30-HOURS UNDERFUNDING: CALL FOR ACTION

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The Government's flagship 30-hours free childcare entitlement has come under fire in a report by the Treasury Committee.

The scathing assessment by MPs simply reiterates the sector's view that the scheme is, quite frankly, a mess and needs to be sorted out.

It begs the question, will the Government now listen and get its act together?

The 'Report on Childcare' - based on evidence from the Treasury, HMRC and sector organisations - found that some childcare providers involved in the free 30-hours scheme for three and four-year-olds get less funding than the costs they incur.

The committee also found that inadequate resources have led to providers increasing charges for children who are not eligible for the scheme, such as under-threes.

'Misleading' and 'out-of-date'

The report states that funding for 30 hours is based on out-of-date wage data from 2013 and rent and other overhead costs from a survey carried out way back in 2012.

It calls the stated average rate of £4.94 the Government provides per hour to fund the entitlement is 'misleading', as it doesn't include the proportion retained by local authorities but does include some schemes such as Early Years Pupil Premium.

And the report says the committee hasn't seen any evidence that increases in the National Living Wage have been factored into the hourly rates provided by Government to local authorities and childcare providers.

The report also finds it is highly likely increases in other costs, such as auto-enrolment pensions and business rates, have not been factored into Government hourly rates.

The sector has been saying the calculations of how much it costs to provide childcare are incorrect since before the 30-hour offer was rolled out.

The upshot is that the committee is calling on the Government to ensure the hourly rate paid to providers reflects their current costs and is updated annually in line with costs increases.

Warning

The report warns that as a result of a shortfall in funding providers are altering their provision in response to the 30-hours offer, such as restricting times funded hours can be taken, cutting back on higher-qualified staff and increasing child-to-staff rations and charging for services like food and activities that were previously free.

The committee says these could be avoided if the Government pays a higher hourly rate to local authorities for the 30-hour entitlement and ensures all the money is passed on to providers.

£157m shortfall

Nicky Morgan, Chair of the Treasury Committee, said: "The Government’s own figures on how much it provides per hour to fund 30-hours free childcare are often misleading and out of date.

"One estimate suggests there would be a total sector-wide shortfall of over £157 million per year from 2017-18.

"As a result, some childcare providers are altering their services, potentially redistributing resources away from low income parents towards higher income parents.

"If the Government wants to avoid these consequences, it should pay a higher hourly rate to providers that more accurately reflects their current costs."

Sector response

Of course sector organisation have all added their voice to the committee's findings.

Chief executive of the Pre-School Learning Alliance, Neil Leitch, said there are few people left outside the Government who are not 'fearful' the childcare policy will fail if the Government does not take action.

While Liz Bayram, Chief Executive of PACEY said she hoped the Government will take the committee's recommendations 'seriously'.

"Parents and providers both want children to benefit from high quality early education, but the low funding rates, delayed payments and red tape...are all preventing this from happening," she added.