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Deloitte Data re: cost of childcare


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The freedom of information request put in by the PLA has resulted in the Deloitte data being released. There are several documents to go through, which you can access here. I was particularly interested in the questionnaire response summary - they say many of the things that we have been discussing here on the FSF. I am not familiar with the ICERS research ;)

You can read the summary below:


Meeting: Interviews with stakeholders to discuss childcare policy
Held on: Between September and October 2015
A summary of the interviews is set out below.
  • Funding has not been sufficiently increased over the last few years.
  • Limit on the ability to charge above funded entitlement is causing a mismatch between supply and demand.
  • There is often a delay on receiving funding, and it is onerous to check that you have been paid the correct amount (funding done termly, but many want to have monthly accounts).
  • Will be difficult to sustain after the introduction of the national living wage.
  • New pension plans may affect costs.
  • Lack of joined up thinking.
  • More of a drive from local authorities now to have SEND children in mainstream settings.
  • Generally accepted that regulation is necessary to keep those who are too lax in check.
  • Significant compliance costs.
  • Local councils make demands on top of Ofsted requirements (they are not consistent, but cause additional work). It is unclear from the numerous council requirements which ones are enforced, and which are requested – causes unnecessary administrative burden e.g. frequency of assessing development.
  • Sometimes, regulations on staff requirements can be too onerous.
  • Takes 3-6 weeks to apply to the LA to see whether a child requires extra support (SEND).
  • Registration for childminders is generally simple, though the doctor's check is expensive and difficult to arrange (£60).
Pricing and costs
  • May have to cross subsidise. But some providers struggle with this as parents tend to go elsewhere if the nursery adopts additional charges.
  • Providers tend to operate at ratios lower than the requirements to help build slack into the model.
  • Maintained nurseries in a school setting are at an advantage because they have a wider pool of staff to call upon in the event of sickness or training.
  • Well-positioned nurseries can take advantage of high demand and choose the children they want to care for, e.g. choose those who are taking about the 15 hours entitlement, to provide greater opportunities for cross-subsidisation.
  • Management capability can be limited, as staff need to spend their time with the children for ratio requirements. Management and admin is often done in spare time.
  • Many providers are having to take on admin themselves in their free time, as they cannot afford admin staff.
  • Local authorities used to support training, but budget cuts have meant that in some places nurseries are funding this themselves. Some profitable businesses are actually offering below minimum wage.
  • High costs are having an impact on quality – people are unable to operate at the ratios they want to, or to buy all the equipment/ toys they would want to offer.
  • There are some strange unusual costs, e.g. fitting out a toilet with sanitary wear for children’s size. The problem is worsened when buying these things in low volume.
  • Processing the different sources of revenue can be expensive in terms of back office operations. Other sources include funding, childcare vouchers, family tax credits, cash, debit card etc.
  • Lack of space is a barrier.
  • Ofsted ratings generally align with quality.
  • Additional quality scales include ECERS and ICERS.
  • Quality of service is correlated with qualifications of staff.
  • Parents are generally prepared to pay for quality, however providers often keep prices low as a social commitment.
  • Many providers operate at a lower child to staff ratio than required, to improve quality of service.
  • Parents are concerned with safety; they also appreciate being proactively engaged.
  • Quality can include additional services e.g. music and culture.
  • Quality includes allowing staff to go for training, having the funds to pay for this, and to consider how much collaborative working time is needed.
  • In terms of staffing, people registered at job centres tend not to have the right qualifications, and don't have the requisite passion.
  • Care home work and childcare work are highly substitutable, but care home workers receive a higher wage, meaning the people with these qualification may be tempted to go there instead.
  • Staff who remain in the market are generally passionate about what they do.
  • Nursery schools are in competition with schools for teachers - it can be hard to recruit them.
  • Demand is higher in high net worth communities, as in deprived areas parents tend to struggle to afford childcare and tend to rely on other family members more.
  • Demand for places is generally higher in the morning than the afternoon/ evening, and higher mid-week than on Mondays or Fridays.
  • Low wages are not attractive: particularly for childminders, who tend to take what is left after all other costs are paid. Many have reported that they make well below the minimum wage.
  • Some providers may have to change their business model to incorporate 'childcare' as well as 'early education'.
  • Some settings e.g. school-based nurseries are limited to providing care in term-time only.
  • Hiring more staff is too costly; many providers already do the administrative tasks themselves in their own time and can't afford to bring anyone else in
  • Agencies can reduce quality, as only the agency is inspected by Ofsted, not the individual setting.
  • Agencies can help childminders to reduce the administrative burden of regulation, can help them find clients and advertise their services.
  • It can be difficult to share information between nurseries and childminders, as they have little in common.

Support and Impacts

  • Some example business models that providers could use to support them in operating efficiently would be extremely helpful.
  • Providers could share training costs and send staff on communal courses. Particularly easy with core training.
  • Some LAs provide support to childminders.
  • Support could be given to help providers understand the trends in the market, as well as income and expenditure management, how to secure funding etc.
  • Networks such as PACEY for childminders provide support.
  • More information on the policy of additional 15 hours should be released, particularly in regards to timescale to help providers prepare.
  • Streamline and simplify processes for SEND children e.g. funding application, approval, referral etc.
  • Some children have additional needs but do not receive official approval - could there be an interim financial support in these cases.
  • There is potential that there won't be a huge increase in demand post the policy of additional free entitlement, it will just switch from 15 hours of paid care, to 15 hours free entitlement, causing revenue problems for providers. Currently, many parents do not take up 30 hours of childcare, as they will work part time to spend more time with their children, so require less care.
  • There may be a positive impact on occupancy, as if there are 30 free hours guaranteed, parents are likely to take this.
  • Providers may have to move from offering sessional to full day care. This can be more expensive as it includes lunch etc., which may put parents off. To keep business, providers may have to absorb some of the full-day costs.
International examples
  • Denmark:

Childcare is publicly subsidised. SEND children are more highly funded; inclusion is important so they are mixed in with other children. Market is municipality run; private providers must apply to municipality to register themselves. Municipality controls and regulates public and private providers. Parents are put on a waiting list, and are guaranteed a place as long as they do not have a preference of provider. Less regulated in terms of type of service offered. Parents tend to make decisions based on convenience of location. Price is not an issue, and quality is uncertain as providers are not rated. Issues in market are lack of education for employees, who often take jobs whilst studying. Service is therefore more focused on day care. Quality is based more around number of staff. Incentives that could help the market would be better links between day care and school. Less incentive to be private, profitable providers. Fewer nannies than childminders, as price for a nanny is higher due to less funding, and they are less regulated. Cultural aspect that children should not be put in institutions for more than the necessary time.

  • Sweden:

More competition; parents can choose their provider. More inventive to be private, profitable providers.

  • Canada:

More regulated than Denmark. Subsidised childcare may only be available to those on a low income. Subsidy payments made to parents, not providers. Issues may be similar to those in England

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