Children and Young People Education Finance

‘The Childcare Offer for Wales’

04 November 2016

Article by Sian Thomas, National Assembly for Wales Research Service

Darllenwch yr erthygl yma yn Gymraeg | View this post in Welsh

Taken from Wikimedia Commons by Arto Alanenpää. Licenced under the Creative commons
Image from Wikimedia Commons by Arto Alanenpää. Licenced under the Creative commons

On Tuesday 8 November 2016, Carl Sargeant, Cabinet Secretary for Communities and Children is scheduled to make a statement in Plenary about ‘The Childcare Offer for Wales’. It is likely this statement will provide Assembly Members with more details on the Welsh Government’s Programme for Government commitment to provide increased childcare to 3 and 4 year olds. The Welsh Government refers to this ambition as ‘the most generous childcare offer anywhere in the UK’.

The Welsh Labour Party included a pledge in its Assembly Election 2016 Manifesto to deliver 30 hours free childcare a week for the working parents of 3 and 4 year olds, 48 weeks of the year. Plaid Cymru’s manifesto pledge was for ‘free universal full-time pre-school care for children from 3 years of age, by the end of the Assembly term, introduced in stages’ and ‘capital investment to ensure that schools are suitable for early years’. Following the election, Plaid Cymru’s website referred to childcare as being one of the areas within its ‘agreement’ with Welsh Labour. It was also referred to in the ‘Compact to Move Wales Forward’ in a joint statement with Welsh Labour.

The current position is that all 3 and 4 year olds are entitled to a minimum of 10 hours per week of ‘early years education’ for 38 weeks a year from the term following their third birthday. This is often referred to as ‘free childcare’ and the terms are used interchangeably for this age group. Local authorities are responsible for delivering this entitlement. Parents in Wales can also apply for tax relief for childcare, but this is non-devolved and is the responsibility of the UK Government. The current Employer-Supported Childcare scheme will be replaced by a new ‘Tax-Free Childcare’ scheme early in 2017.

What do we already know about the ‘Childcare Offer’?

The Welsh Government’s Programme for Government of September 2016, Taking Wales Forward, includes a key commitment to deliver ‘Thirty hours free childcare for working parents of 3 and 4 year olds for 48 weeks per year’. Detail of how this will be taken forward has not yet been published. (The Welsh Government’s existing 2013 Building a Brighter Future: Early years and Childcare Plan aims to ‘set out the direction of travel for the next 10 years’). The Welsh Government’s #Talkchildcare campaign was launched in September 2016. Its website says that some local authorities will run the new childcare pilots from the autumn of 2017, ‘followed by wider roll-out’.

What’s will this new ‘Childcare Offer’ cost the Welsh Government?

The Public Policy Institute for Wales (PPIW) was asked by the First Minister to support the Welsh Government in developing options for extending support for childcare in Wales. Its report ‘Childcare Policy Options for Wales’, December 2015, looked at the potential impacts of an additional 20 hours free childcare for 3 to 4 year-old pre-school children in Wales. It considered two options: one of a universal offer for all children of the target age and one with a work requirement that the lone parent or both parents in a couple must earn the equivalent of at least 16 hours a week at the new National Living Wage. The report states that the annual budget cost for the Welsh Government would be £144 million for a universal offer and £61 million for the option with the work requirement, assuming 100% take-up and an hourly delivery cost of £4. Table 2 of the report sets out a range of options, the highest estimated costs as being £228 million and the lowest estimated costs as being £53 million annually. In October 2016 the BBC reported that ‘The Welsh Government said it was currently analysing the likely costs.’ On 2 November 2016, Carl Sargeant told the Children, Young People and Education Committee that the current best estimate of the annual cost was £100 million. You can hear more about what else he said about the ‘childcare offer’ on Senedd TV here.

Of interest to Assembly Members is whether any future Welsh Government investment in free childcare will actually deliver on its intended outcomes? The Public Policy Institute for Wales’ report says:

The policy options of an additional 20 hours free childcare for three to four year old preschool children with or without a work requirement would not have substantial impacts on net income, poverty or work behaviour for families with children.

It goes on to say:

The impact on work participation and work hours for mothers in families with a child of target age is extremely small. The universal option is estimated to reduce work participation by 0.2 percentage points because it effectively raises out-of-work income as well as in-work income, while the option with a work requirement is estimated to raise work participation by 0.1 percentage points. The impact is limited because the policies have extremely small impacts on the net financial return to working.

Given the relative budget costs, these findings indicate that the option with a work requirement would provide better value for money in encouraging parental employment, but the options have similar value for money in reducing poverty. However, neither option is likely to achieve either objective to any notable, possibly even discernible, degree.

The PPIW offers further commentary in this blog.

In his written evidence to the Children, Young People and Education Committee on the Draft Budget 2017-18 the Cabinet Secretary says:

For 2017-18, £10million of revenue funding has been allocated to test the first phase of the Offer.  In addition, £20milion per annum from 2018-19 has been included in the Education MEG for investment in childcare settings alongside the 21st Centuries Schools programme. […]

Detailed cost modelling work is currently being undertaken.  This modelling and analysis builds on the work undertaken by Public Policy Institute Wales / Frontier Economics in autumn 2015.  This is a highly complex piece of work because key factors such as the number of eligible children, take-up rates, number of hours utilised, length of eligibility, and hourly cost impact on the cost estimates.  Alongside this work, I am also commissioning an independent financial review of the provision and cost of providing childcare, and the value of the childcare sector to the Welsh economy.  This will make a major contribution to building the evidence base needed for the childcare offer and will enable us to deliver government-funded childcare that is attractive to the sector and also provides value for money for the tax payer.

See pages 15-18 of Carl Sargeant’s paper for further detail.

The potential challenges of implementing the new ‘childcare offer’

There are a wide range of practical issues likely to arise as a result of moves to substantially increase levels of childcare provision. There will be a need for more physical space from which to deliver the provision. More childcare staff will also be needed, with a workforce able to deliver the entitlement both in English and Welsh. The capacity of local authority school settings along with that of the private sector nursery providers to support the delivery of the increased offer is likely to be key to how this new childcare offer will be developed in the future. The Cabinet Secretary for Communities and Children has already said that a 10 year Early Years, Childcare and Workforce Plan will be published in ‘spring 2017’.

The Welsh Government will be keen to avoid press coverage similar to that in England which quoted providers as saying the system was at ‘breaking point’ as ‘plans to double free provision for three and four-year-olds in England are sped up.’ The Department of Education in England responded to these criticisms in August 2016 with a revised funding plan. This House of Commons library briefing on childcare sets out more detail on the position in England.

The First Minister has already said in Plenary on 18 May 2016 that ‘key to our work in developing and rolling out this offer will be the quality of provision and equity of access, both in terms of geographical reach and language.’ Carl Sargeant has also said ‘our enhanced childcare offer will work to ensure that there is adequate Welsh language provision, for those requesting it.’ The consultation on the Welsh Government’s new Welsh Language Strategy, August 2016, set out an ambition to have a million speakers by 2050. It refers to significantly increasing the number of welsh-medium workers in the childcare and early years sectors.

Tuesday’s statement

The PPIW report stated that just under 47,500 children would be eligible for the universal option and just over 20,000 children for the option with the work requirement. Given the numbers of children and families which will be directly affected, the Welsh Government’s statement and the following discussion is likely to attract much interest.