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Childcare (Early Years Provision Free of Charge) (Extended Entitlement) Regulations 2016

Volume 777: debated on Monday 12 December 2016

Motion to Consider

Moved by

That the Grand Committee do consider the Childcare (Early Years Provision Free of Charge) (Extended Entitlement) Regulations 2016.

My Lords, the Childcare Act 2016 delegates power to Ministers to create these regulations. It gives the Secretary of State a duty to secure 30 hours of childcare to three and four year-olds of working parents. The regulations provide for the additional 15 hours of childcare for children of working parents. I thank noble Lords who are members of the Secondary Legislation Scrutiny Committee for their views on and support for the regulations. I hope that my department has provided reassurance around the questions raised.

This Government are committed to giving working parents of three and four year-olds 30 hours of childcare from September next year. This policy provides significant support with the cost of childcare, worth around £5,000 per year, to working parents who take up the full 30 hours. We debated the eligibility criteria and the detail of the policy extensively during the passage of the Childcare Bill last year. These draft regulations provide more detail on the design and delivery of the additional 15 hours.

The draft regulations set out the eligibility criteria for the 30 hours entitlement. The main income-related requirement is that all parents within a household will need to be earning the equivalent of working 16 hours a week at the national minimum wage or national living wage, and less than £100,000 per year. We are also enabling certain “non-working” households to be eligible for the 30 hours; for example, where parents are not working because they are on maternity or paternity leave or where one parent is working and the other is not because they are disabled or have caring responsibilities.

The Secondary Legislation Scrutiny Committee asked how the application process would work. Parents will apply online via GOV.UK, providing some basic information which HMRC will verify against a range of government data. The system is being trialled with a variety of parents across the country, and I want to offer reassurance that a phone line will be provided for digitally excluded parents.

Over the summer, the department consulted on how the 30 hours would be delivered and published its response in November. On flexibility, we have carefully balanced the needs of working parents with the need to maintain quality for the child. As a result, and in the interests of the child, the maximum session length of 10 hours per day will remain. However, we are extending the hours in which providers can deliver the entitlement to allow parents who work shifts to use the offer as early as 6 am or until 8 pm where they need to do so. To support the market in delivering the entitlement flexibly, we set out in our response to the funding consultation that local authorities are permitted to include in their local funding formulae a supplement for “flexibility”.

To ensure simplicity and clarity for parents and providers, and fair, consistent arrangements for children and families, we have committed to a national grace period for children whose parents lose their jobs. Further informal consultation will be carried out with stakeholders on the length of the grace period before we set out final decisions in statutory guidance in the new year. My department continues to undertake extensive informal consultation with key stakeholders, including childcare providers, local authorities and national childcare provider organisations, and I am grateful for their constructive engagement.

I want to restate that children accessing the additional hours will benefit from the same stringent quality standards that we apply to the existing childcare entitlements. Providers delivering any part of the 30-hour entitlement will need to follow the requirements of the early years foundation stage and must be registered on the Ofsted early years register. We have also committed to developing a workforce strategy to help employers attract, retain and develop staff to deliver high-quality provision. The strategy is a priority and we will publish it as soon as possible.

The department has now responded to its consultation on introducing a new, fairer funding system. We have introduced a minimum funding rate so that no local authority is paid less than £4.30 an hour for the delivery of the entitlements for three and four year-olds, bringing the average total hourly rate up to £4.94 per child. This, along with the requirement that local authorities pass through 95% of the funding they receive from my department, means that the great majority of providers will see an increase in the level of funding they receive. Alongside this, we have also extended the £55 million per year supplementary funding for maintained nursery schools until the end of the Parliament. This reaffirms our commitment to high quality early education in disadvantaged areas and to social mobility. We are committed to consulting on longer term plans for maintained nursery schools.

I am delighted to report that we went live with the 30 hours offer for early implementation in eight local authorities in September. The programme is going extremely well with more than 3,700 children already accessing a 30 hours place. We are capturing learning from these areas throughout the year and sharing it with every area to make sure that the roll-out has the benefit of learning from their success. The 30 hours offer is just one part of my department’s broader commitment to giving all children, whatever their family circumstances, the best start in life. All three and four year-olds and the most disadvantaged two-year-olds receive 15 hours a week of early learning. The early years pupil premium provides additional support for the more disadvantaged three and four year-olds. Targeted support through the new special educational needs inclusion and disability access funds will support children with special educational needs and disabilities. To further help parents with the cost of childcare, tax-free childcare will offer parents a 20% subsidy on childcare from early next year. The Government’s flagship welfare reform programme, universal credit, already allows low-income working parents to claim up to 85% of their childcare costs even if they work for only a few hours a week.

Together these offers will amount to funding worth £6 billion per year by 2019-20. This is a major package of support for working families and is higher than any Government have committed to this sector previously. That brings me to the conclusion of my introductory comments, and I hope that the Committee will support these regulations.

My Lords, there is much to welcome in what the Minister has said. He may well recall the graph of disadvantage, where an intelligent boy or girl from a low income family will start high on the graph but over a period of time will decline and a less intelligent and less able middle-class child will rise past that child. As the Minister so eloquently put it, “High quality early years childcare and education can make a huge difference and promote the social mobility of such young people”. So I welcome the extension of the funding.

As the Minister is aware, I am concerned that future costs, such as the new cost of the minimum wage—a welcome addition, but challenging for childcare providers—is something that the Government need to take into account in future funding arrangements. I am grateful to the Minister for indicating that he and his colleagues will be monitoring this very closely and I recognise that this is the most that any Government have invested in high quality early years childcare.

I have two questions for the Minister. One relates to the penalties part of these regulations. I do not know how they will work in detail and there may not be grounds for concern, but I am thinking again of homeless families. I thank the Minister for ensuring that the piloting of these arrangements has ensured that homeless families are given attention and reached out to. I am concerned that with their movement, they can be hard to communicate with, that they might miss letters, and I would not wish to see them penalised because they missed some correspondence that they should have responded to—the Minister might like to write to me on that particular point.

The second point is in regard to foster children. I am sure that we discussed this at length during the course of the Bill, but I cannot recall why it is that foster children are excluded from this; perhaps the Minister could remind me of that. Since we discussed the Bill, we have had a report from the Family and Childcare Trust highlighting that 14% fewer looked-after children access high quality early years care than the general population. I think that emphasises how more needs to be done to ensure that they do access it. It may be that their access needs to be kept under review. I have nothing more to add and I look forward to the Minister’s response.

My Lords, I thank the Minister for introducing these regulations. It goes without saying that we welcome the extension of free childcare to 30 weeks from next September and it is helpful to have these regulations as the route map to delivering that—or at least in theory. I suspect that the practice will be more challenging and that the Government will, I fear, face real difficulty in meeting the demand unless greater resources are committed to that end.

My fears on that score stem from the current difficulty in ensuring uniform delivery of 15 hours a week and from what we hear of the plans for the future. Indeed, the Government have been accused in some quarters of “raiding the budgets” set aside by local authorities to help disadvantaged children in order to fund the doubling of free childcare for working families, some of them relatively well-off families. Local authorities currently receive government funds for 15 hours of free childcare for three and four year-olds. Under the present system, local authorities have been able to pay extra cash to schools with nurseries from that budget because they employ qualified teachers and are used disproportionately by poorer families. They have also been able to set aside extra funds to ensure that children from the most disadvantaged families get more than 15 free hours. However, local authorities will now no longer be able to offer additional funding above a set hourly rate per child. Instead there will be a requirement to pass on 95% of centrally provided funds directly to childcare providers.

The new offer of 30 hours of free childcare is of course available only to working families, so any child from an unemployed family currently getting more than 15 hours will lose that extra support. About 80% of three year-olds from the most disadvantaged areas currently attend childcare with a qualified teacher or early years professional. By preventing local authorities from continuing to offer what are known as “quality supplements”, it is likely that schools will need either to reallocate funds from the main school budget, which is already stretched to breaking point in many council areas, or reduce the status of their school nursery. This policy threatens to take cash away from disadvantaged children to pay for the childcare costs of better-off families. I am confident that the Minister will use this opportunity to deny that that was the Government’s intention, and I am not suggesting it was, but if that is the outcome then will he commit to finding a way of ensuring that children from disadvantaged households do not become the victims of unintended consequences that could seriously hamper their development?

The significance of this issue cannot be overstated. We know that the Government are struggling to find the resources to finance 30 hours of free childcare, but targeting non-working families or those who are disadvantaged should be off the agenda. This is because investing in early years is not just about quality childcare for working parents. It is also critical to closing the education inequality gap, which can already be very wide before children arrive at school. I suspect that the Minister will respond by saying that local authorities are able to offer additional cash to childcare providers from their wider budget, but the reality is that few local authorities have the flexibility to do that, and even where they do, it may not be on a sustainable basis.

At the beginning of this month the Early Years Minister, Caroline Dinenage, announced that councils will receive a minimum rate of £4.30 an hour in the new early years funding formula. This came in response to the consultation which was carried out over the summer and the DfE has now found an extra £30 million in its budget to support the introduction of this rate. While any extension of the supplement is welcome, the Government’s funding plans still fall well short across the sector of what is needed to deliver on their promise of 30 hours of free childcare. It has to be said that their record is one of closed Sure Start centres, rising childcare costs and parents waiting for much-needed support. The Government have also announced an extra £50 million for councils to build nursery schools, which is of course an important part of the whole process, but last week the shadow Early Years Minister, Tulip Siddiq, released figures that show a huge black hole in the Government’s nursery building programme which is needed to provide for the new demand. With only one-third of councils having submitted their bids, the total asked for has already exceeded £55 million, which suggests that there could be a shortfall of around £100 million if all local authorities are to have their needs met.

It is all very well promising free childcare, but we need assurances on the infrastructure and resources to back it up. Even if the Government dispute the figure of the shortfall, there will be one, so where do they intend to make it up because surely they did not intend that local authorities which apply for this funding should be turned away empty handed? If they are unable to get the funding, that will underline the evidence that the Government’s funding plans fall short across the sector of what is needed to deliver on their promise of 30 hours free childcare a week from September next year. At the same time, the childcare profession faces a recruitment crisis, with the nursery sector struggling to pay staff even the national minimum wage.

Caroline Dinenage announced that the increased rate in the early years funding formula will be made up of a base rate, plus an uplift for additional needs, based on measures for free school meals, disability living allowance and, as the noble Earl, Lord Listowel, mentioned, English as an additional language. The Minister also said that the disability access fund would provide £615 a year for every eligible child. That, together with the recognition in paragraph 9.8 of the Explanatory Memorandum to these regulations, is welcome. Currently, children with special educational needs or a disability are not adequately supported, and it is hoped that this additional funding will, to some extent, address that.

The response from providers and sector organisations still suggests that the latest offer from the Government is unlikely to be sufficient to achieve the requirements set out in the regulations and to deliver the policy more broadly. When these regulations were considered in another place last week, my colleague Tulip Siddiq asked the Minister whether such concerns over the latest funding announcement were well founded. She did not receive a response, so perhaps the Minister will be able to oblige today. I heard his opening remarks but, given the concern in the sector, I think that that point needs to be reinforced.

The doubts about sufficient resources remain. Sir Michael Wilshaw’s annual report notes that the current increase in early years places has not kept pace with the increase in the early years population. So, again, I invite the Minister to assure us that he is confident that there is sufficient capacity to meet demand.

I thought that last week the Early Years Minister sounded somewhat complacent, saying that she did not expect the 30 hours of free childcare offer to double the demand for childcare places, because many parents already access more than the 15 hours a week and pay for the additional hours. That may well be the case but surely, human nature being what it is, these parents will now cease paying for it themselves as they will be entitled to have it covered by government—within earning limits, of course. Therefore, why the demand is unlikely to double is at best unclear.

I have one final point of clarification to put to the Minister. A new organisation called Childcare Works is to be established. It is intended to be a conduit between the DfE and local authorities to ensure that there will be sufficient 30-hours places from September next year. I wish it, and the local authorities involved, well, but the DfE website describes the new organisation as a consortium consisting of two companies of consultants and a charity. I am happy for this to be done in writing but can the Minister outline some details of the kind of assistance—I assume it will not be handing out cash—that Childcare Works will provide to local authorities to meet the demand for 30-hours places?

I hope that the Minister will accept that I have no interest in scoring points at his expense—at least, not on this issue. Naturally, I wholeheartedly welcome the introduction of 30 hours of free childcare, but I repeat that it will be meaningless for many parents if it is not fully funded.

In relation to the noble Earl’s points about future costs, as he knows—we have discussed this—we have thought about this carefully through our review. In answer to that point and the question asked by the noble Lord, Lord Watson, about capacity, it is true that the system has responded remarkably well to the substantial increase in provision that we have brought in over the last six years, including the funding for disadvantaged two year-olds. I think it is fair to say that the childcare system is in very good shape, but we will monitor it closely.

I will look carefully at the issue of homeless families and the point that the noble Earl made about penalties. I am sure he will also be interested to hear that in Swindon 30 hours of free childcare is being piloted in a refuge for women who have suffered domestic violence. This includes providing childcare at the refuge and using the space to provide training for the women living there.

At the moment, foster children are excluded from these arrangements but we have been listening carefully to concerns raised on this point. As we all know, foster carers play a vital role in supporting some of our most vulnerable children, and we recognise the importance of effective support for their recruitment and retention. However, we also need to consider whether it is possible for children in foster care to take up the additional hours in a way that promotes their best interests. We will consider whether the blanket exclusion of all children in foster care from the 30-hours policy is the right way to balance this and will clarify our eligibility criteria in relation to this group in advance of September next year.

The noble Lord, Lord Watson, was quite rightly concerned about disadvantaged children, and the Government and the coalition Government have been heavily focused on the plight of disadvantaged children over the last six years. Of course, our new Prime Minister has stated quite clearly that social mobility is right at the top of her agenda. As I said, we have already introduced 15 hours of free childcare to the most disadvantaged two year-olds and I am sure that noble Lords will be pleased to hear that take-up has gone up from 58% last year to 68% this year.

We introduced the pupil premium and the early years pupil premium, and the gap between disadvantaged children and others achieving a good level of development continues to narrow, from 19% in 2013 to 17% this year. We recently announced six opportunity areas, which will focus particularly on the issues facing disadvantaged children. It is true that the best way out of poverty is work and that is what our reforms to welfare have been about. But local authorities can still use their funding to provide additional support for disadvantaged children if they so wish. However, we are clear that if passing on the 95% creates real issues, it is something that we will listen to.

The noble Lord, Lord Watson, talked about capacity. As I said, the sector has responded very well to increasing capacity so far. In recent rounds, we have enabled free school applicants for primary schools to apply for nurseries as well, and a high proportion of those have done so. That has added substantial capacity.

The noble Lord also asked about Childcare Works. The consortium includes a number of people including Mott MacDonald. It has built both capacity and demand successfully so that 68% of disadvantaged two year-olds are now taking it up. Together with Action for Children, it offers a wealth of experience supporting local authority childcare providers to respond to the expansion of free entitlements. I think that that covers most of the points raised by noble Lords, but I will check Hansard carefully and write to the noble Lord, Lord Watson, if there is anything I have not covered.

I thank the Minister for what he said about examining the case of looked-after children in early years provision. I have a couple of supplementary questions, on which he might write to me. The report, Starting Out Right: Early Education and Looked After Children, has four recommendations, and I mention two. One was improving national data on the attendance in pre-school of looked-after children. It would be helpful to have those data kept in future. Another recommendation was for a pupil premium plus for looked-after children in pre-school care just as there is in primary and secondary education. Perhaps the Minister will write to me about those two things.

I will certainly do that. Having made those comments, I hope that noble Lords will support these regulations.

Motion agreed.