CEY1346

Written evidence submitted by the APPG for Childcare and Early Education

Childcare Entitlements 

1.       How affordable and easy to understand is the current provision of childcare in England and what steps, if any, could be taken to improve it, especially in relation to families living within the most deprived areas in England? 

Prior to the pandemic, the independent sector analyst Ceeda estimated that the funding gap for the early years sector was £824 million. Ceeda’s latest data also shows that the average gap between the hourly cost of delivering a funded 2-year-old place and the funding rate paid for that place in 2020/21 is still an estimated -£2.01 per hour (a 37% funding deficit), falling to a loss of -£0.90 per child per hour for 3- and 4-year-olds (a 20% funding deficit).

These figures are based on the unlikely assumption that occupancy recovers to the April 2019 average of 77%, highlighting how greatly the pandemic has exacerbated the pre-existing need for reform.

This funding gap has had a cumulative effect and its persistence has produced the current market failure and pattern of closures. The increase in funded hours from 15 to 30 led to many providers reporting a reduction in profit or surplus, while in many circumstances created a trade-off between provision for disadvantaged 2-year-olds and provision for 3- and 4-year-olds on the 30 hours entitlement.

Reduced occupancy associated with the pandemic means that many have now slipped into making a loss. The base rate of free entitlement funding is currently too low, and the costs of delivering childcare have also risen for many reasons over recent years due to policy changes such as increases in pension contributions, the national minimum wage, and the introduction of the national living wage.

The current landscape of childcare support across Universal Credit, Tax Free Childcare and funded hours is complex for families, Government agencies and local government to budget and plan for. Money is left unspent in Tax Free childcare and council budgets that could be supporting children and families. A simple, online, parent held account would simplify administration for families, government and providers and could increase uptake of existing support while reducing the amount of funding lost to administration of the systems.

2.       Are the current entitlements providing parents/carers with sufficient childcare, and to what extent are childcare costs affecting parents/carers from returning to work full-time?

Internationally, the UK has the second lowest level of government investment in the early years but the highest level of fees for parents. Research from Coram suggests that a full-time nursery for children under the age of two costs almost 66% of a parent’s weekly take-home pay in England.

Proposed reforms, including the relaxation of staffing ratios and the introduction of a “childcare budgets” system, would lead to rising costs to maintain the standard of care early years educators are expected and want to deliver. This would exacerbate financial problems in the sector, with 84.8% of providers expect to operate at a loss or break even this year, up from 54% in 2018.

Figures show that financial pressures on settings and parents disproportionately impact women. The Centre for Progressive Policy found that if women had access to adequate childcare services, and were able to work the hours they wanted, they would increase their earnings by between £7.6bn and £10.9bn per annum - generating up to £28.2bn in economic output per annum.

Any potential solutions must begin with better use of our existing early years budgets and a fundamental overhaul of how the sector is funded to ensure that the money follows the child.

While last year, it was the children who were struggling, this year we are seeing how much parents are struggling – many have had work patterns changed, some have moved house due to the pandemic and all have struggled either being pregnant during Covid, or having restricted access to both their personal and professional support networks. Parents are more anxious for themselves, for their children and the cost of living crisis has made this much worse.

3.       Whether the current Tax-Free Childcare scheme, and support for childcare from the benefits and tax credit system, is working effectively or whether these subsidies could be better used within other childcare subsidies 

The part time only funding for just 3–4-year-olds is inadequate even before increases in minimum wage, interest rates, utilities, and inflation. This is on top of business rates and VAT that cannot be reclaimed. Business rates for early years settings should be scrapped (as they are in Scotland and Wales) and early years settings should be exempt from VAT, as our schools.

There is no direct nursery funding for under 2 and most 2-year-olds, and inadequate funding for SEND children and 2 yeaers in deprivation. In addition, the 15- and 30-hours policies are not free, providers are subsidising them. They should be called ‘funded’ and settings should be permitted to ask for ‘top up’ payments from parents.

Money allocated via Tax-free credit that is unclaimed should be invested in the sector not sent back to the Treasury.

Early years provision

1.       What challenges do early years providers face in terms of workforce, including recruiting, and retaining qualified staff, and the barriers faced by individuals joining the profession? To what extent has the Covid-19 pandemic exacerbated workforce challenges?  

We face a staffing crisis in the early years sector. Staff are leaving the sector at record levels, with many choosing careers in retail for fewer hours but similar levels of pay. Data from the University of Leeds shows a net loss of workers from the sector post-pandemic, above the usual churn of staff.

52% of early years staff say their workload and lack of a work/life balance were a cause of stress or unhappiness. Staff are under pressure and tell me that they are already worried with the time they are able to give each child in their care, even with the existing ratios.

55.6% of nursery and early education providers said it had been more difficult to recruit, whilst over 20% of childminders didn’t think they would still be working in the sector in six months.

Proposed reforms, including the relaxation of staffing ratios and the introduction of a “childcare budgets” system, would lead to rising costs to maintain the standard of care our early years educators are expected to, and want to, deliver. Increasing the number of children each member of staff is working with, or responsible for will, only increase pressure and stress within the workforce and mean more of these vital workers for our country will leave a sector already facing a recruitment and retention crisis. 

Many are concerned about working with the new ratios and what they regard as unsafe conditions.  One nursery worker wrote to us saying that changes to ratios gave her “nightmares”, whilst another said she was “extremely concerned” about the additional pressure on staff “both physically and emotionally”. Indeed, figures suggest that 75% of practitioners would leave the sector if the ratios changed.  This isn’t just a figure, it’s parents across our country who will be unable to find good childcare and early education for their children to enable them to go to work and provide the growth I know this Government seeks to bring.

Staff are also referencing workload, stress and burnout as key concerns in their role, exasperated from both a personal and setting perspective by concerns around the cost of living implications. Providers want to pay their staff a good wage and provide professional incentives for upskilling and development, whilst also running a viable business which delivers a high-quality service. However, they are currently unable to do this due to the funding crisis across the sector.

Nursery staff are now having to support parents and families as well as children. Nursery staff are untrained for this role and there is little free support or training for them available. Nursery managers are bearing the brunt of this as they support their own families, as well as the families of the children in their care, their employees and the children registered at their setting. The mental health of managers is at risk.

Current senior staff have benefited from previous policies where investment in skills and qualifications coupled with payments to settings funded both cover staff and training expenses. Settings cannot afford to release staff for further training during the day and staff are too tired to work in the evenings or at weekends. Senior staff and their skills and experience are leaving the sector for less stressful jobs with better pay – there are not an equal number of junior staff moving through qualifications, gaining sector experience, to replace those that are leaving.

The 2020 Spending Review and the 2019 Spending Round brought welcome increases to early education spending in 2020/21 and 2021/22. Taking into account, however, growing costs through inflation rates and wage rises, before even considering COVID-related costs, this amounts to a real-term funding cut.

The overwhelming majority of early years settings are small businesses run by professionals who have chosen their vocation because of their passion and commitment to delivering the best for our children. Business rates are an unfair tax on space that is a drag on funding, resulting in inefficient use of public funds to pay other taxes and limiting investment in nursery environments.

VAT on providers delivering the EYFS curriculum and funded places is an unfair burden and should be reformed so these settings are exempt in the same way as Academies. Any meaningful definition of levelling up must include ensuring access to quality, affordable early years education across all parts of our country, and that businesses are enabled to do this.

This is a workforce that offers holistic and specialised education and care to babies, young children and their families, professional educators who identify as key people in the lives of others. The workforce is not just a convenience for working parents/carers but an essential service for parents and an educational experience that must be given every investment required to maintain the vital, quality work it currently provides. 

2.       Whether the Early Childhood Education and Care (ECEC) system is meeting the needs of pupils with Special Educational Needs (SEN), and the improvements that could be made to better support young children with SEN within early years provisions 

There are concerns amongst both providers and parents about settings about having capacity to support children with any additional needs and who may need, more, rather than less, time with educators, such as children with SEND.  The proposed further ratio reduction would reduce capacity and parental confidence even further, driving more exclusion in early years education.

92% of settings have paid from their own funds to support children with SEND, and 53% do so regularly (Early Years Alliance, 2022). Every setting is responsible for being open to every child, and yet since the pandemic there are increasing reports of settings turning children with SEND away (University of East London, 2022).

Currently, from the point of view of children with SEND in the early years, we have major concerns about the financial sustainability of the sector. Increasingly there are reports of rising numbers of children with SEND, with higher needs than ever before – in part due to the effects of the pandemic. At the same time there is a rise in settings turning children with SEND away, in many cases saying that with the difficulties in recruitment they do not have enough staff to support them effectively. Recent discussions of reducing ratios will also exacerbate this issue and mean that fewer settings will believe they can effectively support children with SEND – leading to more exclusions. Children with SEND deserve the best start in life and in their education, but the current lack of funding in the sector is directly reducing their opportunities.

Recent changes to the EYFS have meant that there is now significantly more paperwork for children with SEND than for other children, and on top of that there are discussions about reducing ratios in settings. These two changes together raise real concerns that rather than become more inclusive, the early years sector will become less inclusive of children with SEND. The extra pressure that this puts on early years staff will also contribute to the recruitment and retention crisis, as they struggle to support increasing needs and numbers of children with minimal resources.

In addition, there is a dire lack of medical specialists such as speech and language therapists, educational psychologists etc, and this means settings are not being effectively supported to provide the right early intervention, and children and families are experiencing long delays in accessing the therapeutic support they need. The stress this puts on practitioners’ wellbeing as they try to give young children what they need should not be underestimated, and contributes to the reasons why many are considering leaving the sector. In addition, this causes major stress to families who see their child not being able to access the support they need, and builds more mistrust of the system – a mistrust that the government has said it wants to reduce.

Without investment in the early years, that allows the sector to pay more to its staff, there will not be the ratios in the playroom needed to run a high quality provision. High quality means inclusive for every child and is vital to build inclusion for children in the mainstream from the very beginning. In the Government’s Green Paper on SEND there is a clear focus on inclusive practice for as many children as possible, and yet the current lack of investment in the early years means that children with SEND are increasingly being excluded. This immediately builds barriers as children are not able to experience inclusion with their peers, and parents cannot trust that the system will support their child effectively. This urgently needs to change if we are to ever realise any of the ambitions in the Green Paper.

Finally, adjustments to staffing ratios would also disadvantage children who do not enjoy equal access to early education, including those with SEND. Only 21% of local authorities believe they have sufficient spaces in early years settings for children with SEND according to Coram's Annual Childcare survey, and research from the Early Years Alliance found that nearly half of providers regularly used their own money to fund costs for SEND children in their settings. An increasing number of settings are turning children with SEND away as they struggle with a lack of resources, and lower ratios will only exacerbate this issue and work directly against inclusion in the early years.

January 2023