Why the free childcare funding system is broken?

INTRO

You may have heard about the free government funding that is available for all children aged 3 years old and some two year olds.

If you haven’t, I will explain a little bit about it in a second.

I firstly want to state what we will be discussing in this video.

If you’ve heard of govt funding you may be under that impression that it’s a great idea, for all parties involved.  It’s great for parents they  get free or discounted childcare allowing their children to access learning opportunities and for parents to be able work longer hours. and also providers get more people seeking childcare.

Well this works in principle.  

In this video I will try to explain why the current system isn’t working and why it’s quote unquote broken.

Before getting into that, I will give a brief explanation of how the current government funding works.

This is just in reference to the 30 hours or 15 hours funding that is available to 2 and three year olds in England and other parts of the UK.

There are other types of funding you can get like universal credits, tax credits and tax-free childcare, but we won’t discuss that in this video.

To briefly explain,

In England all 3 and 4 year olds are entitled to 15 hours of free childcare per week over 38 weeks of the year.  Which is 570 hours per year.  This is important to note.

As most childcare providers are open for more than 38 weeks, and spread there hours accordingly.  So if they are open for 51 weeks, you would be entitled to 11 hours per week.  This is stipulated by the childcare provider so although you are entitled to 570 per year, you can’t use 3 hours one week and then 19 hours the next for example.  

So, in most circumstances you would not be getting 15 hours but usually 11 hours as it would be spread out. 

This is the same for the 30 hours.  So, in most circumstances the 30 hours translates to 22 hours per week.

In England, most children aged 3 and 4 are entitled to 30 hours of free childcare per week.  This is providing that both their parents/ guardians are working and earn less than £100,000 combined.  There are minimum earnings too but it is dependant on a variety of factors.

Unlike the 15 hours funding for 3 and 4 years, you do have to apply to check your eligibility.

Finally, there is the 15 hours funding for 2-year-olds.  This is available for some two year olds and is primarily for families on some form of benefits.  Again, you would need to apply for this. 

So, that’s a quick explanation of the free funded hours the government provides.  The 2 year old funding, and the 15 and 30 hours funding for 3 and 4 year olds.

CONTENT

Let’s get into why this current model isn’t working.

Starting a business, no matter what field, is not easy. It takes a lot of time effort stress and usually a lot of money. If you’ve started this journey already I’m sure you’ve had a few sleepless nights along the journey. Even if you plan everything perfectly there are no guarantees of success.

Usually part of the planning process involves working out how much it will cost for you to run your business. If your business sells products you may work out that it costs you £6 to make the product so in order to make any money and provide you a wage you decide to sell the product for at least £6.

Likewise, if your run a service based business, like nurseries, childminders nannies and other childcare providers.  You work out how much it costs for you to provide that service, usually per hour, which includes your rent, wages, utilities business rates and other costs.  So, let say you work out that it costs £6 per hour for you to provide your service.  So, you would have to charge at least this for your business to operate.

If you charge any less than this, your business will begin to lose money.

You will lose the time your put, the money you put and your employment and the employment of the people you work with.

And eventually you would run out of money and end up losing your business and you will have to close and lose everything.

So, how would you avoid this situation?

Well, the answer is simple, you would make sure that you charge more than the £6.00 per hour it costs for you to run the business.

But, even just charging £6.00 per hour is just breaking even, it may not cover other unexpected costs like for example if you had to close for a period or something went wrong with your business that insurance might not cover.

So, you decide to charge at least £6.50 p/h.

This, is generally what most nurseries and childcare providers charge.

Though, it does vary throughout the country,

But, that’s understandable right.

It costs you £6.00 to provide the service, so most people would understand that you have to charge at least this in order to survive.

It’s a shame the government doesn’t fall into the most people category.

Imagine a scenario, where the government are saying no.

No, you can’t charge more than £6.00 p/h.

And if your costs go up, no, you can’t increase them either.

You can’t change what you offer too, in order to reduce your costs.  You can’t have a slightly cheaper service for a cheaper fee and offer top ups to help cover the difference.

You have to provide a £6.00p/h service but we’re only going pay you £5.00p/h for it.

What would you do?

You can’t change what you offer to reduce your costs.  The bulk of costs in childcare is to pay wages, and it isn’t the most high-paid field already, so you can’t reduce costs there.

You’re also not allowed to get the additional £1.00 from anywhere else.

You are told you have to provide the £6.00 service but you’re only going to get £5.00 for it.

What would you do?

At what point would you say we’ve had enough.

Well that’s what is currently happening across the country in early years settings in the UK.

The government are currently offering childcare providers £4.99 per hour to cover the cost of the ‘free government funded hours’.

However, the average nursery fee is £5.40.

That’s almost a 50p deficit for every child and every hour that they care for.

So, if you have 30 three-year-olds attending nursery claiming 30 hours per week, you’d be losing £441.00 compared to your regular fees.

Running a nursery or other childcare provider is not cheap.

A nursery needs money for rent, gas, electricity, staff wages, managers, cleaners, cooks, staff training, replacement of toys, food, tax, recruitment as well as other things like pension contributions.

So, it’s understandable why many childcare providers aren’t enthused about the governments childcare funding and why many are calling for it to be reformed or fixed.

If you went to work and were told that for every hour you work we’re going to pay you 50p less than you usually earn you wouldn’t be excited about going back to work.

Every government has stressed how important early years is to the well-being and development of children.  Giving them the best start to life and that early years plays a crucial role in this

Yet the funds provided only allows for staff to be paid minimum wages.

Increased pressure on staff, with less wages and higher cost of living has led to a demoralise workforce with very little reward.

Thankfully, many people stay in the field simply because they love what they do, and there are many benefits to running and working in childcare which money can’t give.

However, many good members of staff are leaving the field simply because it’s not being funded properly and they can get better pay in fields which are potentially less stressful.

Most nursery owners, nursery workers or childcare providers simply want to do the best for your child and the children they care for.

Their dream is not to be multi-millionaires.

They just want to be able cover their costs and provide a great service doing so.

But, this costs money, money which the current system is not providing for.

This is why many are asking for reform.

This is why some childcare providers are closing.

And this is why the system is broken.