Policy Exchange calls for voucher-led, free market childcare system

The doubling of free childcare for three and four year olds could be “transformational”, says a new report from the right-wing think tank Policy Exchange which argues for the extra childcare to be paid for by government-funded vouchers given to parents.

Childcare

 

The report, Time to Care, says the doubling could be used to improve the efficiency of providers and prompt mergers or closures of inefficient childcare businesses, leaving a more market-led type of model.

Citing increasing demand for places and quality and a significant increase in the take-up of childcare provision in low and middle income areas, it says the structure of the existing provision and funding patterns is at the root of some of the problems with the current system.

It states: “Specifically, the fractured and mixed model of providers means that the incentives for improvement, especially as pushed by government, are weaker than they would ideally be – because the supply side is so varied and will therefore both have different needs and indeed respond in different ways to any one single improvement policy.”

It adds that the small size of many providers is “inefficient”. It says that the average hours of formal childcare for three and four year olds that is consumed is 25 hours a week (and around 20 hours a week for 0-2 year olds) the 30 hours free childcare “would effectively make government the monopoly buyer and funder of this childcare for working families in this country. We would, in other words, nationalise childcare.”

It suggests a government-funded voucher system which it says would give parents free choice of where to go so they would “effectively [be] commissioning their own provision…with the market responding to supply and demand”.

The voucher could be topped up. In parallel, the report argues, there would be a small, entirely private market for those who could pay.

It says this would offer a “mature childcare market” similar to that developing in schools, particularly secondary schools with the advent of academies and the like.

To achieve this, it lists several areas that need to be looked at, such as actions and incentives to improve settings “via collaboration, merger or exit” and the provision of greater flexibility of childcare in response to market demand.

Neil Leitch, chief executive of the Pre-school Learning Alliance, said the report ignored “the primary issue with the current model of childcare in England is that it is significantly underfunded”.

He said: “A parental voucher system ‘funded and paid for by government’ may sound simple in theory, but in reality, government funding has not covered the cost of delivering quality early years care and education for many years now. Any new childcare model that does not recognise this is doomed to fail from the start.”

He also rejected the idea that the 30-hour offer would make childcare providers more efficient and avoid cross-subsidies from different parts of the income they receive.

“Providers are already incredibly efficient – that is why, despite chronic underfunding, the vast majority are rated ‘good’ or ‘outstanding’ and take-up for the three- and four-year-old offer remains high.

The fact is, however, that the childcare system has historically survived on a combination of cross-subsidies and the good will of providers, neither of which can be relied on in the long term,” he said.



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