expansion of free childcare hours by think tank Localis argues that instead of doubling the current amount of free childcare for three and four year olds of ‘working families’ to 30 hours the government should expand childcare on a means-tested basis. That would mean providing low-income families 15 hours free childcare for one year olds and an additional 15 hours free childcare for three and four year olds. This would be provided on top of government’s existing scheme which provides low-income families fifteen hours free childcare to two year olds and all families fifteen hours free childcare to three and four year olds.

Localis says its proposals “would allow government to significantly expand its free childcare offer to low-income families, providing them greater freedom and flexibility when returning to work”. It claims this could cost £64 million less than government’s proposed extension whilst being more sustainable for childcare providers.

The think tank points out that childcare providers have raised many concerns that the government has not allocated sufficient funding for the extension of free childcare, meaning childcare providers would have to top up their fees for ‘free’ places by charging for ‘extras’ , increase fees for places for younger children or decide not to provide the 30 hours at all.

Its means-tested alternative would be based on the methodology of current provision for disadvantaged families with two year olds. This includes, but is not limited to, families receiving: Income Support, income-based Jobseeker’s Allowance, tax credits (with an annual income of under £16,190 before tax) and Universal Credit.

The report also argues that, compared to government’s proposed extension, this alternative model of free childcare allocation would ease the burden on childcare providers. With an estimated 24.1% of children eligible – compared to 42.9% in government’s planned extension – there is increased scope for providers to make ends meet through cross-subsidisation, it says.

Liam Booth-Smith, Chief Executive of Localis, said: “Government are right to want to make childcare more affordable, but it’s irresponsible to overheat the childcare market by placing an additional financial burden on providers. The risk is you create a similar situation to the one we face in social care, where providers aren’t able to make ends meet because the subsidy the government provides doesn’t cover the cost of care.

Our new report takes the principle of expanding affordable childcare but offers an alternative proposal which focuses on the lowest income families. Not only does this target the benefit to those most in need and expands the age range at which it is available, but it also saves the Treasury £64 million in the process.”

The Pre-school Learning Alliance, which has been a vocal critic of the funding arrangements for the government’s extension plan, agrees that the government needs to re-examine its approach to early years funding and ensure that, at a time of limited resources,  money is being spent where it will have the most impact. However, it thinks it is highly unlikely the government will reverse its current plans.

Neil Leitch, its CEO, said:  “What is needed, therefore, is an approach to so-called ‘free childcare’ that ensures that funding actually covers the cost of delivering places. This would not only enable early years providers to deliver quality, sustainable care and education, but also remove the need for cross-subsidisation, meaning lower costs for parents of children of all ages.

“There is simply no avoiding the fact that more money is needed in the early years system. Survey after survey has shown that, without adequate funding, the ‘free childcare’ offer is unlikely to succeed in the long term. The government has made a big promise to parents; now it must invest what’s needed to deliver it.”

Meanwhile, the Women’s Equality Party candidate for the mayor of Liverpool has pledged  to fund 15 hours a week of free childcare for children over nine months old with parents paying just £1 per hour for any additional care.

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