How to make childcare affordable: the Tories won’t listen, but will Labour?
look at how to improve the affordability and accessibility of childcare for working families, particularly wrap around and holiday care for school age children, and how to reduce burdens on childcare providers, without compromising the safety or quality of provision.
Now, there is a need for properly affordable childcare, and a limited amount of deregulation might help a little around the margin. But the government is sadly and grossly mistaken if it thinks “cutting red tape” is going to make any serious difference.
Below are the main bits of my reply to the (woefully inadequate) questions set out in the call for evidence.
Some of the early questions require somewhat ‘technical’ responses, but the final section on what actually might be done to make childcare properly affordable may be of more general interest.
It is unlikely that the current government will do anything like this, given its fixation on marginal-at-best ’supply side’ solutions, but I do hope the Social Impact Bond idea* might be picked up by Labour policy people, and to this end I’ve submitted the same thoughts to IPPR, who are currently working up their own proposals. Ideally, of course, I’d be properly involved in that project, given that I actually understand childcare, but IPPR doesn’t seem interested. Funny that.
Commission on childcare: call for evidence
Commission question: What wrap around and holiday provision do parents need that they are not currently easily able to access?
Our response: People use childcare if they can a) afford it; b) know their children will enjoy it. The key problem with a lot of holiday provision is, quite simply, that it’s a bit scary for both parent/guardian and child. This is because the economies of scale needed to make it happen mean that children are lumped in with staff who don’t have an understanding of them (never mind a personal development plan) and other children that they don’t know, and expected to make the best of it.
Wraparound care is often not ‘accessible’ for similar reasons. The provider the parent/child trusts/likes going to may only provide the free Nursery Education Grant care, and wraparound care may require a new scary setting as well as travel between.
What barriers exist that make it more difficult to provide high quality and affordable wrap around and holiday care for children, particularly those aged five and over? How can these be overcome?
The key barrier to smaller local, quality, affordable care is that it is quite difficult for new providers to enter the market because the economies of scale do not allow a surplus to be returned.
It is well established that the major, private-equity financed providers will not look at any setting which provides less that 50 places, because they cannot turn the profit they need/want. The economics of the childcare industry therefore currently militate against small, school-linked settings, even though these are the most popular/trusted (and often highest quality) settings where they do exist.
Any deregulation should therefore be geared towards the establishment and sustainability of these smaller (often non-profit) settings (see below).
Commission question: What are the main barriers to parents setting up or getting involved in running before and after-school activities and holiday schemes? How might these be addressed?
Our response: a) The support provided by local authorities is often quite generic, and while helpful as an introduction, does not help nascent providers through the ‘hard yards’ of business planning, financing and physical establishment. As set out below, we would like to see a transition to local nursery trade associations tasked with this kind of development work.
Commission question: What role can schools play to help parents access the before and after-school and holiday provision they need?
The single biggest help schools might provide is by becoming (via the local authority) the planning applicant in cases where planning approval is needed.
In addition, the commission may wish to recommend that schools be encouraged to adopt more flexible lettings policies to allow pre-school/afterschool provision to benefit from lower rental rates, in consideration of the benefit such services bring to the school.
Commission question: How could existing regulation be improved?
Our response: The obvious answer that will come from many people responding to this consultation is that the child:carer ratios set down by Ofsted need to be relaxed (or even abolished) in favour of providers’ own risk assessments.
We would support a levelling out of the ratios to a certain extent. For example, instead of the current 1:3, 1:4, 1:8 ratios for the different age groups, which create ‘pinch points’ for many providers and lead to either restrictions on provision or lower profit/surplus, it may be more sensible to even the ratios out to say 1:5 for all children, accompanied with a risk assessment/quality assurance process requirement geared towards younger children.
However, the Commission needs to be aware that, if it proceeds down this route, it may end up favouring the bigger providers, at longer term cost to the smaller providers (see above) actually favoured by parents. This is because larger providers will generally have first mover advantage to take advantage of any such relaxation/abolition, given their larger strategic management resources.
In addition, it is worth noting that more unscrupulous providers (of whatever size), who do not meet the ratio requirements on a daily basis anyway (or do so by formally by sleight of staffing figures but not in a way which has carers in contact with children), may be advantaged by a relaxation because it will simply legitimise what they do anyway.
Given this background, and in the interests of the quality provision that the government wants, we would ask that the Commission consider weighting any new ratio requirements towards smaller providers, such that smaller numbers of staff overall are needed pro-rata to bigger providers. This reflects the reality that, in a small setting, all carers know all children’s development needs, such that a slightly lower ratio (and management supervision) might be justified, whereas with larger providers tighter ratios will need to be maintained (a good analogy might be the ratios needed in larger vs smaller medical wards with differing numbers of ‘bays’ for the charge nurse to oversee).
What are the main issues parents face when making decisions about work, either entering work, or increasing their hours, in relation to childcare? Do some families face particular challenges, such as low or middle-income families, or families with disabled children?
Forgive us for stating the obvious, but the main challenge for parents is that childcare is simply too expensive for parents, and makes taking up work/increasing hours either impossible or ‘just not worth it’. Clearly, the less people earn, the greater the challenge is.
With everything else stripped out as having only marginal benefit (see above)), there are two options. People need to be paid more, or childcare needs to cost less. The most practical option in the short term, if the government is not going to promote a wage-driven economic recovery (and the indications are that the government is looking for the opposite), is to reduce childcare prices. We give one relatively bold suggestion on how this might be done below in the ‘final comments’ section.
Commission question: When are the key transition or tipping points, and what are the main issues at those times?
Our response: The key tipping point is clearly where It becomes pointless to go out to work if a large percentage of what is earned is then spent on childcare. There is no exact figure for this as circumstances, and views on what childcare offers in terms of a child’s development, differ, but as a rough guide a family asked to spend on childcare more than 30% of what is earned by one family member may well consider that it is not worth it.
Commission question: What do employers do well and what further role could employers play in supporting parents with their childcare needs?
Our response: What employers do well is employ people. Our fairly simple view is that employers are best focused on running their operations (in private, public and non-profit sectors), and not being given additional responsibility over and above meeting flexible working hours legislation requirements. The rest should be up to providers and government to manage.
Commission question: How do parents access information and support relating to childcare, from local authorities or elsewhere? How could information or support services be improved?
Our response: Parents generally choose their childcare options on the basis of a) word of mouth recommendation; b) links/proximity e.g. next to the school.
Realistically, the need for a county-wide Childcare Information Service is past. It was a good idea in the days e.g. mid/late 90s before widespread access to Google (and childcare settings establishing their own web presence, and while there was a need to find a balance between knowledge about provision in the then new children’s centres and provision elsewhere, but that time has now gone.
The same applies to Childcare Sufficiency Audits, which local authorities must be law provide. This was useful enough as a planning tool when Children’s Centres were being introduced, but they often do not reflect local realities (and, especially in the many areas, like ours, which are close to several county administrative boundaries, they can be a hindrance because they give an inaccurate picture of actual/latent demand).
Our preferred approach would be to redeploy resources currently used to deliver Childcare Information Services and the Sufficiency Assessment towards the establishment and part grant-funding (matched to a small membership fee) of town/city/sub-regional childcare associations, along the lines of the Bristol Association of Neighbourhood Daycare providers (BAND), run under the direction of member organisations, and with a broad strategic remit to facilitate the development of affordable, local childcare, with a particular focus on social enterprise/non-profit operations providing services in locations, and with child numbers, where the main Private Equity-funded providers will not go (see also our comments above). Any surplus from this redeployment of resources should be ploughed directly into provider subsidies along the lines of the Nursery Education Grant (see below for wider views on how to increase subsidy levels without upfront Treasury investment).
Commission question: How effectively is existing government support to help parents participate in work being delivered?
Our response: Changes to tax credits have not helped in this regard, in our experience.
Commission question: Please use the space below for any other comments you would like to make.
Our response: As we have sought to set out above, the relatively (and understandably) inflexible nature of the childcare ‘market’, reductions in the cost base of childcare providers of the scale that deregulation can bring will have, at best, a limited impact upon childcare costs as they are met by families. The relative lack of competition in many areas (linked to the difficulty in starting up, especially with smaller scale operations) means that little or none of the cost reductions are likely to be passed on to the consumer.
Certainly any cost reductions passed on to consumers will be of insufficient scale to create the major surge in childcare uptake that the government wishes to see. Our sense of the kind of reduction in costs needed to make this happen needs to be at least more than 30%; even the severest deregulation (and even disregarding the counterproductive effects mentioned above), allied with any (welcome) measures to allow easier access to the provider market for social enterprise, is unlikely to have that kind of impact.
The only realistic way to cut the cost of childcare as radically as the government wishes is through enhanced government subsidies, whereby the provider (as with the Nursery Education Grant) is paid by the government to provide free childcare, or at least at a fee capped to a wholly affordable level under that funding agreement.
This may be unpalatable at a political level, but real progress towards properly affordable childcare for all will only be made when this is recognised.
There are two ways in which these enhanced providers subsidies (a sort of Nursery Education Grant Plus, inclusive of what we currently describe as wraparound provision) can be brought about.
The first, and most obvious route, is for the Treasury simply to fund the cost. That cost would be significant, but not astronomical in relation to the overall budget. Roughly, based on the £2.5million per year currently spent on providing around 1.2 million 3-5 years (and some 2 year olds) with three hours per day for 38 weeks of the year, the government would need to invest a further £4-5bn a year on a subsidy which allowed a) existing free care to be doubled to six hours a day, but across, say, 46 weeks of the year b) that provision to be extended to all 2 year olds, and to allow for significant subsidies for the 6 month to 2 year age group. This would allow most families to work full-time while keeping childcare costs to a relatively small percentage of their expenditure.
It is, however, acknowledged that – while such investment makes good sense in policy terms – direct taxpayer-funded childcare is unlikely to be politically acceptable in the current ‘austerity’ environment.
The alternative, therefore, is for the government to develop and launch a comprehensive Social Impact Bond aimed at both social investors (and in time the wider investment market) and UK Pension Funds.
This would be similar in some ways to the Chancellor’s plan, announced in November 2011 to engage Pension Funds in the delivery of major infrastructure funds, but with the ‘infrastructure’ being child development/family employment rather than bridges, roads and railways.
The plans for funding the latter schemes through Pension Funds appear to have run into the sand , perhaps because it is difficult, in the absence of clear plans for tolling etc., to define the long term revenue streams by which investors would get their returns. A childcare investment bond could, on the other hand, be structured in such a way that – similar to the social impact bonds emerging in other areas like prison rehabilitation – the return to the investor is based on the savings accrued by the Treasury as a result of the provision of high quality, affordable childcare.
Such measures of Treasury savings might include employment levels in local areas as well as savings from lower spending on ‘remedial’ work in primary schools because children/families go into the primary school stage of their lives more able to cope and thrive because of the foundation they have received. (Any such development would also need to be accompanied by a well thought-out workforce strategy, which gradually shifts existing school-based remedial capacity into the more preventative early years environment.
Clearly, this is nothing more than a thumbnail sketch of how a Social Impact Bond for Childcare might work. Much more work would need to be done on working through the practicalities, especially as they relate to measures of savings around which contracts can be drawn up (e.g. between Treasury and Departments) and then ‘payout’ points for investors agreed. Our recommendation to the Affordable Childcare Commission is that it look to commission a further detailed study of how such bonds might be brought into being, looking to external expertise such as offered by think-tanks/research bodies (for example, IPPR are currently working on their own affordable childcare report, and they could be asked to include/add specific consideration of Social Impact Bonds).
This work might include an assessment of whether the development of such a Bond might be subject to the kind of Randomised Control process promoted in the recent Behavioural Insights team document. Such a research process may bring evidence to support the view (explicitly promoted by the Coalition, including by Nick Clegg himself) that high quality early years development ‘interventions’ (to use the somewhat contestable terminology of the Behavioural Insights team) will have a very advantageous cost-benefit ratios.
Such a recommendation is made notwithstanding our view that Randomised Control Trials are only one research methodology, and open to criticism that they prefer internal research rigour over external validity of the findings. Nevertheless, given the government’s rhetorical support such early years intervention, it may be wise to assess effectiveness in this and other ways, rather than risk affordable childcare becoming a ‘must’ in future policy, even at the expense of other potentially more effective ‘interventions’ (and of course the desired outcomes from these interventions will necessarily remain contestable).
For a fuller review of the potential for Social Impact Bonds (and the constraints) see here.