Quality costs

paying for Early Childhood Education and Care

Aims of project

• to identify the elements required for high quality provision of ECEC • to establish and cost a high quality model • to identify the current costs and levels of funding for ECEC in England • to explore funding options for the high quality model to ensure that the costs do not become prohibitive for parents. • Doesn’t include childminders

Methodology

• Literature review • Interviews with stakeholders • Two roundtables • Development of a ‘high quality’ model for ECEC • Social Market Foundation costed ‘high quality’ model, compared with current costs • Researched who pays what currently • Institute for Fiscal Studies costed a number of options for funding the ‘high quality’ provision

High quality model

• Current adult:staff ratios • For children aged 2 years and over: half of staff as graduates (Level 6 qualified) and the rest Level 3 qualified; • For children aged under 2: one-third of staff as graduates, the rest Level 3 qualified; • Pay scales based on equivalent roles in schools; • Other non-staff costs (premises costs, expenditure on insurance, food, materials, etc) set at one-third of the staff costs.

Table 1: Cost for one hour of ECEC provision calculated by Social Market Foundation Ratios

Under twos 1:3 Two year olds 1:4 Three –four year olds 1:8 1:13

Cost with current staffing High quality cost

£4.09–£5.05

£3.27–£4.11

£10.37–£12.48

In London the costs are 20% higher £8.26–£10.40

£1.85–£4.44

£2.94–£6.17

£2.23–£3.07

£2.69–£4.54

Summary of costs increases

• biggest increases for youngest children • under the Daycare Trust high quality model, the costs of ECEC in full daycare and sessional settings up to three times current costs. • the increases are just over double for full-day care in Children’s Centres around 135 per cent or 100 per cent when the cap on other costs is applied. • only around 15% increase for nursery schools, and up to 27% increase in nursery classes

What do parents pay now?

Daycare Trust Survey DCSF Providers Survey Laing and Buisson Day nursery, London Day nursery All ages, all types Family Resources Survey DCSF Parents Survey £0.00 £1.00 £2.00 £3.00 £4.00 £5.00

Price per hour Data from 2007-2009

What does Government pay now?

• Free entitlement – Dedicated Schools Grant does not ring-fence ECEC – LEAs spend in Section 52 returns • SSEYC grant – How much are Children’s Centres about ECEC?

• Childcare for FE students • Childcare Affordability and Child Poverty pilots • Childcare element of WTC • Tax breaks on employer-supported childcare • Much harder to add up – Mixture of UK and devolved policies – Some for under 5s, some for all children

£m/yr

Government spend on ECEC in England

Free entitlement for 3-4s Standards Fund for expansion to 15 hrs/wk Other DCSF Funding Other funding (FE students and pilots) Tax credits (all children) 2007/8 1,214 Tax breaks on employer vouchers (all children) 1,790 1,129 307 2008/9 2009/10 170 651 95 Total: £4.1bn, with £1.2bn more for Sure Start local programmes and Children’s Centres.

Around 0.4% GDP.

Based on various sources.

Meeting cost of High Quality childcare

• Paying for existing ECEC at High Quality rates would cost £2.6bn/yr, with parents paying £2.3bn/yr net. Parents of under 3’s would be the hardest hit. Average spend on childcare increase from £49 to £93 a week. • Daycare Trust report highlights following options to reduce cost to parents, with implementation by 2020 - Quality subsidy to providers for ECEC for 0-2 year olds linked to staff qualifications - Childcare element of WTC: subsidy rate to 100%, remove work test - Free entitlement: 2 year-olds: 15 hrs/wk, 38 wks/yr; 3-4 year-olds: 20 hrs/wk, 48 wks/yr • Impossible to say how ECEC use would respond, so assume unchanged Copyright Institute for Fiscal Studies 2009

Summary of costs to parents and government

(£bn/yr) Total Gov’t Parents

Current level of spend, existing CCTC 2.6

1.6-1.8

EEE

1.2-1.4

CCTC

0.4

-

Quailty subsidy (under 3’s) Total (parents & Govt)

4.2-4.4

Additional costs of high quality

5.7

4.2

0.5

1.0

Increased EEE, subisdy, reformed CCTC -0.7

4.9

Total costs

5.4-5.6

Future level of spend 1.9

7.3-7.5

0.9

1.0

9.2-9.4

Copyright Institute for Fiscal Studies 2009

Conclusions

• If Government were to foot the entire bill for centre-based ECEC it would cost them just over £9 billion a year in England • Our package would require £7.5 billion a year from Government to deliver ‘high quality’ provision • This would make total Government spend on ECEC approximately 1% of GDP • Wise investment in children’s futures & to make savings in public expenditure in future years