Policy brief: Early Years developments in the UK

Last week, in his Budget 2023 statement, Jeremy Hunt, the Chancellor of the Exchequer in the UK, talked about how he wanted to reform the Early Years and School Age Care sector as it was damaging the economy. He announced that parents of children aged nine months to three years will be offered 30 hours a week of Early Years care in term time to parents who are working at least 16 hours per week. This will have a staggered introduction, with 15 hours of free care for two-year-olds from April 2024 and the same for all children from nine months from September 2024. All parents will be able to avail of 300 hours of free care per week from September 2025. Hunt also announced that local authorities will be given more funding for wraparound care and that funding for free nursery places will increase by £204 million by September and by £280 million by next year.

Criticism

In their response to these announcements, the Early Years Alliance criticised the £204 million funding increase as it is unlikely to match what’s needed to put providers on a steady footing. They stated that an expansion of free care without the necessary investment ‘can lead to disaster’.  They also pointed out that the government is not clear on how to guarantee an adequate supply for places when demand will naturally increase due to the Budget 2023 announcement.

Changing Children

Ahead of the UK’s Budget announcement, the Joseph Rowntree Foundation launched a new project,  “Changing Childcare”, which will see the publication of a series of high-level articles that look at how to design a better Early Years care system for the United Kingdom, one that will help parents work and gives children the best start.

In one of these, Kathy Evans, CEO of Children England argues that public service markets, such as Early Years and School Age Care, can learn from the children’s social care market about how to avoid the dysfunctions that are present. Children England recognised that the mechanisms and culture in which residential children’s homes were being asked to compete for business in a public sector marketplace were having major impacts on the whole sector and on the experiences of children, and she makes links with the Early Years and School Age Care sector.

Evans examines private goods and public goods. Evans argues that Early Years and School Age Care straddle both:  partly a private good because people are free to pay others to look after their children and can do it privately or without state policy, provision, or funding.

Public Good

However, Evans also points out that governments of various political views have decided that Early Years and School Age Care serve an important collective purpose that cannot be left to a free market. Early Years and School Age Care are seen as important to children’s development and learning, for women’s rights, and to the economy. In this regard, Early Years and School Age Care are a public good as, if it is left to market forces, they will not be readily available or affordable for everyone who needs them.

Evans argues that children’s homes and Early Years and School Age Care have a commonality in the UK: a failure to distinguish between the costs of running a service and the ‘unit prices’ being paid for them from state funding. In the Early Years and School Age Care sector, the government decides on a fixed standardised price per child, per hour that will be paid to the provider for ‘free hours’. Evans points out that this fee for ‘free’ care is not related to actual costs which vary from provider to provider.

Gaps in the market

Evans finally argues that the current government spending approach in the UK is accelerating market failure and leaves gaps in the market that only large private equity-funded firms can buy and expand. Evans argues that the building of powerful cartels is not a positive move in any market, let alone the Early Years and School Age Care sector. Evans concludes, following a decade of examining the impact of competitive forces in public service markets, that market competition will not improve the provision of public goods and services.

Ireland

In Ireland, the Government announced an increase in funding for the sector, with it reaching €1 billion for the first time, which Early Childhood Ireland welcomed. This increase in funding includes investment in the National Childcare Scheme and Core Funding, both of which aim to reduce costs for parents. As in the UK, the government here will need to also move beyond a focus on fees and ensure that Ireland moves to increase overall investment in Early Years and School Age Care with the main effort on providing equitable access to high-quality provision for all children, regardless of their location, parental income, and any form of disadvantage.

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