September will, for the first time, see some children under age 2
entitled to a free childcare place in England. Around a third of
under-2s are already using – and paying for – some formal
childcare. This group will benefit financially from the new
entitlements; a family paying average prices for childcare could
save £3,600 a year on the hours that they will get for free. But
these won't be “new” places, and so aren't likely to shift
families' outcomes or indeed prove difficult to deliver.
In other cases, families will look to start using formal
childcare (or using more hours) as a result of the new
entitlements. But this is likely to be a much smaller group:
while three-quarters of parents not using childcare say that this
is down to their preference, only a quarter cite lack of
available or affordable care.
The government is offering generous funding rates for the new
entitlements for under-2s – per-hour funding is set to be more
than 75% higher than the current market price. Generous funding
for this age group should encourage providers to offer new
places, if needed. This would probably mean expanding the
childcare workforce, which providers have found challenging so
far. One obvious route to improving recruitment and retention
would be to raise wages – which recent history suggests some
childcare providers have been reluctant to sign up to. More
generous funding rates should provide more incentive – and more
scope – for providers to take this step.
Christine Farquharson, Associate Director at the
Institute for Fiscal Studies said:
“Against a landscape of funding pressures in many areas of public
services, new childcare entitlements are one big place where the
state is choosing to do – and spend – much more than it has done
hitherto. The hope is that this will pay off by boosting
employment and improving children's development. That's a
question for future evaluation – but what seems clear already is
that the biggest immediate effect will be to save families
already using formal childcare a substantial amount of cash.
In a bid to make a success of the new entitlements, the previous
government planned – and this government is continuing – very
generous funding rates for the new entitlements. For the
under-2s, the average national funding rate is more than 75%
higher than the market price of childcare. This will certainly
help to encourage providers to offer these places. But they may
find that building capacity will also mean raising wages to
attract and retain the staff they rely on.”
