Analysts give cautious welcome to government plans to expand childcare

Analysts have given a cautious welcome to government plans announced in the budget for a significant expansion of state-funded childcare – but have raised questions over the details.

The independent Institute for Fiscal Studies (IFS) said the plans, which will extend state-funded childcare places to children under two, created a new branch of the welfare state and would save the average family with a toddler using formal childcare over £80 a week – with particular benefits for parents using full-time formal childcare, or with multiple young children, or living in London and the South East.

However, the IFS warned that if the funding rate paid by the government to providers to meet the costs of childcare placements was set too low, providers could opt out of delivering the new state-funded places or reduce the quality of care provided.

While the IFS said the planned 7.5% uplift for existing state-funded childcare was in line with expected inflation for the sector, it baked in an existing 13% real-terms funding cut since 2017/18.

Christine Farquharson, senior research economist at the IFS, said: ‘For such a huge reform to the early years system in England, [yesterday’s] budget gave us remarkably little detail about the one thing that will really matter: the funding rate that providers will receive.

‘Even under current patterns of childcare use, expanding the 30-hour offer to almost all pre-schoolers in working families will put Whitehall in charge of the price of 80% of childcare hours delivered in England. That raises the stakes for getting the funding rate right, with the potential for huge damage to the quality and availability of childcare if the government gets it wrong.’

The left-leaning Institute for Public Policy Research (IPPR) think tank published a report last year calling for a major expansion of state-funded childcare. Rachel Statham, IPPR associate director and a co-author of its childcare proposals, said: ‘[Yesterday’s] ‘back to work budget’ signalled a positive step change in the government’s childcare offer, recognising that a lack of affordable care is holding families and our economy back.

‘But with England’s childcare sector already at breaking point, we need wholesale reform to deliver affordable, available, high-quality care to families everywhere. For now, significant questions on funding, quality and supply of places remain unanswered.’

Jeremy Hunt announced the childcare plans within his spring budget yesterday, in a bid to help individuals cope with the current economic crisis. 

Image: Aaron Burden