Interlocking stylised cogs

‘FREE’ CHILDCARE – HOW DOES THE FUNDING REALLY WORK?

In 30 hours free childcare, For parents, News & Media by adminLeave a Comment

The 15 hours entitlement for 3 and 4 year olds

The inverted commas around ‘free’ in the title above are intended to convey that, as with lunches, there is no such thing as ‘free childcare’. Someone has to pay for it and, if the government decrees that this should not be the parents, and then pays the childcare provider less than the going rate, the entitlement ends up being subsidised by the childcare provider.

All three and four year old children are currently entitled to a ‘free’ childcare place for 570 hours a year. This entitlement is not means tested and all children are eligible from the start of the term following their third birthday. Thus:

Children born between 1 Jan and 31 Mar become entitled on 1 Apr
Children born between 1 Apr and 31 Aug become entitled on 1 Sep
Children born between 1 Sep and 31 Dec become entitled on 1 Jan

Settings (nurseries, pre-schools and childminders) do not have to participate in the scheme but, if they do, they must offer a certain number of ‘funded only’ places. In other words, while many working parents need year round day care and treat the funding as a welcome subsidy when it is available, others use the setting only for the free sessions.

Settings claim funding from their local authority to help them provide the free entitlement. This funding is based on a fixed hourly rate, which is generally well below the rate that the setting charges for non-funded children. Settings may charge whatever they like for any additional hours, as well as for any extras such as food, special activities etc (provided these are genuinely optional). However, settings are not allowed to charge any additional fees for the actual free entitlement hours, even if this leaves them facing a big shortfall compared with their normal hourly rate. For this reason, the scheme is deeply unpopular with many nurseries in affluent areas, where rates can be more than double the funding received.

One point which can cause difficulty is what happens to the funding if a child changes settings during the course of a term for which funding has already been claimed. It is important to understand that this is not the child’s funding: it is a grant paid to the setting to enable it to provide a free place during the relevant term. Different local authorities have different policies about this, although most prefer not to get involved but to leave it to the settings. Some settings will happily transfer funding, while others take the view that the funding should remain with the setting which originally claimed it.

Two year old funding

Settings with a good or outstanding rating from Ofsted and who are approved by the local authority to do so, can also obtain funding to provide a free place for certain two year olds. This scheme is administered in a very similar way to that described above but, unlike three/four year old funding, it is not a universal entitlement but is restricted to families on low income or receiving certain benefits (broadly the same criteria as for free school meals).

The extended 30 hours of ‘free’ childcare

This controversial scheme for three and four year olds was launched in September 2017. It is important to note, however that – despite the government spin, this additional support is not a universal entitlement. Like Tax Free Childcare, it is restricted to families where both parents (or the sole parent in the case of a single parent family) are in work. Couples where only one parent works are not eligible. To qualify for the extra entitlement, each parent must earn at least the equivalent of 16 hours at the legal minimum wage and neither may earn more than £100,000 p.a.

Some childcare providers have refused to participate in the 30 hour entitlement, claiming that it would cause them to sustain losses. Each childcare provider must consider its own particular situation. Those who have no difficulty filling places at their normal market rate will, obviously, be unwilling to substitute these with places which the government underfunds. Other childcare providers with capacity will prefer to fill a place, even at a lower rate of funding, than to leave it unfilled. It is also possible that the availability of extra support will persuade some parents, who currently can afford to take only the funded hours, to increase their child’s participation at the setting.

You can register for the 30 hours scheme, and obtain more information about entitlements, at www.childcarechoices.gov.uk.

About our guest blogger Ross Midgely

Ross Midgely

Ross is a chartered accountant and law graduate who has worked both in professional practice and as a finance director.   In 2001, together with his wife Alison, he founded the Crocus nursery group which achieved outstanding Ofsted grades at each of its three nurseries before being acquired by Bright Horizons.  Subsequently he set up and managed the leading early years training provider PBD and advised government departments and awarding organisations on early years matters.  Ross and Alison also acquired a failing nursery, which Alison managed and turned round to outstanding in less than a year.  After retiring in 2017, Ross and Alison made an investment in Kinderly and now provide it with advice and consultancy on practice and business issues relating to early years.