Free childcare funding figures ‘misleading’, MPs find

MPs called for more money to be paid to childcare providers involved in the free 30 hours per week scheme for three and four-year-olds because a shortfall in funding is impacting on the quality of the service available.

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

Parents are also being asked to pay for things that were previously free, such as food and activities, and cutbacks have been made in higher qualified staff, the study found.

The report said the Government had put out “misleading” and “out of date” figures regarding how much it provides in funding per hour because it included money intended for other schemes, or failed to take into account things like the introduction of the National Living Wage.

The study said: “The most recent estimate of the average cost per hour of providing childcare is £4.68. The average rate that the Government actually passed on to providers for 2017-18 was £4.34, meaning some providers will receive less funding than the costs they incur.

“As a result of this shortfall in funding, some providers have started restricting the times at which parents can claim 30 hours, reducing provision flexibility.

“If the Government wants to avoid these consequences, it should pay a higher hourly rate to providers that reflects their current costs, update this rate annually, and also ensure that all the money provided to local authorities is passed on to childcare providers.”

The report found some local authorities are cutting back on provision for low-income children younger than three because they do not qualify for the scheme.

The report said: “Given the high cost of this policy, and the potential for lower-income parents to lose out as a result of its introduction, the Government should explain how it is ensuring that no lower-income parents lose out as a result of its decision to fund 15 hours free childcare to all parents regardless of income, and 30 hours free childcare for parents with incomes up to £100,000.”

The committee also called for the removal of age restrictions on childcare support for parents in training to improve productivity.

The MPs urged the Government to keep the childcare voucher scheme open until winners and losers of discontinuing it are known.

Committee chairwoman Nicky Morgan called for more Treasury research into the impact of childcare provision on the economy.

“The committee has heard no evidence that the Government’s childcare policy will improve the UK’s productivity.

“The Government’s 11th hour stay of execution for the childcare voucher scheme is poor management of childcare policy.

“On funding, the jury is still out. 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 that 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.”

The report called on the Government to improve its communications strategy as Tax-Free Childcare has a take-up rate 90% lower than initially expected.

The study said: “The consistent failure of the Tax-Free Childcare website, which has caused stress and inconvenience to thousands, is unacceptable.”

A Government spokesman said: “We are spending more than any previous government on childcare, set to rise to £6 billion per year.

“Through introducing tax-free childcare and delivering 30 hours free childcare, we are helping working families cut thousands of pounds from their childcare bills.

“The increasing numbers of self-employed parents can now access support, unlike vouchers and it is also fairer to lone parents.

“We will consider the committee’s recommendations carefully and respond in due course.”