Prime Minister David Cameron's election pledge to double the amount of free childcare available for three- and four-year-olds, is underfunded by £1bn a year, according to the Institute for Public Policy and Research (IPPR).
The Government has promised to increase free childcare hours for three-and-four-year-olds in working families from 15 hours per week to 30 hours per week, for 38 weeks of the year but has only allocated £365m for the first year (2017-18) increasing £670m (2020-21).
The Government’s estimate of £670m a year is unrealistic according to the IPPR which says £1.6bn a year is actually needed. The think tank highlighted the £1bn budget shortfall in its report, ‘Extending the early years entitlement: Costings, concerns and alternatives’.
Neil Leitch, chief executive of the Pre-school Learning Alliance , which has 14,000 early years members, said: “Independent research commissioned by the alliance earlier this year found that the cost of this pledge would be approximately £1.6bn, a figure matched by IPPR’s own estimates.
"In fact, only last year, the childcare minister estimated that the cost of Labour’s plans to extend the free entitlement to 25 hours a week would cost ‘£1.5bn, at least’. It is impossible, then, to understand how the Government can argue that its current estimate of the cost of the scheme - £350m, eventually rising to £670m – will be anywhere near sufficient, especially given that that it has not yet accounted for the planned increase in funding rates.”
The IPPR believes the funding hole will hurt the families that David Cameron is trying to help by pushing costs up for paid hours outside the 30 hours, and will threaten the sustainability of the child care sector with some providers reducing services.
Its report stated: “If the rates the Government pays to providers to deliver care (which are already under review) are consequently set too low, it will result in falling quality, poorer outcomes for children, and less choice for parents as the market shrinks.”
Mr Leitch added: “We also share the report’s concerns about the impact that this policy may have on quality. With the spending review imminent, it is vital that the Department for Education now looks to ensure that the 30 hours pledge is delivered without threatening the sustainability of providers or the quality of the provision that they deliver – an aim that can simply only be achieved through adequate funding.”
The think tank recommends that the Government target the free hours at two-year-olds for whom childcare support is lowest, despite childcare costs for this age group being highest “by universalising the current 15-hour offer (for the most disadvantaged two-year-olds) to cover all two-year-olds. This would have a greater impact on child development, maternal employment and gender equity”.
It also recommends extending the free hours offer from 38 to 48 weeks of the year in order to cover holiday care, which it says is expensive and hard to find and pushes parents out of work or onto reduced hours. The report states: "As a step towards full holiday coverage, the government could provide an additional 10 weeks for the 40 per cent most disadvantaged two–four-year-olds.”
Author of the IPPR report, Giselle Cory said: “We are concerned that the low costing for this policy will lead the government to change the nature of provision to fit the price tag, including by loosening child-to-adult ratios in care settings.”
Liz Bayram, chief executive of the Professional Association for Childcare and Early Years (PACEY), said: “The Government will recall just how passionately both providers and parents feel about ratios. We echo calls from peers during the House of Lords debates on the Childcare Bill to ensure that current ratios are protected.
"The Government should commit to a regular and ongoing review of the true costs of providing childcare."
First pilots of the 30 free hours’ provision are set to take place in 2016 with full roll-out across England in 2017, according to the Government’s policy statement on the Childcare Bill published this week.
The policy statement revealed that of the 19,300 respondants to a Government questionaire, 45 per cent of parents reported using nurseries, 29 per cent used relatives, 15 per cent used childminders and 15 per cent used playgroup or pre-schools.
National Day Nurseries Association’s chief executive, Purnima Tanuku said: “The policy will stand or fall on the achievement of a viable funding package for providers. Both the amounts per child allocated to local authorities and the amounts passed on by local authorities to providers vary widely across the country and urgent reform is needed."
Ms Tanuka added: “With providers already concerned about recruitment and retention and the impact of the National Living Wage, enabling investment in the workforce will be key to ensuring parents and children benefit from the high-quality extended hours they want and deserve.”
The Childcare Bill is scheduled for Royal Assent this winter.
Imelda Redmond CBE, chief executive of 4Children said: “We await further information in the autumn statement regarding the funding allocation, which will be pivotal to the success of the programme.”
The policy statement on the Childcare bill can be found by visiting www.gov.uk/government/publications/childcare-bill-policy-statement