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Child poverty

Expanding childcare in Wales could loosen poverty’s grip on families

Childcare can play a key role in unlocking work opportunities for parents, and in children’s development. In Wales, expanding Early Childhood Education Care could also help to loosen the grip of child poverty, as Cavin Wilson and Gillian Paull of Frontier Economics explain.

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Almost three in ten children in Wales live in poverty, according to the latest figures – 180,000 children whose life chances are severely restricted. These children miss out on things others take for granted, do less well at school and earn lower incomes when they grow up.

High-quality early years education and care (ECEC) can be part of the solution. Access to ECEC unlocks work opportunities for parents and can play a vital role in children’s social and academic development – two things that can help break the cycle of child poverty.

However, in Wales, many disadvantaged families are currently locked out of funded childcare because of gaps in provision.

In research for Save the Children, we looked at the costs and benefits of expanding free ECEC to cover all children in Wales. Not only do the benefits often outweigh the cost, but the largest benefits go to the most disadvantaged families.

Gaps in ECEC funding

As it stands, parents of two-to-four-year-olds in Wales have access to one of three childcare provisions:

  • Foundation Phase Nursery: 10–12.5 hours per week during term-time for three- to four-year-olds not in reception, with some local authorities offering more hours in specific circumstances
  • Enhanced Childcare Offer: up to 30 hours per week during term-time (and nine weeks during holidays) for three- to four-year-old children of working parents
  • Flying Start: 12.5 hours per week during term-time (and a further 37.5 hours total during holidays) for two-year-olds living in deprived areas.

It is easy to see how children can fall through the gaps.

Grow up in a local authority that is not officially designated as “deprived” and you’ll receive no funded childcare before you are three, and very little before you start school if your parents are not employed. Forty-five per cent of children living in income deprivation in Wales are not eligible for Flying Start, according to Save the Children, and by confining the policy to ‘deprived‘ areas it ignores thousands of disadvantaged families elsewhere who could also benefit.

For families with non-working parents, who need access to affordable childcare to unlock employment opportunities, this situation is especially serious. If one or both parents are out of work, three- to four-year-olds only receive 10 to 12.5 funded hours per week. More hours could potentially lead to better results in school, greater lifetime earnings, and a lower likelihood of being trapped in poverty as adults.

Crucially, the long-term economic benefit of expanding ECEC is far is greater than the cost of delivery today.

The costs and benefits of expanding ECEC funding

Of course, the reason free childcare provision is important is because childcare is expensive – around £117 per week for 25 hours in a nursery in Wales. This is no less true for the Government.

When examining the possible expansion of ECEC funding then, it is as essential to analyse the costs as it is the benefits. This helps us determine which policies are most feasible by calculating whether additional funding is good “value for money”.

In our study, we modelled a number of expansion scenarios. We found that expanding provision for three- to four-year-olds is likely to deliver benefits that exceed the costs. For two-year-olds, while expanding provision to is likely to deliver benefits, these are not expected to exceed the associated costs.

The table below shows the results of our modelling for the expansion of provision for three- to four-year-olds for two scenarios:

  1. expanding Foundation Phase Nursery to 15 hours per week for all three- and four-year olds not entitled to the 30 hours programme
  2. expanding Foundation Phase Nursery to 15 hours per week for all three- and four-year-olds living in poverty and not entitled to the 30 hours programme.
Cost and benefits of expanding ECEC in Wales
Benefit (£) Cost (£) Net benefit (£)
15 hours for all three- to four- year-olds (term-time) 31.7m 9.2 – 18.4m 13 – 22.5m
15 hours for all deprived three- to four-year olds (term-time) 20.2m 6.0 – 12.1m 8.1 – 14.2m
15 hours for all three- to four-year-olds (term-time & holidays) 42.3m 27.6m – 36.8m 5.5m – 14.7m
15 hours for all deprived three- to four-year-olds (term-time & holidays) 26.9m 18.1m – 24.2m 2.7m – 8.8m

Note: The ranges around the estimates are due to uncertainty about how many hours children currently receive. If raising Foundation Phase Nursery to 15 hours from 10 hours, it will cost more than from 12.5. Costs and benefits assume ECEC in a Private, Voluntary and Independent (PVI) setting.

Benefits primarily accrue from higher earnings in later life, but lower government spending on health and social care also contribute[MB1] s. Of course, benefits associated with unlocking employment opportunities for parents would further increase these figures.

Figures on economic benefits and costs are based on the findings of earlier research we conducted for the UK Government on value for money in early education and the costs and funding of early education in England, along with technical documentation on the funding rate used for the Childcare Offer in Wales in 2017/18.

A modest expansion in ECEC funding to provide 15 hours of childcare for all three- to four-year-olds brings more benefit than cost — especially when expanded only during term-time. We also found net benefits to be greater in private, voluntary and independent (PVI) settings than in maintained settings, due to a combination of lower costs and larger impacts.

Breaking the child poverty cycle

These longer-term effects, particularly those on earnings in later life, suggest that expanding the remit of ECEC funding could be a key factor in breaking the cycle of child poverty. By increasing the later-life income of disadvantaged children, it becomes less likely that their children will grow up in poverty.

ECEC is far from the only intervention required to break the cycle of child poverty. Health, good nutrition, and a nurturing family life are all essential, along with good-quality work, affordable homes, and a social security lifeline that we can all rely on when we need it. But based on our findings, a modest expansion of ECEC in Wales deserves serious consideration.

  • Read JRF's Poverty in Wales 2020 report for the latest trends and figures, and our recommendations for developing a new childcare offer based on seamless provision for all children.
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