How can we fix the childcare system?

Paul Johnson

Hello and welcome to this episode of the IFS Zooms In, I’m Paul Johnson and today we’re going to be talking about childcare and the childcare system in the UK, how much it costs, who uses it, what the government can do to make it more affordable, more effective and more accessible. We’re also going to be talking about what it’s for. So, I’m delighted to be joined by two of the country’s great experts in this issue, Christine Farquharson, a senior economist here at the IFS, who works on education and childcare, and by Neil Leitch, Chief Executive of the Early Years Alliance.

Let’s start by asking what is the childcare system in the UK? I have a lot of experience of it, fifteen, twenty years ago when my children were very young, other people here may have children in the childcare system others may have no contact with it at all, so how does it work?

Christine Farquharson

I always use three C adjectives to describe the childcare system in the UK, constantly changing, complicated and costly. Complicated really comes down to just the sheer number of programmes that we have out there to support families and children with accessing childcare and early education. I count at least eight of them split across three different government departments, so it’s not a straightforward system for anybody, including parents to navigate. Not by any stretch of the imagination.

But those eight programmes are broadly split up into three different areas. The first and the one that probably most parents are most familiar with is the programme of the free entitlement. These are the free or funded childcare hours that are provided by the department of education. All three- and four-years olds are eligible to access the free part time place to that free entitlement, fifteen hours a week during term time. If your parents are both working then you get thirty hours a week and if you’re a particularly disadvantaged two-year-old, you also get fifteen hours a week through the free entitlement.

But there’s also support for childcare that comes through the tax system in the form of tax relief, either through employer sponsored childcare vouchers which are being phased out, or the new programme, tax free childcare which is being introduced to replace them, and that looks like the government allowing you to not pay tax and sometimes not pay National Insurance on the money that you end up spending on your childcare.

If you’re somebody who’s working and on a low income, in particular if you’re accessing universal credit or legacy benefits like working tax credit, then there’s a sort of third leg of the childcare support system for you. And that looks like subsidies of 70% or 85% depending on your specific circumstances, but a very large proportion of the spending that you put into childcare actually then gets reimbursed and you get that money back through the benefit system. Those  are the three kid of big parts.

There’s probably also a fourth part that we can think of, the fourth leg of the UK child system, and that’s grandparents and family and friends, that the informal childcare that isn’t being paid for, isn’t being subsidised, isn’t really part of how the government thinks about the childcare system, but nevertheless is quite an important apart of many families of how they experience that system.

Paul Johnson

So, Neil, Christine has really set out the several programmes that support families, and has quite rightly mentioned the role of grandparents and so on, what is the shape of the formal childcare sector in terms of what sorts of providers there are, how many people use them, and the role of the local authorities as opposed to the private sector?

Neil Leitch

So, there’s quite a mixed position for them in as much as we have private, voluntary, independent, we have state run provision at this particular point in time and that is just as a result of what has really been a piece meal creation of what we think to be the early years system at this particular point in time. So, different governments, different ministers, have added to it as we’ve gone along, so it is a pretty complex position. The one thing that I would add, because I think, Christine, you have really described accurately the whole system itself. But what we tend to have a biased towards when we talk about the early years childcare system, it is just that, care. We don’t talk about education, and I think a lot of the programmes that have been developed have been predominantly about getting parents back into the working environment, and predominantly dare I say, mums. And that’s where I think we differ from my other systems where they look at it from an education perspective and a long-term investment. And we seem to deal with it just, as I say, to predominantly get mums back into work. So, it’s a hybrid system, it’s a confused system, it’s been pieced together over several years, and I suggest if most people looked at it objectively, they would say, “I wouldn’t have this system in place.”

Paul Johnson

Well, we’ve got quite a selection of adjectives there, piece meal, confused, hybrid, complicated, costly, and another C of Christine that I’ve now forgotten.

Christine Farquharson

That was constantly changing.

Paul Johnson

Constantly changing, yeah.

Christine Farquharson

That works really well with what Neil has said because at the moment I completely agree that we’re focusing really hard on this this parental labour supply and helping parents to work. It was not always that way and one of the real features of England’s childcare system is that this real back and forth, at one point were focusing on early education, then we focus on parents, then we’re back to education. And the fact that you know as, I’ve talked to some of my colleagues I talk to people in the sector and some of them say, “this is absolutely insane, why are we giving childcare to two-year-olds whose parents aren’t in work? Like they don’t need the childcare, it’s the working families who need the childcare.” And then you speak to other people, and they say, “the thirty-hour offer is really weird, isn’t it? Because we’re giving it to these parents who are working who are higher income and we know it’s the disadvantaged children whose parents aren’t in work who need that early education the most.” So, getting those different priorities to line up and getting people to even acknowledge that there are many things that you want to try and target at the same time, that’s somewhere where the UK is possibly a little further behind other countries too.

Neil Leitch

It’s an interesting point if I could just interject there, just to say that, I literally came away for a conversation with urr a mum who said exactly the same thing, that prior to actually having a child, she thought all the support that was given was basically about employment. It’s only when she had the child that she realised how critical it was, from birth, the children are supported, and they’re educated. And so, you know I think there is this confusion about the purpose of our early year provision at this particular point in time. I’m absolutely clear, it’s about developing young citizens which do not become a burden on society, whether that be through health, whether that be through crime, you contribute to our revenue stream, etc, etc, and by that I don’t mean you know go-getters who want to step over people, I mean qualities like kindness and people who will look after this world - and that is all about education. So, I think we need to get back to that rather than all the rhetoric at this particular point in time that seems to be about balancing the books, financial equations, nobody talks about what’s in the best interest of the child.

Paul Johnson

No, that’s very interesting and I mean you’re absolutely right, Neil and Christine, the perceived and the stated reasons for state support have changed over time. I remember in the 2000s there was a lot of focus on early years education, particularly for deprived children, and particularly from those from more difficult backgrounds because there’s such good evidence that really high-quality interventions at least on formal childcare and early education can make that big difference to young children turning into, or becoming, more productive adults and well attuned to society. But at the moment of course, and particularly even more at the moment, with the cost-of-living crisis, a lot of this is very focused on costs to parents and parents being able to go to work. And unquestionably the fact that I don’t think we’ve been clear as a society what we’re looking for from this system, has made it much more complicated than it needs to be.

I mean one of the things that in a sense is surprising, given what you’ve both said is in many other countries there’s more clear focus on this as an education activity in developing young children. And you’d think that would be more expensive than providing care as it were to allow parents out to work. And yet we certainly perceive that childcare is much more expensive in the UK than in most other counties. So, why is that? I mean do we have a clear sense of what is driving that?

Neil Leitch

I think the answer actually, dare I say is quite simple. And that is when you look at what’s happened in the UK over certainly the last ten to fifteen years, is that we have chronic under funding, we’ve had it literally for decades, as I say and eventually it catches up. When you look at the percentage of investment that we put in, essentially to GDP compared to other OECD countries, we are actually a fraction of the mean average, and yet when you look at other tables, we appear at the top. Unfortunately, those other tables relate to how expensive our childcare is, so we have some of the lowest investment and yet we have some of the highest childcare cost. And yet I would suggest that government struggles to see that there’s a link between the two. If you put little investment in, somebody has to pick up the tab, and I would just say one thing on that and that is back in 2018, I think this is important, we were tired as an organisation of constantly hearing, “this government has invested 3,6 billion, 4 billion,” whatever it happens to be. So, we said to the government, “so if you think that you pay enough money for the free entitlement Christine alluded to, then show us your computations, show us your figures.” That’s not an unreasonable request, if you think you pay enough money, two and half years later after a freedom of information request, having to go through the information commissioner’s office because the department of education refused to provide that information and they appealed against it, two and half years later, they had to provide us with their data. And their data said this, and these are not my words, their data said that to adequately fund the free entitlement, it would cost an additional £2 billion. They predicted, specifically, that by 2021, the hourly rate that you’d have to pay for a three and our year old, would be £7.49, and yet what the sector was paid in the very same year was £4.89. They then went on to say that we accept that if we don’t adequately fund it, the prices to parents of younger children who do not qualify for the so-called free entitlement, will increase by up to 30%. So, the government knowingly underinvests, and knowingly appreciates that that underinvestment will be reflected in higher costs of parents. Their words, not mine. And that’s why we have this ridiculous position whereby we are, yes, one of the most expensive countries in the world when it comes to investment.

Paul Johnson

I think what you’re saying essentially, it’s because the government underfunds the hours that come for free, if you’re buying anything additional you’re effectively subsidising those free hours. And that’s why for example the cost for the under twos have gone up so fast over the last few years even before the cost-of-living crisis.

Neil Leitch

Yeah, but it’s important to recognise that almost every single year I’m sort of asked by the low paid commission to appear in front of them to explain why it is that the early years sector pays such low salaries. The reality is about 70% of our cost relate to people and again, a practical example, this time three years ago, so we’re a membership organisation, we represent about 14,000 members out there in terms of nurseries and some child minders, but we are unique in so much we also operate 65 settings, all in areas of deprivation. This time coming back to the point, three years ago, we had a compliment of 132 settings, so we have closed half of our settings, we don’t make profits, we don’t make money, and yet we’ve had to close those settings. And that’s because they are grossly underfunded. And that a consequence of under investment.

Paul Johnson

So, Christine, simple, Neil says, simply underinvestment from the government that makes it expensive for anyone paying for themselves, is it any more complicated than that or is that the whole answer?

Christine Farquharson

I think Neil makes a really good point about particularly how we square different ages. And one of the complexities and nuances that makes this policy area so difficult is actually, it’s not enough to just look at zero- to four-year-old children, you really have to look at what’s happening with one-year olds, with two year olds with three and four year olds quite separately, because the challenges facing those different groups look really different. Far north, you know 90/95% of three- and four-years olds are taking up their free entitlement, they’re getting funded hours from the government, possibly they’re paying a little bit on top of that for meals or nappies or things like that. But by and large, they’re getting quite a bit of childcare and early education at quite a low cost to the family. And when you look at the younger children that’s where you really see those price increases going through the roof. Often those younger children, or those full-time hours, or those centre-based care arrangements, those quite particular cases, those are the ones that end up being picked up in those international comparisons, so it is pretty hard to look at this and understand what’s going on even within England, let alone once you start to compare internationally.

What is true is that the government has increased spending on the early years quite significantly, particularly compared to what’s happened at other stage of equation and to what’s happened to public services more widely. But a lot of that has come through this increase in the number of free hours that providers are expected to deliver, both the thirty-hour entitlement and the two-year-old offer for disadvantaged children. And so, if you look at what’s happened in real terms to per hour funding there has been growth there, but it looks much flatter, and you end up with this sort of ratchet pattern where the government sort of ignores things for a few years and then realised that possibly they’ve squeezed a bit too hard and they kick the funding right up again only to ignore it for a few years more.

I think in the current circumstances where we’ve got really high levels of inflation, we’ve seen the minimum wage increase quite quickly, energy costs and food costs are going up too, that sort of lack of of consistent policy intervention and consistent attention to the funding rate becomes more damaging. And that becomes a particular issue the more of the childcare market the government brings under it’s control. The more free entitlement hours you offer, the more funded hours you’re asking providers to deliver at the government rate, the more important it is that you get that rate right because of the consequences for the rest of the market. So, I think what we’ve seen in the last few years is that programme expanding but not necessarily so much attention on what is the right funding rate and are we really confident that were on top of what this is doing in the rest of the market as well?

Paul Johnson

And Neil, in terms of what it is doing in the rest of the market, when you suggested your organisation has had to, you know, draw your horns in quite a lot, but is that happening more broadly, are we losing capacity?

Neil Leitch

We’ve lost something like sixteen thousand providers in the last six years. Now, I accept that many of those providers will be for example child minders, but nurseries have also gone by the wayside and as you’ve alluded to Paul, we are part of that equation, we’ve halved our compliment of settings. The big fear is that operators will be driven to provide care and education in the more affluent areas where parents can afford to cost subsidise. And in the areas where you would argue that you would get the biggest return on human capital investment, where you would argue that those children need more support in terms of education and care, that’s where providers will be closing their doors because they will be squeezed. And the inevitable situation is that it completely contradicts the so-called levelling up agenda. So, we had that working at one side of the equation, and yet we had actually a funding model that steers you away from supporting vulnerable, disadvantaged children. So, yeah, it’s a warped, it’s a warped position. Even I would say this, even some of the support programmes that Christine referenced when she first spoke, so if you take tax free childcare, the reality is yes you can pull in £8,000 and you get two thousand additional from government, but you have to have the money to put that in the first place. The most disparate families are struggling to have a penny in their pocket at the end of the week. So, cash flow is absolutely critical, so it seems like it completely again contradicts the levelling up policy. It cannot be right that you have a thirty hours programme, i.e. where you get an additional fifteen hours of free childcare, where both parents can earn up to just sort of £200,000 between them. So literally they’ll work a couple of hours per weeks, and they get an extra fifteen hours of free childcare, and yet if you’re on minimum wage, you have to work sixteen hours. How is that morally right, never mind technically supporting disadvantaged families. That’s the system that I think I’m afraid we have.

Paul Johnson

Well, I guess that comes to the real issue about that the systems for. i.e if it is about helping everyone in work with the cost of childcare then you have one system, and if it’s about supporting children from less advantaged households to educate them and give them their best chance in life then that’s another system. And I think what you’re describing is that sort of tension between those two systems. So, Christine, what’s our sense of how well the system we’ve got at the moment is achieving the second of those, that supporting the children from less advantaged backgrounds and giving them that step up in life that things like Sure Start for example were intended to do?

Christine Farquharson

I think when we look at the evidence for the childcare system in England, it does look like a little bit of a case of we’ve tried to do two different things at the same time and we’ve kind of ended up short changing ourselves on both of them. If you look at the evidence for helping mothers back into work from the fifteen hour universal entitlement it looks like there’s not really much of an effect there, if you look at the evidence of supporting children’s development through the school system for the fifteen hour entitlement, there’s some benefits in the first couple of years of school, but they’re generally pretty small, certainly in comparison to the sorts of benefits you get from systems like Norway where you know you can trace those benefits out through children when they’re fifty, or sixty, or seventy years old, they’re that big and that persistent. Part of that, a big part of that is about the funding of the system and whether providers are adequately resourced to do these things. But I think it is sometimes a little too easy to focus exclusively on the money and say, “oh if we had unlimited budgets, if we were controlling this, it would all be absolutely fine.” Because the reality is is the way you design a childcare or an early year’s system to support child development might actually look quite different to the way you design one to help parents to work. If you’re really looking for child development, then the evidence we have suggests you target very disadvantaged children, you have potentially shorter hours you might have two or three hours, or four hour a day in care, you have that quite consistently so the child goes most days of the week and doesn’t really have a lot of flexibility on when they’re going to go and when they’re not going to go, you have something that’s very focused on high quality but short and relatively intensive days. Now, that sounds great for a child, but if you’re a parent or a mother thinking about, “well, hang on a second my job does not look like that, you know, I can’t drop off my kid, go to work and then show back up two hours later and expect my employer to be okay with that, what I need is long days, flexible days, pretty cheap, accessible, affordable and childcare that I can kind of flex around the needs of my job. If my employer doesn’t want me that week, maybe my kid doesn’t go to childcare, and I don’t pay.” And so, I think that those design constraints for me are more and more ushing towards we need to look beyond just what we would call the childcare system.

So, Paul, in your question, you mentioned the idea of Sure Start. This was a big programme of kind of one stop shops for parents with kids under the age of five - childcare services but also parenting classes and health and parental employment support, all kinds of stuff brought together under one roof. And we showed that that was actually a really good thing to do for children’s development, similarly parenting programme where, like the family nurse partnership where you go into a disadvantaged families home and over years you build up a relationship with the parents and you support them and you address the needs that they have and you help them to understand what they as the parents can do to support their child’s development. Those are really impactful, and it makes sense if you think about it, like if a child is going to spend fifteen or thirty hours a week in childcare, that’s great. But what’s happening the rest of the time? If we can shift what’s happening the rest of the time in the home environment, that has the potential to really help us support children’s development. So I think we can get a little bit too narrowly focused on the free entitlement, the subsidies, the tax credit, and the childcare system, and neglect the fact that actually we have other policy levers available to us, and some of those might be better suited to those tasks of child development, which would take a little bit of pressure of the childcare system, trying to make it do everything all at once and succeeding, basically at very little of it.

Paul Johnson

And it’s fair to say, isn’t it, that it’s the targeted programmes like Sure Start that have been cut over the last decade or so, and the more general support for childcare as childcare rather than early education which actually has been increased.

Christine Farquharson

Yeah, what we’ve seen over the last decade or so is a real shift in the way that education spending for the early years is allocated. Free entitlement has really increased very quickly, but support, particularly through the benefits system, has been cut really hard, and so there’s a real shift in the type so families who are able to access support from the government, really away from those really low-income families and towards more of the working families in line with what we’ve been talking about these shifts in priorities. Sure Start of course is this different and even harsher story in the sense that the budget there fell by more than two thirds since 2010 despite the fact that we now know that those centres were actually pretty effective and what we’ve seen so far in family hubs in encouraging. It does look like the government is starting to realise that that kind of model can be useful, but the family hubs funding we’ve seen so far is a drop in the ocean compared to what we’ve got used to under Sure Start I wouldn’t, I wouldn’t go so far as to claim that we’ve solved that policy challenge yet either.

Paul Johnson

Oh, you might have to help me and the listeners out here, what is a family hub?

Christine Farquharson

Well, Paul, actually nobody really has a good answer to that yet. A family hub is meant to be a way of bringing together services for young children and for their families in a similar way to what Sure Start was, but in terms of what the actual delivery and model looks like, you know, is this going to be a physical building in the community where parents can go, or is this going to be a website where we can badge some of the services that are already on offer and maybe add a couple of midwives in and call that a day. Those kinds of questions haven’t really been answered yet and a lot of that is being left up to individual local authorities and individual teams to kind of decide and find their own way. What I would say on that is in some sense that makes a lot of sense, it helps local authorities to pick the policies that work best for them. On the other hand, if the central government funding isn’t there to support one of those more intensive models, then it’s not really fair to say that that’s local authorities making the choice, that’s kind of a choice that’s being imposed on them.

Paul Johnson

And Neil, that shift is one that you have seen over the last years away from this type of provision?

Neil Leitch

Absolutely, I mean it is quite interesting just to go back to one of the points that Christine’s raised, when we talk about free entitlement the increases to fee entitlement usually occur just before an election. So that probably tells you what the motivation is, predominantly votes that I suggest rather than actually addressing the fundamental problem. And I think it goes back to the fact that we don’t have a strategy, or we don’t have a strategy in this country in terms of medium or long term, we don’t actually have a short-term strategy. We tend to lurch from one crisis to the next and if you ask ministers what do you think parents should look for, what do you think they should receive in five years’ time in terms of what should their costs be? What would we expect the workforce to look like in terms of its development etc? there are no answers whatsoever. And because we have no vison, we have no strategy, therefore we have no operational plan to achieve that. 

Interestingly, in other countries, they do manage to balance this, is it about supporting parent return to work, feeling comfortable that their child is safe, that their child is educated, and is it about basically providing children with a good education? Other countries seem to balance that and that’s because they prioritise early years rather than think of it as an afterthought. If you go back to the pandemic, I can tell you that early years just felt like it was everything that was - and this is not a criticism of schools, everything was about schools, schools, schools, schools, schools. All the PPE went to schools all the funding for support went to schools, even the recovery programme, it goes to schools. Early years is still not considered to be part of our education system, it’s not considered to be part of our social infrastructure, until we get that change in that mindset, its difficult to see how things will differ from where they are at this particular point in time. It needs somebody to go: “this is a priority.” And I accept, you know I’m always asked the question, “well where does the money come from?” and actually you probably are better placed to answer this question than certainly I am, but the reality is, it’s about priorities. We spent tens of billions of pounds over budget on rail links and other areas of dare I say infrastructure. Is that more valuable than developing young children and supporting parents in work? I guess you would know what my answer would be.

Paul Johnson

It is extraordinary the degree to which it’s turned into a mess because I mean this isn’t something that we can blame on you know, deep history. You know this in a sense this is a leg of the welfare state that’s really in any serious way only developed in the last twenty-five years. If we were talking thirty years ago, we would not be talking about all these free entitlements, and the substantive share of state support for a child care that we’ve got now. We have had genuine change over the last twenty-five years or so. And an opportunity therefore to shape it relatively from scratch in a way that actually makes sense. But we seem to have failed to do that. And I think the… I think the reasons that I’m kind of listening to are that’s a combination of consistent uncertainty, as it were, about what’s trying to be achieved, and the move towards the popular, or populist in the sense of, and it is remarkable how this is always in everybody manifestos nowadays, towards helping that large group of families in work with childcare, and away from what I think was the original conception which was very much about supporting children’s education and particularly those from less advantaged homes. So how do we move on from here? Is there anything we can learn from how other countries do this? I mean what’s the next step?

Neil Leitch

It’s quite interesting that the childrens and families minister recently announced that, some of your listeners may be aware, that there are proposals to change what we call the adult to child ratios, in other words there are educators to look after more children, and again that was, that’s all connected with trying to reduce the cost of care. The reality is simply this, is that the minister is visiting other countries and so, my suggestion would be, rather than look at the lowest common denominators, i.e. just ratios, and I’ll happily say a little bit about that if you like me to, Paul, but, I would suggest look at how they invest in their workforce, look at how they invest in their system, look at how other countries acknowledge that education doesn’t start when a child walks through a school gates, it is long before, and that therefore might give them some ideas as to what an infrastructure might look like for England, certainly, moving forward.  

The ratio proposal again is just evidence that it’s, it’s about balancing the books, and my fear is that children all of a sudden have become commodities and we don’t think about the child. It is interesting, when this was first leaked from Downing Street, we released a survey to ask providers what are your thoughts on this, a record response, 9000 response from providers in the first week alone. And they told us, and the government knows this, that even if they were able to look after more children, i.e. bring in more revenue with the same number of staff, only 2% would consider passing that across, that saving, to parents, because they are so underfunded etc. More importantly, 75% of their staff said that they would leave a setting if they changed their ratios. Because we have a recruitment and retention crisis that we have never witnessed before, people are leaving in droves because they are exhausted, and they are undervalued. It is really ironic that the very day that Number 10 leaked this potential proposal, that the head of Ofsted, Amanda Spielman, was on Radio 4 telling people that their focus over the next five years will be on the early years. Telling people that young children’s development had stalled, and they need more support. So, it feels to me that somebody has gone, “what’s the worst possible time that we can look at changing ratios? I know let’s do it when her majesty’s chief inspector tells us children need more support than ever, let’s do it when we have a work force when it’s leaving in its droves.” How ironic. I just can’t believe that anybody would consider this, but that’s where we’re at.

Paul Johnson

Christine, would you like to come in on that? I think we definitely got the message from Neil, if you were minister for a year Christine, what would you be doing on this?

Christine Farquharson

Oh, I have a list as long as probably both of my arms and one of my legs as well. But, I think if I were, if I were in this space, what I would urge policy makers to be thinking about is first of all reframing the way that they’re approaching this sector... so, the ratios point that Neil’s brought up, that’s kind the latest in this series of announcement after announcement and announcement that doesn’t really fit into any coherent strategy that doesn’t really tell us about where we’re going or what we want to do. And you know if you want to do that, if you want to change ratios then make the case for it, look at the international evidence and embed that in some sort of strategies that talks about the early year’s workforce as a whole, don’t just pretend that it’s magically going to solve the cost of living crisis on its own.

So, I think that will be the first thing, the second thing is I really would like to see more focus on the different experiences that families have within the early years sector, there’s a real tendency to talk about the early years or the preschool period, as though it’s one thing and in one sense take the worst of everything. So, look at you know children under the age of two have seen really huge increases in childcare costs, children with three- and four-years olds, the problems are much more around what the right funding rate is for the free entitlement and whether that policy is delivering what we want it to be and whether we’re getting a good value for money for that. And so, looking and being a little bit more nuanced about who’s using this system, at which ages and what their experiences are would help us to make policy that’s a bit better targeted, rather than just slap dash announcement it’s that maybe sounds good but run the risk of messing up other parts of the system.

And then the final bit, possibly slightly controversially, but you know we’ve talked a lot of about the purpose of the childcare system being child development or being supporting parents to work and those are two really big and really important goals where actually the childcare system is front and centre. Like what we do in the early years does really determine how we succeed or fail on those goals. But I’ve recently seen more and more government and commentators trying to introduce the third goal, which is the cost-of-living crisis and families budgets and what we need our early years system to do is relieve pressure there. For me that is important, it’s clearly important this is clearly a pressure on families budgets, but that’s the kind of thing that we can address in other ways. We can look at child benefit, we can look at targeted transfers, we can think about giving people money in ways that don’t affect the childcare system, the structure of what we’re delivering, and don’t make it harder than it already is and that it already has to be, to achieve these goals that we’re trying to with this system that we have at the moment. So yeah, greater coherence, greater evaluation and a little bit more honesty about what we’re actually trying to do and how long it’s going to take to get there.

Paul Johnson

Right, well coherence and honest will be good right across government policy one feels. We really need to finish in a moment, but I just wanted to ask one final question which is about the organisation for the sector and where we started, this kind of patch work of urr local authority and private providers, mostly quite small, a few quite big providers. I mean how much has that impact on the coherence of the system of the difficulty of the government has working with it or is that actually you know there’s no problem about that structure and it’s really all about how government does work with it and can we learn from how other countries have organised their systems?

Neil Leitch

I think in fairness, you wouldn’t have the system that we have, and I think everybody in the sector acknowledges that, but I think we have to accept that the infrastructure is in place and it’s difficult to imagine that we will not be able to utilise that over the next sort of decade plus, to say the least. I would suggest it’s, and it’s, if you had independent assessment of whether the funding was adequate, etc, and you had it reviewed on an annual basis, so it wasn’t down to the provider, it’s not down to the government, but you had an independent assessment, and you pay a fair rate, then you’d have more operators retain their position within the sector, they would stay there, we would have more nurseries I would suggest open at a particular point in time. You would then be able to regulate it effectively, because at the moment, what we do is, we turn a blind eye to the need to have to charge so called top up fees, extras, cross subsidise, charges for one and two year old etc, and government turns a blind eye because they know if they did anything else to regulate it, the market would collapse, it just couldn’t happen. But if you have equity, you can then regulate it, providers would feel happy, you’re always going to have those parents you know, we’ve got it in secondary education where parents will pay tens of thousands of pounds for extras, whatever it happens to be, but at least we have a sound core offer and so independence and then you remove this argument and a vison is where I think we have go. It’s come back to this point, if you have no vision and no strategy, don’t be surprised if in five years’ time you’ve still got the same darn mess and you’ve got today.

Paul Johnson

Last word from you Christine?

Christine Farquharson

I think we’ve talked a lot about challenges, and we’ve talked a lot about the difficulties here, I think there are opportunities as well, but they’re linked in with challenges too. One of the things that the sectors going to be dealing with over the next ten/ fifteen years is a real decrease in the number of children that its supposed to be looking after and so when we think about capacity and when we think about funding, actually keeping the total envelope pretty close to where it is now, but having a bit less pressure in terms of the number of children that has to serve, that’s one way of perhaps slightly more easily increasing the funding rates that we’ve been talking about. And thinking about the capacity that we have, managing, both the providers who exit but also the providers who enter to acclimatise to that new smaller number of children will be really important too.

But ultimately, I agree with Neil, what we need is more attention and more consistent sustained, strategic thinking about with the purpose of the sector is, how we’re going to get there and what other tools we have like parenting classes, like Sure Start, like the tax and transfer system, to try and achieve some of the other goals that we want as well.

Paul Johnson

Well, I think we’re going to have to leave it there on a slightly hopeful note, I think. I’ll just go back to Christine’s three Cs, complicated, costly and constantly changing, which I’ve remembered this time, and it strikes me from this conversation that there are two things on the line with this. One is the lack of vision the lack of strategic purpose across time in what this whole system is intending to be for and clumsy attempts to make it achieved to allow perhaps three things, early education, childcare to help parents to work and maybe dealing with the cost of living as well. And an underlying inadequate level of funding which results in some of that complexity and creates an issue where it’s difficult to recruit the right people and involves a lot of cross subsidy from people who are paying themselves. All of which sounds like it’s eminently fixable from a government with a long term and appropriate vision, and as Christine said at the end maybe not even a lot more money if were going to have as we expect, fertility rates falling over the next few years and therefore the number of children in need of this provision falling.

But we’re going to have to leave it there, after what’s been I think one of the most fascinating discussions that we’ve had on this podcast series, fantastic input from Christine and from Neil, so think you very much indeed to them, and thank you for listening to this episode of the IFS Zooms In, we’ll be back in a fortnight and do subscribe as well, thank you very much.