CEY1375

Written evidence submitted by Coram Family and Childcare

Key points:

-          The current childcare system is not achieving its potential to narrow the achievement gap between disadvantaged children and their peers or enable parents to work – and the families most likely to miss out are the ones that need the support the most

-          Coram Family and Childcare wants to see reform that recognises childcare and early education as the essential social infrastructure it is and creates a system that works for children, families, workers, providers, employers and the taxpayer. Early education and childcare should be recognised as part of the education system, with supply side funding, a sliding scale of affordable fees for families and every family able to access they education and care they need when they need it.

-          The benefits of reform have been clear for many years, but the need is now urgent. The gap between disadvantaged children and their peers at the point when they start school is widening – high quality early education can narrow this. The issues around recruitment and retention of childcare professionals are threatening the market meaning that gaps in availability could become even wider.

Introduction

Coram Family and Childcare are experts on childcare, bringing together what we learn from our on the ground parent-led programmes with our authoritative research. Our annual Childcare Surveys provide the definitive information on childcare costs and availability in Great Britain. In this submission, we draw on our own evidence to answer the committee’s questions on the affordability and accessibility of current childcare provision, and what can be done to improve the system for families. This includes The Implications of COVID on Early Childhood Learning and Care, funded by Nuffield Foundation and undertaken jointly with Centre for Evidence and Implementation , Frontier Economics and IFS.

Current childcare provision

Our evidence shows that the childcare system is currently falling short of its potential to boost development, reduce inequalities and support working parents. Our annual Childcare Survey 2022 finds that the average cost of a part time nursery place is £138 per week or over £7,000 per year, and that these prices continue to rise year on year. This is particularly problematic during the current cost-of-living crisis and means that work does not provide a route out of poverty for many families.

Even if parents are able to afford these prices, they may not be able to find a childcare place that meets their needs. The Childcare Survey 2022 found that only 59 per cent of local areas have enough childcare for parents working full time. The shortages are even more acute for childcare for disabled children - less than one in four local areas in England have enough childcare for disabled children (21 per cent).

The Childcare Survey 2022 also found that sufficiency of the 2-year-old free entitlement and the 3-4-year-old 15-hour entitlement has dropped by 9 per cent and 3 per cent respectively since 2021, hitting the most disadvantaged children and families the hardest.

Childcare entitlements

Well-intentioned investment has been made in childcare over recent decades, meaning that there is support out there to help families pay for childcare. However, the system is incoherent and overly complex meaning that it is not achieving its potential or value for money. The support that is available is neither pushing up childcare quality to maximise child development nor making childcare affordable for parents.

The particular affordability pinch point for families is the period between the end of maternity or parental leave and the start of funded early education entitlements starting when their child turns two or three (depending on family circumstances). This is when costs are the highest but there is the least support available with most only able to claim support through Universal Credit or Tax Free Childcare. The support available through Tax Free Childcare is not generous enough to make a significant difference to affordability for families and is under-claimed, with £2.4 billion not claimed since it was introduced. The issues with Universal Credit are discussed in more detail below.

The support available increases once a child is able to access funded early education entitlements. These are well understood and popular with parents, meaning that take up for three and four year olds is high. However, low funding rates for these entitlements are destabilising for the sector. For many providers, the funding they receive from Government does not cover how much it costs them to deliver the entitlements meaning that they need to make up the shortfall from parent fees causing prices to rise elsewhere in the system. This can mean parents having to pay to access their ‘free’ entitlement. It also puts pressure on providers to keep their costs low, pushing down wages in the sector.

Universal Credit and childcare

Middle and low income households can receive support with their childcare costs through Universal Credit. This support is more generous – up to 85 per cent of costs – recognising that this is essential in order to enable parents on lower incomes to be better off as a result of working. However, the flaws within the Universal Credit system mean that it is almost unworkable, particularly for parents moving into work.

Firstly, payments are made in arrears meaning that parents have to pay their childcare bill and then claim back support. This bill can easily be over £1000 – it is unclear how families are expected to be able to afford this in the short term and this can be an insurmountable barrier for parents looking to move into work. For children in school or school nursery, childcare costs are likely to rise significantly during school holidays when parents need to buy full days of childcare rather than just wraparound childcare at school. Again, parents will need to pay this higher bill before they are able to claim back the higher level of support.

Secondly, the maximum amounts that are available through Universal Credit do not match the current costs of childcare. They have not been uprated from when they were set as part of the tax credits system in 2006. Full time childcare costs for a child under two exceeds the maximum cost covered by Universal Credit in 99 per cent of local authorities.

Impact of Covid

There is strong evidence that the COVID pandemic has increased young children’s needs – fewer children are reaching the expected level of development and the attainment gap between disadvantaged children and their peers is widening. In this context, it is even more vital that action is taken to push up the quality of childcare and improve access.

Our research into the impact of COVID found that:

-          Speech and language delays were reported across all age groups as children had fewer opportunities to develop their communication skills at home.

-          Children struggled to adapt to new situations and missed out on opportunities to socialise and develop self-regulation skills resulting in increased social, emotional and mental health needs.

-          Children’s physical development, including their motor skills, were negatively affected by not being in a setting, as they spent less time outdoors and more time in sedentary activities.

In addition to these increased needs from children, many childcare providers experienced a reduction in income affecting their financial sustainability.

Children’s development and workforce challenges

There is strong evidence of the impact that high quality early education can have to reduce the attainment gap between disadvantaged children and their peers. The Early Years Foundation Stage is strong curriculum based on evidence of how to support young children’s learning. It holds huge potential to change children’s life chances.

In order to achieve this potential, the curriculum needs to be delivered by early years professionals with strong knowledge and experience of child development. Working in childcare is low paid and, while it is a rewarding field, it can be stressful and hard work. In our Childcare Survey 2022, 94 per cent of local authorities reported that settings in their area were finding it difficult or very difficult to find staff with the right experience or qualifications.

Our research on the impact of COVID found that the sector is facing unprecedented staff recruitment and retention challenges. The health risks of working during a pandemic, increased workload due to staff absences and shortages, and supporting children with higher needs all took their toll on morale.

These challenges around recruitment and retention are not only threatening the quality of childcare provision but also its availability. There are an increasing number of reports of settings forced to close permanently or temporarily, reduce their opening hours or reduce the number of places they offer because they are unable to find staff with the right qualifications and experience. This has the potential to reduce the sufficiency of childcare in the short term.

This is particularly concerning in terms of how the childcare system meets the needs of disadvantaged children who stand to gain the most from a well-functioning system. Providers often receive a higher hourly rate from parent fees than from Government funding and so their business models are reliant on these fees. This means that children who are only receiving funded hours are not being prioritised for places and risk struggling more than their better off peers to be able to access a place. We have already highlighted the drop in sufficiency we found for early education places in the Childcare Survey 2022 – this raises significant concerns around whether disadvantaged children will be able to access the education that could improve their life chances.

SEND

This struggle to find a childcare place is particularly acute for children with special educational needs and disabilities. Our Childcare Surveys find persistent shortages in the availability of childcare for disabled children. Settings struggle to be able to afford to make the necessary adjustments, even with the additional funding that is available. This funding is often too slow to be able to meet needs – children are only entitled to three to five terms of early education and so delays to funding awards can mean that children have missed out on most of their entitlement by the time the funding has come through.

For working parents looking for childcare outside the funded early education entitlement, the picture can be even more challenging. For many, there is no additional funding available so either the childcare provider or the parent need to meet additional costs of meeting the child’s needs, such as one to one care or specialist equipment.

Impact of insufficient childcare provision

The closure of childcare during the first COVID lockdown provided further insight of the impact on families of a lack of childcare. Our research found that mothers were more likely to experience negative effects from the disruption or withdrawal of care, including to their mental health and wellbeing. Some working parents (mainly mothers) experienced reduced income due to disruption in childcare arrangements forcing them to take unpaid leave or reduce their hours of work. Lone parents, families with school-age children and families with children with additional needs who required considerable support found parenting without childcare particularly challenging.

This shows the multiple roles that childcare and early education plays in supporting the whole family and provides strong evidence why improving the current system must be a public policy priority.

Need for holistic parenting support

Early education forms a crucial pillar in supporting children’s development in the early years, but is not enough alone. A positive home learning environment is one of the key areas that distinguishes children from disadvantaged backgrounds who do well from those who struggle in school. Early education can play a key role in supporting this as early years professionals are well-placed to encourage parents, provide families with materials and ideas, monitor progress and facilitate participation in local activities. This role should be further strengthened in order to achieve its full potential.

Parents should also be able to access the support they need when their children are younger in order to support development during the crucial early weeks, months and years. It is positive to see that the importance of high quality parental support during this time recognised in the Family Hubs and Start for Life agendas, and this now needs to be supported by funding across the country in order to make sure that every family is able to access information and support when and where they need it.

Key elements of a reformed system

The current childcare system is inefficient and not achieving its potential. In order to achieve the greatest benefits for parents and children, we need to see wholescale reform of the system. This reform is now urgent and needs to be based on the following principals:

-          Shift to supply side funding to reduce complexity and achieve better value for money. This would also improve the opportunities for Government to improve the quality of childcare and early education.

-          Introduce a sliding scale of parental contribution for childcare costs based on household income and number of children, removing all parental contribution to childcare fees for families below the poverty line and capping payments at £4 per hour even for the highest earning households.

-          Improve the quality of childcare and early education through increasing funding for early education entitlements alongside stronger governance requirements. We need to see a move towards a graduate led workforce and decent pay levels across all settings.

-          Fill the gaps in childcare availability through introducing a fully funded entitlement to a childcare place for every child, supported through a strong role for local authorities to make sure that the local childcare system meets local needs

The need for reform of this nature is urgent, but it will take time to implement in partnership with the sector. In lieu of the full implementation of these reforms, the following changes are needed so that families are able to access the childcare they need:

-          Increase the funding rate for early education entitlements. The funding rate no longer covers the cost of providing high quality early education and is putting unsustainable pressure on the sector.

-          Reform Universal Credit by increasing the maximum amounts that can be claimed and moving to upfront payments.

-          Extend 30 hours funded early education to parents in training to help parents move into work and out of poverty

-          Improve support for children with SEND through introducing responsive funding to improve staff skills and make more childcare places accessible

-          Double the Early Years Pupil Premium At 60p per hour, funding for the EYPP is not enough to help close the widening attainment gap disadvantaged children and their peers.

It is worth noting the £2.4 billion underspend on Tax Free Childcare since its inception which could be reallocated in order to achieve some of these necessary changes.

January 2023