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The last few months in the childcare sector have been dominated by the words ’30 hours free childcare’. Across the country, the ‘dirty 30’, as it has been nicknamed by those of us in the industry, has caused countless sleepless nights for many. It has necessitated an overhaul of offerings across the board from childminders through to large scale nursery operations.

Nurseries, pre-schools and childminders across the country have now made their decision whether to offer the 30 hours funding or not, decided how to offer it and how to adapt their business model to be able to offer it. Parents have had their childcare invoices for September and now it’s a waiting game. A waiting game to see quite how much damage this policy is going to do to the sector.

30 hours free childcare….or is it?

From a parent’s perspective, the government has hyped up that if you meet the criteria for eligibility, you are going to get 30 hours of free nursery hours a week. Any normal person would therefore expect their weekly costs to have 30 hours’ worth of fees deducted compared to if they did not have the funding. But this isn’t the case…

30 hours free childcare’ is the slogan on all the government literature.  

What a huge proportion of parents don’t realise is that this is 30 hours childcare for 38 weeks of the year only (corresponding to school term time). This equates to 1140 hours annually and if a setting is open all year round, this translates to only 22 hours per week. If you are two working parents – which you need to be to be eligible – you are mostly going to need all year round childcare unless you are teachers. And just like that you’ve lost 8 hours a week from what you have been lead to expect.

Recent research by the Champagne Nurseries on Lemonade Funding (CNLF) campaign group has found that most full day care settings who are offering 30 hours free childcare are only offering it on a stretched basis across the full year.

Offering 30 hours per week places during term time only is not viable for a business which is open for 52 weeks. Which makes perfect business sense! Why would a business want to fill itself with customers for only 38 weeks of the year and receive no income for the remaining 14 weeks?

But parents EXPECT 30 hrs free childcare all year round based on the government’s advertising of the scheme.

Why have they falsely advertised the scheme so blatantly?

It is childcare managers and staff who are having to front angry parents daily to correct their understanding of the poorly advertised 3 year old funding scheme and revise their expectations.

And the hours they can come for each week is only the tip of the iceberg when it comes to revising expectations. I haven’t even started on the ‘free’ bit yet…..

Bare bones ‘free childcare’          

Here comes the next truth parents.

When it comes to your childcare experience, the government’s intention was never to fund the full shebang. It simply aimed to cover the childcare and education costs of providing a childcare place for your child so you can get out to work.

So if your little darling enjoys breakfast when you drop her at 8am, a two-course lunch and then afternoon tea before you collect her, the government’s funding will not contribute to the cost of these meals. If she’s still in nappies, wants to participate in dance or singing class or go on the trip to the farm, your funding also won’t cover this either.

(Under)funded not free

£4.94 is the often government cited ‘average’ funding rate. However, this isn’t what providers actually receive; this is what is paid from central government funds to local councils who administer the scheme. The local councils then skim off their cut and what the providers receive is as low as £3.60 per hour in some areas.

When this is compared to what it costs to actually provide the full service (the standard hourly charge), there is a shortfall. It’s basic maths.

Childminders interviewed by the Professional Association for Childcare and Early Years (PACEY) claim their loss is close to £400 annually per child. The National Day Nurseries Association (NDNA) claims the loss per child per year is around £958.

We have a 40 place pre-school room in one of our nurseries. If I offered fully funded places to 40 full time children, we’d be almost £40k out of pocket annually. What business can survive that level of underfunding?

Subsidising the underfunding

In an NDNA survey of just over 1110 providers, 54% of them who were planning to offer the 30 hours said that they would be restricting the number of places on offer, and 1 in 6 said they would not be offering the 30 hours at all.  Only 1/3 of local authorities believe they will actually have sufficient 30 hour places for the parents who want them.

Across the country, there are so few providers offering 30 hour funding places that have no charge to parents – fully funded places – as their standard ’30 hours’ offering. Instead, provider’s fee structures have had to evolve to include charges for ‘extras’ to subsidise the underfunding of the funded hours.

Parents who are expecting ‘free’ childcare are understandably confused. They are now facing charges for lunch, snacks, excursions, extra-curricular activities, consumables – basically anything which isn’t childcare. They are also facing higher charges for the hours which they use after their funded entitlement. It doesn’t exactly sit comfortably with their expectations of free childcare does it?

Term time only, sessional pre-schools which are often open to mirror school hours (9am – 3pm, term time only) can’t offer additional hours or services to make up the shortfall; these are the most at risk of business failure because how will they make up the shortfall? Hearing from providers in this situation over the last few months, I really worry about the future for these businesses.

Everyone is impacted

Even those parents who aren’t even eligible for the 30 hours of funded childcare may be facing higher charges as nurseries and childminders revise fees across the board for all parents to recoup underfunding of those who do get it.

  • Astonishingly, at some settings there are parents who are now eligible for 30 hours funding from September are now paying fees which exceed the fees they were paying in August when they were only eligible for 15 hours free childcare; this is madness!
  • Younger children (under 3) also now face higher fees to subsidise the under-funding of the pre-school children so for these parents, they effectively pay more for childcare before the age of 3 to cover the cheaper childcare after 3. There is no benefit to them over the total period. Again, it is ridiculous and defeats the intention of the scheme which is to lower childcare costs.

Parents eligible for 30 hours free childcare, parents only eligible for 15 hours free childcare and parents with children not yet old enough for the funding; all parents are feeling aggrieved. They feel cheated. They do not want to have to pay to subsidise this chaotic scheme.

Donations please!

The government guidance on making up the shortfall (they know there is a shortfall!) is very clear that a provider can not charge a top up fee to make up the gap.

Instead it suggests that parents be asked for donations which are entirely voluntary. Do you know any businesses who keep a bucket by the front door and ask for donations to keep afloat. Me neither.

Stay with me, this isn’t a joke. It just keeps getting worse!

What’s going to become of the childcare sector?

Like other small businesses, many within the childcare sector face rising costs with pending increases to the national minimum wage, small business rates and mandatory increases in auto-enrolment pension schemes.  Unlike other small businesses though, a large portion of their income will not rise for a number of years. Funding rates from local authorities are set now until 2020.

Devastatingly for the sector, despite raising their prices, many providers still don’t think that their businesses will be sustainable within a year.  This is staggering. When is the government going to wake up to these figures?

It’s worth £5000 is it?

It could all have been so much simpler….

The government has this week announced that the scheme is worth £5000 a year to parents. This is utter rubbish! The financial impact of the scheme for a parent depends entirely on where in the country they live (different local authorities have different funding models), how much of the funding shortfall their provider has absorbed themselves vs passed over to the parent, how their provider has chosen to offer the funded sessions and whether they suit the parent (and therefore if they need to ‘buy’ extra chargeable sessions).

If the government intended it to be worth £5000 to parents, why not just call it a subsidy from the beginning?

  • Parents would be more than happy to receive a subsidy worth £5000 per annum off their childcare costs.
  • Providers would receive adequate funding and wouldn’t need to impose additional charges to remain viable; their full fee would be met by a combination of reduced fees for parents and the subsidy from the government.
  • No setting would opt out as they would be adequately remunerated; the government could fully deliver on its promise.
  • The government could genuinely say that parents were receiving £5000 a year worth of childcare.
  • Everyone wins!

Will the scheme or the industry fail first?

Undoubtedly, describing its offering as ‘free’ was a great political move. Unfortunately, when a lot of confused and disappointed parents realise it isn’t free, it isn’t the providers that they will be angry at but those who are responsible for misleading them.

With between 20-35% of providers choosing to opt out of the new scheme depending on who you believe, and others closing as they can’t afford the combination of underfunding and rising costs within the sector, is the government going to succeed in its aim?

If the sector doesn’t receive adequate funding and providers are unable to invest in training their staff, recruiting high quality people and investing in their setting, quality will decline. This isn’t what parents, children or providers want.

If you are looking for guidance on how to apply for 30 hours free childcare, take a look at my article here.

As the finance manager of a regional chain of nurseries operating across a number of local authorities, it’s been my task to work out how to make the scheme work for our business and it hasn’t been an enjoyable summer. It’s been great to be a part of the CNLF group who have collaborated to navigate the chaos and are campaigning for a change to the scheme so that parents are no longer disillusioned in to thinking they are entitled to something they won’t get. I have the campaign team at CNLF to thank for providing me with information used to help me write this post.

I have also written a guest post over at The Complaining Cow on what to do if you are a parent affected by the technical problems with the government’s website – please head over there for more information if you have been affected.