The first stage of the rollout of new childcare entitlements will
begin at the start of April, offering up to 15 hours a week of
free childcare to 2-year-olds in working families – around half
of this age group. Combined with existing entitlements for the
most disadvantaged quarter of 2-year-olds, around 70% of
2-year-olds will soon be eligible for free childcare, with a
substantial minority across the income distribution still not
covered.
With significantly higher funding rates and (marginally) more
places than a year ago, this stage of the rollout is unlikely to
significantly damage the childcare market. But it comes against a
backdrop of a long-run squeeze on funding for 3- and 4-year-olds,
who have seen a 12% cut in per-hour funding since 2012 once
providers’ costs are taken into account.
Much of the immediate benefit of the reform will be to reduce the
costs of parents who are already working and already paying for
formal childcare. With big unanswered questions about how parents
will respond to the new offer, wider benefits for parents’
employment or children’s outcomes will need to be carefully
evaluated.
Christine Farquharson, Associate Director at the
Institute for Fiscal Studies said:
'While many public services are squeezed, the government’s big
bet on doubling childcare spending will start next week. Setting
funding rates for 2-year-olds much higher than current market
prices should incentivise providers to sign up for the new
entitlements, and will hopefully be enough to prevent the new
offer feeling like an April Fool’s joke. There are huge
differences in the price of childcare across England, from under
£5 an hour to more than £10, but most areas will still see a
2-year-old funding rate considerably above their market price.
Against a backdrop of tighter funding for 3- and 4-year-olds,
this could reshape the childcare market in England. But
longer-term questions about whether these entitlements also drive
desirable outcomes for parents and children will need careful
evaluation.'
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