11 February 2019

Government childcare scheme ‘misses half of the families it was meant to help’

5 min read

 
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Becky O'Connor

Personal Finance Specialist

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Only half of the 600,000 families in England the Government said would be eligible for 30 hours of “free” childcare for three and four-year olds have actually benefited, according to new analysis by mutual insurer Royal London. 

Last week, Education Minister Nadhim Zahawi told Parliament that 340,000 children had benefited from the scheme[1] , which launched in September 2017.

In 2015, David Cameron had claimed that the extended hours policy would benefit “up to 600,000” families when it was first announced in June 2015[2]. By the time the scheme launched, ministers had reduced their estimate to 390,000 families.[3]

Allowing for the likelihood that some families have more than one child who is eligible because they either have twins or children who are close together in age, the Government’s own figures suggest that the policy is failing to help around 300,000 families it had originally claimed would benefit.

Even taking the Government’s drastically reduced estimate at the launch of the scheme of 390,000 families set to benefit, around 50,000 families had not accessed the additional support in the first full year of the scheme.

The policy extended the existing 15 hours of state-funded childcare for all 3 and 4-year olds, regardless of their parents’ working status, to up to 30 hours for families in which both parents work more than 16 hours a week.[4] It was designed to encourage more parents back to work by helping with childcare costs, which can be prohibitively expensive, particularly for families on low incomes.

The average monthly cost of a full time nursery place before funded hours kicks in is about £1,000 in England [5]. Even after receiving 30 funded hours, two full-time working parents requiring 50 hours of childcare per week would pay about £400 a month.[6]

However, the scheme has failed to reach thousands of eligible families because inadequate funding from the Government, via local authorities, has left nurseries and childminders facing shortfalls of an average of £2,166 per year per child if they deliver the offer.[7]

As a result, many childcare providers have decided that they have to limit the number of places they have for children of parents claiming the 30 hours of funding. Others have had to cross-subsidise the offer by charging higher fees to parents of younger children, some have had to introduce additional “contributions” in order to cover the higher costs. Many have had to make redundancies or simply close their doors.[8]

According to the Government’s own figures, just 34,250 childcare settings including childminders, provided the 30-hours funding last year, out of a total of 81,500 providers in 2018[9]. The number of childcare providers in England has fallen by nearly 10 per cent since 2016, from 90,300 in 2016.[10]

Becky O’Connor, personal finance specialist at Royal London, said:

“Childcare costs are an enormous strain on working parents and this policy was designed to address that. But inadequate government funding means childcare providers can’t afford to offer the extra hours. It is shocking that an initiative designed to benefit 600,000 families is reaching barely half of those who it was designed to help.

“By underfunding this policy, the Government could ironically end up reducing access to affordable childcare for all parents.”

About Royal London:

Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £117 billion, 8.8 million policies in force and 3,745 employees. Figures quoted are as at 30 June 2018.

For further information please contact:

Becky O’Connor, Personal Finance Specialist