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Pouring money into a broken childcare market won't magic its problems away

Against a backdrop of a cost of living crisis squeezing incomes, together with declining workforce participation, getting early years childcare and education right would spill over with benefits for the whole of society.

Written by:
Abby Jitendra
Date published:
Reading time:
6 minutes

Great early years childcare and education would help parents - particularly women, and particularly those on low incomes – stay in the labour market, earning more and reducing poverty rates. It would also help set all children – particularly disadvantaged ones - up for the best start in life.  

But our early years childcare system isn’t working

Parents complain about high fees – which for some can be a third of their income – or say they can’t find support at times flexible enough for the modern working day. The complicated system of subsidies and entitlements needs its own Gov.UK page to help parents navigate labyrinthian eligibility criteria.  

The UK Government offsets some of the cost of early years childcare, of which the universal offer - which gives all three and four year olds in England 15 free hours of care in term time, and 15 more hours for children of working parents – is the most well taken-up. But many don't take up any support, or can’t find what they need, and so reduce their hours or stop working completely to look after their children. Overwhelmingly this affects women, who are hit with pay penalties. Ultimately, disadvantaged households suffer most – support for low-income two year olds and Universal Credit childcare support are  underused, and children with additional needs face significant gaps in support.  

Childcare providers complain of sustained underfunding by central government, worsened by inflationary cost hikes – leaving a shortfall which leads many to charge top-up fees and raise prices to cross-subsidise ‘free hours’. Endemic workforce issues – similar to those in social care – flow from this underlying lack of funding, with staff shortages, high rates of workforce churn, few opportunities to progress, and very low levels of average pay for workers, all contributing to lower quality support. The Government’s attempts to reduce operating costs for providers by relaxing child-to-worker ratios have been met with resistance from opponents who say quality will be compromised. 

Tackling high costs and delivering a funding settlement to providers that actually meets the cost of caring are essential if we want a system that works. But this alone won’t solve the problem. 

Unlike in the children’s and adult social care markets, where the structure and functioning of the market and how this affects users is itself a target of scrutiny, public debate around childcare tends to focus on the most visible symptoms of dysfunction – the cost to parents. This is despite evidence that the same problems persist in childcare as in social care markets – poor oversight, variation in quality, gaps in sufficiency for people in need of support, and private-for-profit providers operating without transparency and along extractive business models. 

Pouring money into the childcare market will not magic these problems away – in fact, it could even exacerbate them. That’s why JRF is launching a programme of work looking specifically into the childcare market in England, bringing together experts and practitioners in the early years childcare system, as well as adult and children’s social care, to reflect on how we can build a better childcare system. 

The formal childcare system is made up of a mix of public and private provision - school-based provision, state maintained (local authority) nurseries, private and nonprofit providers, childminders, au pairs and nannies. Private provision is growing – 70% of group-based providers are private – and while this support tends to be more flexible, experts have raised concerns that it can be of poorer quality. Extractive ownership models – like in social care – have bled through to childcare, with private equity seeing nurseries as another valuable asset to invest in, squeezing out or buying up nonprofit and independent providers. The volatile finances of these companies can affect availability in a local area, increasing the risk of closures and gaps in support. This also has implications on the cost and quality of childcare – less public funding and parent fees go to paying workers a good wage, and more goes to shareholders.  

Recognising the importance – and risks – around early years childcare provision, like quality, sufficiency, access, and safeguarding, there exist levers to manage and intervene in the market. Ofsted quality assures provision and acts on safeguarding concerns, and local authorities and their early years teams have duties to ensure sufficient places and can step in as a last resort provider. But year after year parents and experts tell us there aren’t enough places locally, and quality remains a (literal) postcode lottery. Clearly, something isn’t working and parents, children, and workers are paying the price.  

How can we build a better childcare system?  

We have asked contributors to share their rallying calls about how to reform the system, and will publish a set of think-pieces each week for the rest of March. This week contributors are sharing reflections on who should do the important task of actually providing formal childcare and early education.  

Antonia Simon, Associate Professor at the Social Research Institute of UCL, calls for common-sense controls on private-for-profit providers to prevent the risk of closures and gaps in support, while Kathy Evans, CEO of Children England, considers whether childcare, like children’s social care, should be a ‘market’ at all.  

Jodie Reed, of Isos Partnership, traces the history of our childcare market through successive expansions, cautioning policymakers against replicating a ‘Sweden-style’ state-centred system.  

Finally, Veronica Deutsch, formerly of the Nanny Solidarity Network, calls for better protections for less prominent providers of childcare – childminders, nannies, and au pairs.  

Over the next fortnight contributors will tackle the questions of who should have oversight and regulation of the market to best serve the needs of parents, children and workers.  

This work is not exhaustive – it doesn’t look at reforming complex childcare entitlements, or look in depth at the broader question of how to enable parents to spend time and care for their children themselves without going broke, which itself is about changing the relationship between caring and work. And it’s squarely focused on the mechanisms and institutions of the system, rather than funding – hence why a workforce strategy isn’t a central focus, despite its tremendous importance.  

The focus of this project is the childcare system as it is established and experienced in England although, obviously, the struggle to access affordable high-quality childcare is not unique to low-income parents in England.  We are also working to examine the system in Scotland more closely and are open to discussions on Wales and Northern Ireland as well. 

Our contributors don’t all agree on what the best remedy is, but through their provocations on what a better system could look like, we hope to unearth opportunities for changes in policy and practice to help our childcare system deliver on its promise.

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