Who are the Winners and Losers in 30 Hours Child Care Cuts?

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Who are the Winners and Losers in 30 Hours Child Care Cuts?

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By Trevor Clawson.

As the government sees it, the Department of Education’s offer of 30 hours free childcare has successfully enabled parents to save money and increase their working hours. Yet, according to independent research carried out by childcare platform, Yoopies, costs have risen sharply for at least some of those parents who have not been able to take advantage of the government-sponsored scheme.

Launched a year ago on September 1, 2017, the Government’s childcare initiative was intended to take the strain off working parents by providing 30 free hours per week free in nurseries and pre-schools during term time. To fund the scheme, £1bn per year was set aside and allocated to local authorities.

And research published by the Department of Education earlier this month appears to show that the initiative has been a rip-roaring success. According to the DoE figures, more than three-quarters of parents who have taken up the 30 hours of free care have reported saving money, which has been invested back into their families.

The research points to other benefits too. For instance, 71% said the scheme had helped them balance work with their childcare commitments and four in ten reported having more flexibility over their working hours. A majority also thought there were some educational benefits, with 86% saying their children were better equipped to begin primary school, having previously spent time in Government-funded places.

Children and families minister Nadhim Zahawi welcomed the report, saying:

The research published today confirms the story I hear so often from parents during my visits up and down the country. More parents are increasing their working hours, able to work more flexibly, and spending less on childcare so they have spare cash to spend on their families. Working families of every kind are reaping the benefits, including single mums and parents from lower-income backgrounds.”

Unintended Consequences

But there is perhaps a bigger picture. Parents are eligible for 30 hours if they have children aged 3-4 and if they are in work and earning the minimum wage.

As Zahawi noted, around 340,000 households took part in the scheme in the first year. That represents only a subset of those who require childcare.

Critics say that not all parents are able to take advantage of ‘30 hours’ because their local nurseries do not offer it. There have also been reports that government funding for childcare places has been insufficient to cover provider costs. This has meant nurseries charging more for services that sit outside the subsidised hours of care.

And according to separate research by Yoopies – a platform that connects parents with childminders and other service providers –  the 30 hours initiative has resulted in unintended and costly consequences for those who are not able to take advantage of the Government’s largesse.

In particular, Yoopies says those who opt for in-home care are paying significantly more for nannies and childminders than they were a year ago. To be more precise, hourly rates have risen by 4.1% and families are spending an additional £68 per month, as averaged out across the country as a whole.  The company adds that this rise in costs has taken place in the year following the introduction of 30 hours of free childcare.

So is this a coincidence or has the arrival of free childcare for working parents had a direct impact on the amount that parents outside the scheme are expected to pay?

Supply and Demand

30 Hours Childcare Cuts Costs for Some but There Are Winners and Losers

The Yoopies research suggests there is a relationship, pointing out that the introduction of free childcare has put many nurseries and pre-school establishments under financial pressure because the funding provided by the government has been pitched at too low a level. This, in turn, has resulted in a round of closures.

Yoopies CEO, Benjamin Suchar says this does not come as a surprise.

“We have had so many conversations with nurseries across the UK about the pressures they are under since the scheme was introduced – we know that they are struggling to survive financially.”

Yoopies, says the closures have changed the balance of supply and demand, forcing up prices.

“Nurseries are having to charge more for extra hours and items like lunches and excursions,” Suchar adds. “Parents are struggling with the scheme, the extra hidden costs, finding enough funded hours to work and the day to day complexities of applying through the scheme ”

As he sees it,  parents are turning to nannies, and costs are rising in line with demand.

Suchar says his company’s research supports suggestions of a  link between ‘30 hours’ and rising costs elsewhere. For instance, in areas where the level of public funding for ‘30 hours’  is at its highest – notably the North East of England –  the cost of childcare outside the scheme has risen at a lower rate than the national average (3.4).

Meanwhile, just across the Pennines in the North West of England, where funding for 30 Hours is at a lower level,  the cost of hiring in-home care has risen by 8.85%. Yoopies says this reflects the financial pressures on providers in the less generously funded North West. The East Midlands and North West have also been hit by rising costs.

The UK’s Most Costly Childcare

As you would expect, in-home childcare costs are not uniform across the UK. Surprisingly perhaps, it is the West Sussex town of Chichester rather than London that tops the league, with the cost of a Nanny coming in at £10.84 per hour, £2.24 above the national average. In contrast, if you happen to be a parent living in Middlesbrough, you can expect to pay an average of £7.29.

It has to be said that Yoopies and the Department of Education are not comparing apples with apples. No one can deny that the government-sponsored initiative is making an enormous difference to the 340,000 families who have accessed it. Meanwhile, the Yoopies research is largely centred on the cost of hiring an in-home childminder such as a nanny.

The government has defended itself against early criticism that the funding of the scheme had been insufficient to bring nurseries and pre-school establishments on board. The DoE says that as things stand 75% of nurseries are offering the scheme and that 74% have not had to impose any additional charges.

But the research does seem to suggest there is a correlation between rising costs in one sector of the market and the impact of the  Government scheme. For some parents, finding affordable childcare remains a challenge.

By | 2018-09-19T14:29:01+00:00 September 19th, 2018|Business, Personal Finance, Politics|Comments Off on Who are the Winners and Losers in 30 Hours Child Care Cuts?

About the Author:

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Trevor is a UK-based business journalist and author, specialising in startups, tech companies and fast growth businesses. His career in journalism began as Business Editor of BBC World television's pan-European text news services. From there he went on to edit e.Business and PLC Director magazines before going freelance. He is the author of three books, including The Unauthorized Guide to Business the Jamie Oliver Way, which has been translated into five languages. Follow Trevor on Twitter @trevorclawson