## Childcare In London

Successive governments have implemented a range of reforms with the core purpose of supporting parents' access to high quality and affordable childcare. Yet there remains a lack of affordable childcare in London which is a growing challenge. This briefing explores some of the most recent coalition government policy announcements on childcare and their implications for London. 

## Overview

Every child deserves the best possible start to life and often, for many families, accessing good quality childcare is an integral part of this. It can help to promote children's development and provide a foundation to future success at school, particularly for the most disadvantaged children. Accessing childcare also supports parents to re-enter the employment market. It is for these reasons childcare features prominently on the national policy agenda. At a local level, under the Childcare Act 2006 and Education Act 2011, boroughs are responsible for discharging a wide variety of statutory duties in relation to childcare. These range from securing sufficient childcare provision for children up to the age of 14, providing parents with information about childcare to securing free places. For London local government, two significant on-going challenges to meet their duties are the availability and affordability of childcare. The cost of all types of early years provision in London is 25 per cent more expensive than in any other region. The average weekly cost of childcare in London for 25 hours is £140.12 which equates to £7,286.24 per year with the cost of full time provision (50 hours) at £14,572.48. For some parents, the lack of affordable childcare is a barrier to accessing good quality early education and also, managing or taking up employment. This particularly affects those in low paid employment as childcare takes up a significant proportion of their income and can prevent them from extending their working hours. A range of reforms have been implemented by government in recent years to support parents by subsiding childcare costs through tax initiatives and offering free part-time childcare  to all three and four year-olds. The coalition government recently extended this entitlement to the most disadvantaged two year-olds1.

## Analysis

"
London's population has been growing steadily since the 1980s. This growth is attributed to a number of factors including migration to the capital (from elsewhere in the UK and internationally) and a rising birth rate. Between 2001 and 2011, the number of live births increased steadily from 104,162 in 2001, to 132,843 in 2011.

In London, 
due to higher 
deprivation, an 
estimated 26, 
716 two year-
olds are eligible 
from 2013, 
more than any 
other region

Data from Census 2011 reveals that there were 8.175 million people living in London including 590,000 children under five, which accounts for 7.3 per cent of London's population. Overall, across England, some 6.3 per cent of the total population were children under five at the time of Census 2011. 

"
London's child population is forecast to continue to grow with present estimates predicting it will reach 1.7 million by 2022. To ensure there is sufficient childcare provision to meet local community needs, which is a local authority statutory duty, a range of initiatives are required. London's childcare market is a mixed economy that consists of private, public and voluntary sector organisations. According to Ofsted, there are currently 13,339 early years registered providers in London that manage 200,893 childcare places in the system2. Provision is made up of mostly small, private-for-profit and not-for-profit businesses, including day nurseries, community nurseries, playgroups and out-of-school clubs delivering group care as well as family daycare delivered by childminders in their own homes. To support parents and stimulate the childcare market to meet the needs of local communities, the coalition government has introduced a number of measures.   
Two year-old entitlement To support the most disadvantaged families and children to access high quality childcare, the Department for Education implemented a policy to provide free early education for two yearolds. Since September 2013, local authorities have a duty to secure 15 hours free early education each week for 38 weeks of the year for the 20 per cent most disadvantaged two year-olds. In London, due to the high levels of deprivation, an estimated 26,716 two year-olds are eligible from September 2014 for the offer which is more than any other region. In September 2013 this will be extended to the 40 per cent most deprived children to enable 50,373 two year-olds to access early years education in London. 

Free early education for two-year-olds is an ambitious programme that has the potential to make a real difference to the lives of England's most deprived children, supporting their development and enabling parents to move back into work or undertake training. The government has allocated funding to each local authority to meet their statutory duty to provide free early education. The formula used to make funding allocations includes an area cost adjustment to compensate for increased provider running costs in London. However, even with this additional funding, it has proved challenging to meet provider costs.

London Councils' research3 has shown the level of funding available for providers is emerging as a challenge for London local authorities. The government has allocated a total of £86 million, a 16 per cent share of the £525 million national pot, for revenue funding to enable London boroughs to deliver the entitlement in 2013/14. On the basis that all revenue funding is allocated to the providers, boroughs can offer an hourly rate of between £5.28ph and £6.08ph to deliver the two year-old offer. However, the funding offered does not cover the real costs of delivering the offer which is estimated to be around £8 per hour, particularly for many good and outstanding Ofsted rated providers. This has left a funding shortfall of up to £30 million for 2013/14 that London local government has to meet through other funding streams. 

"
The shortfall in funding has, in part, had a bearing on London local government's ability to stimulate the childcare market to provide children with places. Of the places needed for the first phase of the entitlement, according to the Family and Childcare Trust, London has provided free early education for 13,625 disadvantaged two year-olds to date4. This represents 51 per cent of eligible two year-olds in London, which is the lowest take up rate in the country. 

The Department for Education has advised all local authorities they expect a minimum take up rate of 80 per cent for the two year-old entitlement. Local authorities are funded on an assumption of 100 per cent take up. From 2015 and beyond, the Department for Education will fund the two year-old entitlement on a participation based model, which could result in a lower funding allocation for London and make it even harder to increase take up.

There is a 
funding 
shortfall of 
up to £30 
million in 
delivering the 
entitlement, 
which has 
been met by 
London local 
government 
through other 
funding

"

Take up for Free Early Education Low take up of free early education is not specifically related to the two year-old entitlement and has been a long standing issue for London. Evidence from the three and four year-old entitlement has shown a 91 per cent take up rate in London compared with a 96 per cent national average. This means London children are the least likely to access early education and benefit from the positive impacts it can have on their development. The Department for Education suggest a number of reasons for lower take up rates5: 

- 
Within London evidence suggests that cross-borough travel, combined with high levels of deprivation and unusual working patterns across the capital, have impacted upon take-up. 
- 
Take-up from families in the most deprived areas is very low when compared to more affluent areas.
- 
The DfE's Childcare and Early Years parents' survey indicated that ethnic background has an impact on funded entitlement take-up. Compared with children whose mothers were white, who had high levels of take up, children of Black African, Pakistani and Bangladeshi mothers were substantially less likely to claim funded early years provision. 
London Childcare Fund   
In recognition of the challenges in London to deliver the two year-old entitlement and the need to stimulate the childcare market, a further funding allocation for London was made. In December 2013, Elizabeth Truss announced an £8 million London Childcare Fund distributed to London boroughs based on the estimated number of eligible children to benefit from the programme. The purpose of the additional funding is threefold: 
- 
support school nurseries to offer full time education and childcare from 8am to 6pm, rather than the current 9am to 3pm that most provide

- 
match-fund private sector and voluntary providers to expand
- 
enable parents to take their free 15 hours of early education for two, three and four-year olds at the times that they need them.
Childcare Payments Bill6 
As part of the Queen's Speech on 4 June 2014, the government announced it intends to introduce new legislation to make childcare more affordable for parents. The government will provide 20 per cent of childcare costs up to £10,000 per year for each child, which equates to a maximum £2,000 per child for working parents. The scheme will be launched in autumn 2015 and will support the cost of childcare for children under the age of 12 and for children with disabilities up to the age of 17. To be eligible, the adult responsible for the child, and their partner if they have one, must be in paid work earning more than they would receive for working eight hours a week at the national minimum wage. 

If a parent earns more than £150,000 a year, is claiming Universal Credit or other support for childcare they will not be eligible. An estimated 1.9 million working families in England will be eligible for financial support under the new scheme. It will replace the existing voucher programme, where some employers arrange to deduct some of the cost of childcare from monthly pay. While the new scheme will support families to meet the cost of childcare, it is likely to have a limited impact in London. With the average cost of full-time childcare in London amounting to £14,572 per year, London's parents are unlikely to feel the full benefit of this support as it will not account for 20 per cent of their full childcare costs in many cases. Additionally, it remains unclear how this subsidy will complement current government policies to ensure places available are of good quality and prevent providers from increasing their prices, which will diminish the benefit of the subsidy. 

## Commentary

The prominence of childcare on the political agenda is recognition of its importance as a national issue affecting parents across the country. At a time of significant spending reductions, recent government policies and announcements to invest in childcare to make it both more affordable and accessible to parents are welcome. Programmes including the two year-old entitlement and tax-free childcare for working parents are likely to alleviate some of the challenges within the childcare market. However, evidence has shown that the new childcare offers are unlikely to help London parents to the same extent as elsewhere in the country, due to London's significant affordability and accessibility challenges. With the cost of childcare continuing to rise and showing no signs of abating, government subsidies will need to continue to increase in order to support London's parents. Yet, at a time of overall budget reductions, it is unlikely any increase will be able to match market price rises. Therefore, council budgets are likely to be under greater pressure as any funding shortfall between government allocations and provider costs are likely to need to be met within existing council budgets to increase place provision. 

Author: Neeraj Sharma, Principal Project and Policy Officer (T: 020 7934 9524) Click here to send a comment or  query to the author

## Links:

London Councils - Making the two-year old Entitlement work in London

## This Member Briefing Has Been Circulated To:

Portfolio holders and those members who requested policy briefings in the following categories: Children and Young People; Local Government Finance