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Early years education and childcare is a public good – its operating model should be too

Lucie Stephens, from the Women’s Budget Group, looks at why we need to move early years provision away from its current market-based model, and towards a shared vision and commitment to the greater public interest.

Written by:
Lucie Stephens
Date published:
Reading time:
8 minutes

Children’s early education and care is a complex ecosystem and there is no one-size fits all solution that will suit all children and their families. Despite the huge variety of provision many children and families are unable to access what they need, with marginalised and minoritised children and families facing some of the greatest challenges: 

  • Only 6% of three and four year olds with Special Educational Needs and Disabilities (SEND) take up the universal early years entitlement. 
  • Only 20% of families in the bottom third of earnings distribution are eligible for the 30 hours entitlement.
  • One in three young mums were forced to leave a job because they could not afford childcare.
  • 47% of families with a black ethnic background say their childcare payments are bigger than their rent or mortgage.
  • 44.5% of early years professionals are reliant on state benefits or tax credits.

We need to get past a binary ‘public or private’ conversation and focus instead on what qualities we need to see in all provision. Rather than asking what the right ‘mix’ is, we should be asking what structures are needed to achieve the best local early years system in each area. That means structures that ensure high quality provision available for all children and families that want it, transparency and accountability to local people, financial sustainability of providers, strong workers’ rights, and the best possible social return on public funds invested.  

Who decides, whose market?

There is no single agency responsible for the options nationally or locally, with national and local government, schools and academy chains and Ofsted all holding some influence. In our market-based system parents are ‘customers’ and so should expect that providers will respond to their needs, enabling them to purchase the best possible fit for their children’s and families’ needs. In England right now, many parents would question whether they have ‘choice’ over their child’s early education and care. Genuine choice is constrained by where they live, their income and working hours, their child’s age, how many children they have and if their child has any additional needs.

The marketisation of early years education and childcare in England has taken place without any meaningful discussion of the potential risks. In 2016 the OECD highlighted that a market-based approach to early education and childcare leaves public authorities with less control over fees and when and where services are provided. It identified that market dynamics can result in for-profit providers drifting away from less profitable areas, so that very young children in poorer neighbourhoods are sometimes left without the option of attending quality services at all.

In reality the mix of early education and care provision is predominantly determined by the business plans of early years providers. Provision in England has become increasingly dominated by large, financialised companies with highly complex financial structures making transparency and accountability very difficult.  A private company's responsibility is primarily to ensure financial viability, rather than deliver social value. Within a market-based approach, private providers are extremely unlikely to target children and families on lower incomes who might struggle with fees, or children with additional needs who are perceived to be costly to support.

What’s the solution?

Where historically early education and childcare was seen as a matter of family choice it is now a critical social infrastructure that generates significant benefits for children, families, gender equality, and the wider economy. It narrows developmental gaps, allows women to work, and increases economic prosperity and the tax base. This makes early years education and childcare a strong public good. It produces value to society beyond the parties that are directly involved in providing and receiving the service.

From consumers to co-producers

We need a more democratic and accountable sector and a far stronger partnership approach to deliver for parents, children and early years professionals while maximising return on public investment, specifically:

  • Shifting the role of children and parents from customers to co-producers. This will ensure that engagement and accountability are a necessary part of how provision and funding is designed and delivered at national, local and provider level.
  • Adjusting the government's role from regulator to partner. At the national level we need to see genuine partnership working with the early years sector. Trust will need to be built on both sides, starting with an acknowledgement that responsibility for achieving high quality outcomes for children rests with both the State and providers.

Co-production has become an important approach to service improvement and design in many relationship-based services including health, social care, mental health and community development. Groups such as the Co-production Forum in Newham bring together people with lived experience, carers, councillors, community groups and professionals to design, deliver, commission, monitor and evaluate provision for adults in the borough. These approaches must be developed for early years education and childcare.

The shift to co-production must be coupled with changes to how childcare provision is planned and paid for. First, it requires a fair funding settlement that recognises the actual costs of provision, and secondly a change to how public money reaches the sector. Funding needs to reflect the actual costs of delivery and be invested to pay directly for services (supply-side funding) rather than the current complex and costly arrangement that is tied to the individual hours attended by children (demand-side funding). Supply-side funding puts money directly into provision, based on actual running costs giving providers greater financial stability and creating space for future innovation. Ireland adopted this approach in 2021 through their ‘partnership for the common good’ under their ‘First Five’ commitment to early years.

Investing public money well

The government currently commits public funds to early years provision with very limited ability to influence key concerns like quality, accessibility and affordability. Future funding must come with conditions attached to ensure local provision meets local need. Supply-side funding allows national and local governments to attach conditions to the public money being invested. This means they can use funding to tackle national concerns, such as improving quality standards, increasing access for the most marginalised children or improving wages for early years professionals. Subsidies would be given directly to childcare providers on a per capita basis, provided that conditions are met. In Ireland the approach has been used to stop parent fees from rising, whilst improving quality and boosting the conditions of the early years workforce through introducing national pay scales.

This shift is not focused on one particular business model, or a one-size fits all approach to provision. It increases transparency and accountability and creates opportunities for local areas to develop criteria specific to their area in order to address particular challenges. Under the Irish approach the ‘partnership for the common good’ is available for providers to ‘opt in’. If providers can demonstrate that they comply with the ‘common good’ framework then they qualify to receive public investment. If they don’t comply they are able to continue operating without this public investment, but will need customers (parents) or investors to replace this funding.

Investing in early years as a ‘public good’

At a national level government must commit to a fair funding settlement. Alongside this we need a national charter for early education and childcare that is co-produced by children, parents, early years professionals and providers. The charter will set out the key principles for all early years provision, including a shared vision and purpose for early years education establishing its public good principles. This would translate into minimum specifications that providers have to meet in order to access public investment. It should include factors to ensure:

  • High quality provision for all children, especially those who benefit the most.
  • Provision that works for all kinds of working parents and their employers.
  • Good pay, terms and conditions for the professionals who deliver it including a real living wage for all staff, union recognition and continual professional development.
  • Accessible and affordable options for all parents, in all communities.
  • Locally shaped options that respond to local circumstances through greater local accountability, greater financial transparency and local targeting of provision.

The role of Ofsted would be rethought, to include compliance with the charter, reviewing levels of co-production with children and parents and the financial viability of early years settings, in the same way that the CQC now does in the adult care sector.

At a local level, councils will play a greater role in matching local provision to local need, taking on responsibility for where providers set up, who can access places, and how local providers perform against the Charter. Local government would develop democratic processes that bring together key stakeholders including children and parents, early years professionals and providers. Working together these co-production panels will set the local direction and assess performance against the mix of provision needed for their area, driven by their local understanding. This group would also work closely with Ofsted regional teams to ensure lessons about monitoring and evaluation are shared. Supply side funding would make it possible to direct funding locally, guided by the vision, to address particular local challenges and incentivise providers to innovate or adjust their approach in line with local needs. 

At a setting level, we should build involvement by ensuring that all settings have parents and staff sitting on their boards. In Norway transparency and accountability is achieved by requiring that each provider organisation produces an annual report about policy, practices and finance that are shared with parents and workers, and in a simplified format with children too. This annual report has to be signed off by parents and staff before the provider can be eligible to receive public funding. Research has found that not-for-profit providers often have parents and staff on their boards, are local to the area where they operate, which appears to make them more adaptable and flexible in respect of local needs and that generally, these social enterprise / charity providers were able to retain public values and balance their budgets at the same time.

In moving early years education and childcare away from the crisis it is currently facing we need to focus interventions on both rescue and reform. The current market-based model is driven by individual organisational performance rather than a shared vision and commitment to public interest obligations. There are some providers in England that are already driven to deliver social value but are struggling to thrive due to the current system. To ensure early education and childcare can operate as universal social infrastructure, it must become accountable to those with the greatest stake in its success. 

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