Childcare and the Budget: what next?

What do we want to see in the Budget when it comes to childcare? A sense that the Government understands the true social and economic value of a fully functioning childcare system.

Small child playing with brightly coloured bricks on the floor in a childcare setting


So it’s the Budget this week and we’ve been building up to it for a while with childcare – at least the early years variety – finally likely to get a look-in after years of being overlooked. I recall Kemi Badenoch as Minister for Equalities telling a Women & Equalities Committee meeting not so long ago that nurseries she had spoken to were “very happy” with the support the Government had provided during the pandemic. That was news to anyone who knows anything about what was happening with nurseries during the pandemic.

There have been countless surveys and reports and speeches about childcare over the last few weeks, showing how dire the situation is in terms not just of costs, but also availability of places. These are not separate things, of course, because the cost of childcare is in large part due to the difficult financial straits childcare providers find themselves in. Those difficult financial straits are due to a variety of things – the way nurseries are treated as small businesses rather than vital social infrastructure like schools, staffing issues due to low pay and low morale, the fact that the Government’s ‘free’ childcare hours don’t cover the full costs of places and rising costs generally. Parents, meanwhile, are hit by the rising cost of living and cannot afford higher costs so are finding other solutions, mixing ‘free’ childcare and other forms of care and so reducing the amount of formal childcare they use, changing their jobs, working less, taking time out of work with the knock-on hit on lifetime earnings and pensions, moving to be nearer relatives and so forth. The impact is enormous and mainly, still, on women.

So what is the Government likely to do? It looks like they will make some long-called-for changes to Universal Credit – paying upfront nursery fees and perhaps raising the cap on the amount benefits claimants can claim back on their childcare costs, which has not risen since 2005. If they do this, it must surely be seen alongside the recent policy to force parents on low hours to increase their hours or face sanctions. The argument is that work should pay and that working more hours will lift people out of poverty.

However, that argument doesn’t take account of the complexity of the benefits system and the slew of other benefits changes over the last few years, many of which have conspired to leave people with less money, for instance, changes to child benefit, the cap on housing benefit, effective benefits freezes and a myriad of other benefits changes. Many of these affect working parents and many affect different working parents in different ways. Hanging over all of this is, of course, the issue of low pay. Many parents have opted out of formal childcare altogether in the last years because they can’t afford to pay for any childcare. That has affected the kind of jobs they can do and the hours they can work.

Plus it’s all very well providing upfront fees, but what if there are no places near where you live and you can’t afford a car or the bus to get your child to the nearest nursery? A report out last week shows how varied the picture is when it comes to childcare availability across the country. And it is the poorest areas that are often the worst hit when it comes to availability. I’ve spoken to nursery chains who say that the only reason they can afford to keep nurseries open in more disadvantaged areas is by subsidising them with the money obtained from parents in the richer areas ie through top-up fees. And because different regions are hit in different ways there needs to be greater decentralisation so that local authorities have greater powers to address their own needs.

Everything is linked. Addressing childcare costs only for those on benefits won’t tackle the problem of underfunding of the ‘free’ places for three and four year olds, which is just about the only thing that enables many in the so-called squeezed middle to stay in work, particularly if they have more than one child under five, if they can stay in work at all. I spoke to a community nursery which says it gets nine pounds less than the cost of running a place for every three-hour subsidised session for parents. That’s nine pounds x 25 or so parents per afternoon session. It’s a lot of loss to absorb and because they can’t charge top-up fees as they are a community nursery they are fairly stuck and are only so far surviving because the church they operate from has waived their rent.

It’s a house of cards situation – we need to ensure nurseries are viable which means making them affordable not just for those at the bottom of the income scale, but for those just above the bottom because otherwise the business model doesn’t work. And changing the ratios of workers to children to enable one worker to look after more children – an idea which some elements of the Conservative party seem to think is the silver – and cheap – bullet for solving the childcare crisis – is likely to make little difference to costs, contribute to staffing problems and raise big safety concerns.

At the weekend, I was asked by a radio station what I would like to see in the Budget when it comes to childcare [the interview was bumped for the Gary Lineker furore]. Of course, universal free childcare is the ideal and would recognise that early years has a vital role to play in creating a more level playing field when it comes to education generally. The Government invests a paltry figure in early years compared to other equivalent countries. Yet the universal free childcare suggestion tends to get laughed out of town because childcare is still seen as something that can be fixed through sticking plaster solutions. We’re still in part in the mindset where mothers’ income is seen as secondary to men’s and childcare is seen as purely a women’s issue. The only reason it is getting attention now is because businesses are crying out for it due to labour shortages, not because of any of the wider, long-term benefits.

It is highly unlikely that the Government will fund universal free childcare or even a heavily subsidised system as exists in other countries and there are a lot of other calls on the public purse at the moment, but childcare, including school-age childcare, is not a fringe issue and should be seen in the round as part of core infrastructure, both economic and social. At the very least, the Government should be ensuring that ‘free’ places are fully funded and treating nurseries as a core part of the education system rather than as small businesses. At the very least it should show it understands how connected childcare is to issues of social equity and wellbeing for all.

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