All the ways the government's childcare plans will help richer parents and hurt the poor

Government plans for the expansion of free childcare will disproportionately benefit higher income families while the poorest children fall further behind, extensive analysis shows.

Ministers have celebrated their proposals as the largest expansion of childcare in history. It’s a huge investment of up to £8bn a year and it will help thousands of families access free childcare. 

But experts have found that the plans will help families in middle and high income brackets while the poorest children are locked out of the full offer of support. 

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These are kids who stand to gain the most from quality early years education. It is a key opportunity for them to develop alongside their peers, learning to socialise and communicate with people outside their family. It is an essential time for children and sets up their future.

This means they’ll be more likely to thrive in their education – ultimately leading to higher paying jobs, meaning they will be able to make a greater financial contribution to the country.

For every £1 the government invests in early years education for low-income children, it will get more than double that back, according to recent research from the New Economics Foundation (NEF).

The government loses money when it invests in rich children, many of whom have the support and financial backing from their parents that already guarantees them a good future. 

Here, we break down analysis from leading experts and charities around the government’s childcare plans and how they will benefit the rich and once again leave the poorest children behind. 

Who is eligible for 30 hours free childcare each week? 

All children from working families will get 30 hours free childcare each week for free from the age of nine months until they are five years old by 2025. The key word here is “working”. 

Children whose parents earn less than £8,650 each are not eligible for the scheme and will miss out on key opportunities for development. 

“What we have is a very generous childcare offer,” the children’s minister David Johnston previously told The Big Issue. “An individual parent will be able to earn up to £100,000 and be able to claim this even if two are under that threshold. So while it’s not directed at certain types of incomes, it will help the vast majority of families.”

Few poorer families will be eligible for the full 30 hours free childcare offer, analysis from the NEF shows. By comparison, the majority of middle and higher income households will benefit.

This is because children are only eligible if their parents are working and earning. The Institute for Fiscal Studies (IFS) found that the poorest third of families “will see almost no direct benefit from the new entitlements”. 

All children aged three to four are entitled to 15 hours of free childcare, but this means many of the poorest children are entitled to just half the early years education that their peers receive for free. There are already large attainment gaps when children reach school and experts fear this could widen.

Charities Coram and the Joseph Rowntree Foundation (JRF) have also said that the childcare reforms will disproportionately benefit higher income families. 

“Disadvantaged children are falling behind before they even start school,” said Megan Jarvie, head of Coram’s family and childcare unit. “A well-designed childcare system can be a key tool in tackling this disadvantage. But instead, families are stuck in poverty and children are missing out on early education that could better prepare them for school.” 

There are issues with children accessing 30 hours free childcare – especially in deprived areas

Even if children are eligible for free childcare, they might not be able to access it, especially if they are living in deprived areas of the country.

New research from the NEF shows that 1.5 million children live in “childcare deserts”, meaning there are more than three children for every childcare place. That is nearly half (44%) of all children and it is most common in deprived areas of the UK, where children stand to gain the most from quality early years education. 

Tom Pollard, head of social policy at the NEF, said: “It is no coincidence that childcare deserts show up in the poorest areas of England, when access to our early years education system is based on parents’ working status rather than children’s need. By keeping the poorest parents locked out from the full benefits of early years education, the government risks locking their children into a lifetime of poverty.”

Research shows families living in poverty are less likely to take up their free early education entitlement even if the parents are working. Coram and the JRF found this could be because awareness is lower in deprived areas, with 91% of people aware of the scheme in the least deprived areas and 72% aware in the least deprived areas. 

People with English as an additional language often find the application process difficult, and there may be cultural barriers. A non-white British child is 12% less likely to take up their free childcare place than white British children. Take-up is particularly low for children from Bangladeshi families at 30%, and Gypsy/Roma children at 34%.

Why aren’t there enough childcare spaces in nurseries and pre-schools?

Part of the reason there aren’t enough childcare places is because there aren’t enough staff within the early years sector. It’s also a sector which is “chronically underfunded”, according to an Education Committee report from earlier this year.

The committee welcomed the extension of the 30 hours entitlement, but it said the sector needs “a sufficient funding rate” in order to successfully deliver the proposals.

There is currently a recruitment and retention crisis – and it will get worse as the plans for childcare reform mean there will be increased demand for spaces. 

Around 57% of nursery and pre-school staff and 38% of childminders are considering quitting, research from the Early Education and Childcare Coalition has revealed.

Campaigners warn that staff are “overworked” and “underpaid”, but the government is still planning to increase ratios so that they can expand free childcare. 

There was little further detail in the Autumn Statement about the government’s plans for childcare – disappointing the early years sector which had hoped for further funding to cope with impending pressures. 

The government announced this week it is set to invest £400m in its plans to expand free childcare for working parents in England from April. But those in the sector fear it is not enough.

Commenting, Neil Leitch, CEO of the Early Years Alliance, said: “While any early years funding increases are of course welcome, the fact is that the additional support announced today is still likely to fall short of what the sector needs to successfully deliver the 30-hours-expansion in the long term.

“This is particularly true of three- and four-year-old offer, where funding rates – which have long been wholly inadequate  – remain incredibly low. This is likely to push settings who do not, or cannot, offer places to younger children into an incredibly precarious position, meaning that many will struggle to deliver early education and care without passing this funding shortfall onto parents in the form of higher fees.

“And let’s not forget that today’s announcement only covers the rates that local authorities receive. Nurseries, pre-schools and childminders are still in the dark on their final rate, making it impossible for them to prepare for – never mind deliver – the expanded offer, at a time when many will be receiving a deluge of enquiries from parents eager to secure their funded places. 

“The policy is a perfect example of the ‘announce first, think later’ approach that government continues to take when it comes to early years. With the start of the expansion just months away, it remains to be seen whether there is any hope of this policy actually working in practice.”

Is the government offering any childcare help to families on universal credit? 

The government pays 85% of childcare for children whose parents are receiving universal credit and changes announced in the Spring Statement mean they can claim this upfront. 

But once again, parents have to be working to claim this offer. 

Coram and JRF have said that parents could be losing out financially if they take up this childcare offer. A parent on minimum wage takes home around £4 per hour after childcare costs, meaning it erodes half of their earnings. 

They may well be better off not working and looking after their children, while claiming the full rate of universal credit. 

People can find the support they are eligible for on the government’s childcare choices website. Most of these schemes are for working families, with the only scheme targeted at disadvantaged children for two-year-olds. The IFS has found that just a quarter of disadvantaged two-year-olds are eligible for this, down from 40% in 2015. 

So, what’s the theory behind the government’s plans? 

The government has a key focus in its economic plans – as announced in both the Spring and Autumn Statements – and that’s on driving people into work. The theory behind this is the more people work, the less the government has to pay in benefits and the more money it will generate from people paying tax.

That’s why it’s only offering free childcare to working parents, as an incentive to get people into work while assuming that people who aren’t employed have the time to look after their children. 

In the Autumn Statement, chancellor Jeremy Hunt reiterated the plans for the expansion of childcare and said it “will help tens of thousands of parents return to work without having to worry about damaging their career prospects”. 

But there are legitimate reasons why a person might not be able to work – including difficulties with finding flexible work that fits around childcare responsibilities. 

Many nurseries don’t stay open for full working days, partly because such young children can’t cope with the long days, and employers aren’t always accommodating of this. 

It’s particularly difficult for single parents. One mother previously told The Big Issue she feels “penalised” and “scrutinised” because she cannot find work to fit around childcare for her two young children.

She said: “I’m banging my head against a brick wall here. There isn’t a solution. It is really quite impossible. The reality is that employers still aren’t flexible enough at the moment, and a lot of them still aren’t open to working from home. I feel disheartened.”

Even looking at the government’s own ‘find a job’ website, few are listed as ‘work from home’ and offer flexible working arrangements. 

Why the government would make money if it targeted support at low-income families

It would make more economic sense for the government to put money into childcare for children from the poorest households. 

For every pound that the government invests in early years education for children from low-income households, it gets £2.07 back in the form of tax revenue, according to the NEF. That’s because these children go on to better careers and therefore contribute more to the economy.

Meanwhile, the government loses 33p for every pound it invests in children from high income households – because these are children who already have the financial support behind them to boost their education and are most likely to find themselves in high-paying jobs in spite of access to early education.

Pollard added: “The government’s plan to expand its childcare offer means that by the end of next year the state will be funding 80% of provision in England, making it a de facto public service. It would be inconceivable not to use that opportunity to deliver for the children who stand to benefit the most, and to help level up across our country.

“The government has the opportunity here to do something truly transformative, by making early years education a universal basic service.”

Charities and experts are calling on the government to create a “fair” childcare system, so that childcare is free or affordable depending on a family’s level of need. Those on the lowest incomes would get access to free childcare, while those on higher incomes would pay but at an affordable rate. 

“We urgently need to rebalance the childcare and early years system to better serve the children who stand to benefit the most,” Jarvie added. “We have set out a reformed system to better meet the needs of all families and children, and to level the playing field for disadvantaged children.”  

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