King's College London

Time and time again the high cost of childcare is locking too many parents – especially mothers – out of (re-)entering work. The lack of affordable early years education also has a negative impact on children’s social and emotional development and school readiness. High-quality and affordable early years education simply does not exist for families who want it or need it. But it doesn’t have to be this way.

Highlighting the high cost of childcare and the inequality in access in the UK is not new. For over two decades, Coram’s annual childcare survey has tracked childcare costs and shown shocking increases with many families unable to pay for the childcare they need.

But what is new is that flaws in early years provision have been exposed by skyrocketing inflation and the pandemic. As prices continues to soar, it is no longer someone else who is struggling; it is nurses, social workers and childcare workers themselves – many of whom were on the front line during the pandemic – who are not able to afford childcare. Even more shockingly, one in five children growing up in key worker households are living in poverty; and one in four parents are reporting skipping meals or not turning on their heating because childcare is unaffordable. This rises to over half of all single parents. Almost everyone knows someone who has had to make changes to their work or childcare because of costs.

With nursery costs often up to 65 per cent of a parent’s take-home pay, the UK regularly tops international league tables not on productivity and growth but on the cost of childcare.

Childcare costs constrain mothers’ choices to work. An estimated 1.3 million women are prevented from taking a job; 1.7 million women are prevented from taking additional hours; and over half a million are estimated to have quit all because of childcare issues. Caring responsibilities are significantly contributing to rising inactivity “reversing a 30-year trend of rising participation among parents and particularly lone parents.” The last Autumn statement could and should have done something to enable more parents to choose the balance between work and care.

It is these factors in combination – rising inflation and recession – that is now visibly plunging a highly flawed childcare system into acute crisis. The Institute for Fiscal Studies (IFS) has shown that overall spending on childcare grew in England from £1.5bn in 2001/2 to more than £5bn last year, but it is the distribution of this spend that creates gaps in provision and contributes to unaffordable provision for parents and providers.

Expanded entitlements for disadvantaged two-year-olds and increased provision for working families have driven much of the increased spend. But at the same time, this has left significant holes in provision – especially for families with younger children, and in areas where childcare is costly to deliver. Government funding for the free entitlement doesn’t cover the cost of delivery for most providers according to the Early Years Alliance. The same survey reports that one in three providers were operating at a loss, and almost half (48 per cent) were considering leaving the sector or had already left, because the numbers simply don’t stack up.

Costs for providers have risen faster than general inflation and the IFS estimates this trend to continue, largely driven by wages. But again, beneath the headlines is a more complicated picture. A poorly paid and undervalued workforce is experiencing high turnover, burnt-out from having been on the frontline during Covid.

The number of childcare places is decreasing in areas where families cannot afford any additional costs; and these are often areas of high levels of deprivation. The structure of the current system means that providers have few options to make up the shortfall other than to pass the costs onto parents, lower quality or decrease capacity. Different funding initiatives have created an unwieldy and complicated system for parents and providers to navigate with arbitrary boundaries between different parts of central and local government resulting in patchy and unaffordable provision for too many.

If a new system was being designed for early childhood education and care, the policy aims of supporting children’s social and emotional development and supporting parents especially mothers back into work would remain. But the design would be radically different.

With developmental gaps of up to 11 months already appearing when children start school between those who have attended high quality early years education and those who haven’t this is urgent. There is a strong imperative to target access to those who struggle to afford it. Widening availability for all two-year-olds to access high quality care and shifting existing resources to those households where costs are a higher proportion of income would be a welcome start. For example, 70 per cent of three- and four-year-old children eligible for 30 hours provision are in the top half of earnings. It means children in single parent families, or in training and education, are unlikely to receive it. Reforming Universal Credit by increasing the maximum amount of childcare expenses to reflect actual costs and guaranteeing support for upfront childcare payments; in addition to increasing the early years pupil premium would also help in the short-term.

In the longer-term, the transformative potential of early years education could be realised by moving towards a supply-funded system and investing in a workforce of valued educators.

Early years education is one of those rare policies that could pay for itself. The Centre for Progressive Policy estimates affordable childcare could generate up to £28.2bn in economic output per annum.

Accessible, affordable and high-quality early years education is not easy to deliver especially during a cost of living crisis and in the aftermath of a pandemic. But the sector is in crisis. Families can’t afford it, maternal employment rates are plummeting, and there are widening gaps in children’s development; so, if not now, when?