Money Box Live: childcare

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Hello. In this week's Moneybox Live podcast, we're talking about childcare. Because for many parents, it's a necessity. It's as essential as roads and rail for getting them to work. But it's not cheap. Garza is going up as well in the next few weeks which isn't great. I mean it's the third rise that she's been in which is just over a year.

Sending a two-year-old to nursery for 50 hours a week, which would let a parent work full-time, can cost more than £14,000 a year, at least until next month when new funded hours begin to kick in for parents in England. England. The government is expanding the funded childcare hours available to working parents. And in last week's spring budget, the Chancellor promised extra money to help make it work. The first phase of that plan is just a few weeks away from April.

Eligible working parents of two-year-olds will be able to access 15 hours of childcare support. Or will they? Well, not all parents are finding it easy to find a place. Now, before we meet today's experts, let's hear from some parents. I've been visiting a baby group at the Jungle Soft Play Centre in Warrington to ask parents there how they're finding and how they're funding.

child care just now. So this is Erin, she's 16 months. So do you use child care yet? Yes, she does two half days of a full day at nursery. I think ours is going up as well in the next few weeks which... isn't great and he's the third rise that she's been in which is just over a year. Are you getting any of the funded hours yet? Not yet, I think it's September. I think we get 15 but it's not a massive amount.

So you're here at the baby group with two babies. Hello. Hello. Do you pay for childcare? Do you have older children as well? Yes. We've both got three-year-old boys who are in childcare at the moment.

Our setup is that we actually send him to the nursery which is attached to his primary school which is a cheaper alternative to private day nurseries. We moved him up there when he was two. Before that he was in a private nursery setting which... at the time was expensive for us then and in the time that he was there about 15 months the prices went up so drastically that we had to pull him out when he was um able to move to the crime school but we've made inquiries since for our younger daughter

We're basically struggling to find childcare here at the moment. We're making inquiries for childminders because it's a cheap alternative. But yeah, we're actually finding it really difficult. So tell me about your situation. Is childcare a big cost for you?

Yes it is, so this is Charlotte, she'll be starting Child Parent Oster, so a few weeks away from now, just before she turns one as I return to work. I'm a three year old as well, so Cian now starts three hours, she's just turned three this week. My husband and I both work full-time, so they're both in full-time, all day, childcare.

Was it a big relief for you? You must have been pregnant when the Chancellor made the announcement about the increased funded hours. Yeah, it was nice. It didn't affect our decision to send them to full-time childcare, but it was nice. we're not foregoing a holiday because we've got to pay the nursery fees. It's nice to have but for our situation we were paying that anyway I guess for other people. They've now got an option to send or go work more hours if they need to.

We'll go back to the jungle later in the programme to hear from some childminders as well. But meantime, listening to that are today's experts. I'm joined by Ellen Brew, Managing Director of Family and Child Care at the children's charity Quorum, and Jonathan Broadbree, Director of Family and Child Care.

of Policy at the National Day Nurseries Association. Good afternoon. Good afternoon. Thank you for having me. Thank you both for joining us. Ellen, childcare is a huge cost for working families, so presumably you were delighted when the expansion of the funded hours was announced. We were. Childcare is a really excellent investment, as I'm sure your listeners will know.

As we heard from the people of the jungle, it allows parents to work. And I know high quality childcare also boosts children's outcomes with the biggest benefits for disadvantaged children. So it really helps narrow that gap.

between disadvantaged children and their peers. So we were really delighted when the Chancellor made the announcements a year ago or so. But there's obviously some concerns around how it will be delivered, which I'm sure we will get on to later on in the programme. I'm sure we will.

Why is childcare so expensive? The OECD has got some data showing that in 2021, the UK had the highest childcare costs as a percentage of the average wage. Although, of course, data wasn't available for some countries. Institute for Fiscal Studies says while it's hard to compare different countries, the UK is expensive.

Yeah, thank you for having me. And I think there's another set of OCD data that's important here, which is about the amount that the government of different countries put into childcare policies. For a long time, the UK government has been below the average for our peers and has been spending significantly less. per head on children in their early years. So obviously the investment that we're talking about is good because it supports families with some of the cost and it means that

The funding, you know, can hopefully improve to make sure that the early education is of good quality. But there's, you know, there's a flip side, you know, if if the. government isn't putting the investment into early education and care. then the cost of that falls on the parents. So it's not that the UK is more expensive per se, it's just that the burden of who pays is tilted more onto parents in this country.

And we're starting to see that dial shift now. Yes, yes, some significant changes. But Ellen, we're talking about those funded hours. We should be clear, that's not across the whole of the UK. There are different offerings in different nations. Just summarise the differences for us.

Yeah, absolutely. So it varies across the nations, as you say. In Scotland, all three and four-year-olds can get around 30 hours term time of hours per week, and also some two-year-olds. In Wales, again, it's a little bit different. Working parents of three and four-year-olds...

Four-year-olds can claim up to 30 hours for 48 weeks of the year, but they have to work at least 16 hours a week, and neither parent can earn over £100,000. But they also have, in addition to that system, something called the Flying Start Scheme, but that's only in part... of Wales and that provides free childcare to some children aged two and three.

Now that's a bit different again in Northern Ireland. So unlike England, Scotland and Wales, there is no scheme for free childcare in Northern Ireland at the moment, although it does have some funded preschool education. All parents of three and four-year-olds can apply to have at least 12 and a half hours a week of funded preschool education during term time. But that's quite a lot lower than in all the other nations.

If you are listening to this and thinking, A, you can visit the website childcarechoices.gov.uk and that will outline what support is available where you are, because it is quite different across the nations. Let's hear from Marie, though, because one of the questions...

that Ellen mentioned is whether the nurseries and the childminders are ready for an expansion of those hours. Marie got in touch with Moneybox Live after her nursery suddenly announced it was going to close at the end of the month. The nursery sent an email about two weeks ago, completely out of the blue, saying, with great sadness, the nursery is closing at the end of March.

In the email, in the letter to the parents, they were quite explicit about the reasons and said this is because of the new government funding and a lack of clarity and a lack of support about how to implement. that funding they they said they're really sad about it but they're they're making a loss as it stands and this is going to make it worse so as a result they're going to close at the end of march

And what we've all realised and what I've realised is there's just a lack of places. So as soon as the email came in, I just was phoning around all of the nurseries and early year settings that I could. Some of them had six months long waiting lists. Some of them had 15, 16 months long waiting lists. I have found a place about a 10 minute drive away from us that had a space. and so we showed an interest and they said there is so much demand for these final places that if you want it

you'll need to book it now and pay your deposit to book the place for your child. So we had no other option but to pay £75 to secure his place in that nursery. And that's before we could look at it, before we could really chat to the staff, before my kid could go and have a look around. But they said they were taking dozens of phone calls. We do now have a place. But to be clear, that's been a massive compromise because...

It wouldn't have been our first option. It's also more expensive. So we're in a position where we just have to take it because there was literally no other option for us. Marie, thank you very much for sharing that with us. Jonathan, what's actually happening? Are we seeing closures and why?

Yes, sadly, we are seeing closures and we've reported on this year on year for the last few years that the closures are going up and up. You know, there's Ofsted figures that... thousands of providers are being lost from the early years register each year and worryingly last time around there was 600 and that loss of 600 nurseries so you know anybody leaving the sector is

you know, is really sad. Ofsted, we should clarify, they say that the decrease could be more about a decrease in the birth rate and an increase in flexible working that just reduces demand. Parents don't need it as much.

Well, what we're talking about is... a net loss of settings so not necessarily about the places and we know that there's been movement on on the number of places but a net loss of settings um and you know that's taking into account any new nurseries or providers that open minus off the ones that all close and we you know we are seeing week by week month by month more and more of the situations like has just been described where a nursery runs out uh you know of the ability to stay open and

Our members tell us 35% of our members say they are expecting to operate at a loss and you can only do that for a certain amount of time. Is that going to change? Because in his budget last week, the Chancellor Jeremy Hunt added £500 million in funding for the rollout of...

funded childcare. And he also said he was going to reform local funding rules to make sure local authorities have to pass on at least 97% of funding instead of 95%. So there is more support coming. Will that make a difference? There is more support coming and it will make a difference and any improvement for providers is a welcome one because it helps them to plan. It helps them to figure out how and if.

They're able to offer the places that parents want and need. But, you know, the extra money that was announced last week is coming in for next April. So April 2025.

And what our members are telling us at the moment is that at the moment, 83% say that the current funding rates don't meet their costs. So as more and more of the places in settings are taken up by... funded hours from the government the impact of that underfunding has a greater and greater um you know effect on whether that nursery or or earlier setting can stay open

Thank you. A Department for Education spokesperson has told us that we've committed to increasing the hourly funding rates in 2025 to 26 and 26 to 27, and we'll continue to support providers to deliver the rollout, including through our national recruitment. Let's take a call now from Laura in Telford. Laura, good afternoon.

Yeah, so I have a son who's two and goes to nursery full time. So that equates to, as you said, about 50 hours a week so that I can work full time. However, despite... an income of over 40 000 pound i can't afford those fees without claiming universal credit um and It is only because of that claim that allows me to cover the childcare hours for my son. So does that mean that the new funded hours don't really make a difference to you if you're claiming your childcare through universal credit?

Yeah, so I was expecting to save around £200 a month when I first heard the announcement just on the basis of what my current nursery bill is. I then later found out that... um you know that the hours are term time only weeks so

because I need 51 weeks per year care, I only get around 11 hours per week free, if you like. And then obviously the nursery... um you have to pay like a supplementary fee for those days and for food and consumables and things like that so you know it's £3.25 a day which doesn't sound like a lot but when you add it up over a month it is And so my actual saving after all that was £20 a month because the nursery also put their fees up in line with inflation.

But are you actually getting more value through universal credit than through the funded hours? Well, it... It swings and roundabouts, really, because I am going to be claiming less in child care for universal credit. My universal credit payment will be less. That makes sense. Thank you very much indeed, Laura, for joining us and telling us about your situation.

Let's bring the panel in on this. Ellen, this is an important point, isn't it? And this is across the whole of the UK. If you're on universal credit, you might be able to get up to 80% of your childcare costs covered. What do parents need to know? Well, I think it's really important to say that... The childcare system is incredibly complex and I would urge all parents to make sure that they are getting all the support that is available for them. So on the gov.uk website there is links to...

three different types of benefits calculators where you can work out what benefits you might be eligible for. There's also a childcare calculator that helps you work out which offer works best for you? And I mean, I was sorry to hear about Laura's experience there in terms of nurseries putting up prices and that is something that we're hearing a lot more of in advance of the rollout. But I would really urge all parents to...

make sure that they are definitely getting all the support that they can and if they're not sure to maybe seek out their citizens advice bureau their local citizens advice bureau to make sure that they're getting the right benefit or they're on the right support and I would also

really urge them to speak to the Family Information Service which is something that every local authority has and they can help quite a lot with brokerage with nurseries and sort of have conversations with nurseries and find places for children so I would really urge them to get in touch with their family.

information service as well to make sure again that their child is in the right place and they're paying the right amount of money for that. Yes and universal credit is among the benefits that go chronically under claimed isn't it? And therefore, people who perhaps have an income where they think they wouldn't qualify might be able to qualify for that help with childcare. So it is worth looking at. Jonathan, another...

big chunk of help that is chronically underclaimed is tax-free childcare. Can you just remind parents listening what that offer is? Yeah, certainly. So under the tax-free childcare scheme, parents can claim back 20% of the cost of childcare from, well, the government will top up.

money that people put into their tax-free child care accounts and the end impact is to offset the tax that people have paid on their earnings so it did replace the the old voucher system and then that money goes directly to the provider for the for the place

whether that is a childminder or preschool or nursery so it is really important that people go to child care choices and find out about things that they're eligible for because tax-free child care is from age zero all the way to 14 so you know it can be used before people are eligible for for funded hours and it goes all the way through to school-age childcare as well. So it is a really important one and we know that only half of tax-free childcare accounts.

that are open are currently used and not everybody who's eligible for one has an open account anyway and that's led to £2.4 billion of support going back into the treasury instead of helping parents. And it's a considerable potential help, potentially up to £2,000.

per year, per child. I should be really clear, though, it can be used, tax-free childcare, alongside funded hours. You can't apply for it if you're on universal credit. They're two different systems. And in fact, there is a risk to your universal credit claim if you try.

to apply for tax-free childcare. Right, part of the government's plan to offer more places is to increase the number of childminders and it's doing that partly by offering a £600 grant for people in England who qualify as... providers. So once I was done cooing over the babies at the parent group, I went downstairs in the jungle soft play centre to where a group of child minders were enjoying a coffee while the toddlers did some crafts.

You are here with three very small children. Hello. Hello. What are they up to? So we've come here for the day and we do lots of crafts here. They have soft play. And we love it, don't we? How much is the hourly rate for your childcare or day rate or whatever it is? A day rate for me, eight till five, is £45 a day. And that includes snacks and breakfast. What about the funded hours? Is that the same kind of rate?

Funded hours, it works out about the same. Depends on the age of the child though. The funded hourly rate is higher for two year olds than it is for three year olds. The biggest problem we've got is that parents are wanting to now negotiate our rates because they see that the funded hourly rate from the government is slightly higher than the hourly rate we are charging.

so they want a discount on the remaining hours that go over the 15 hours funded. It's created a little bit of tension between childminders and parents. already before the funding is even in place because parents are trying to negotiate on reducing the additional hours. So how many children do you look after? I have four on my books at the moment.

full days, some come full time, some part time. And will anything change for you when the new funding comes in next month? No, not necessarily. The funding is actually more than what I charge parents until I put my fees up.

The only thing I will say about it is I think a lot of three-year-olds are going to get pushed out because the two-year funding is more than what you get paid for the three-year-olds. So a lot of childminders are going to opt for the two-year funding because they get paid more, basically. because the three-year-old one doesn't really cover what we do with them. Do you want more toast or are you okay? Finish what's in your mouth. Just make sure he's finished what he's eating, shall we?

So you're relatively new on the childminder scene. How long have you been doing it? It'll be two years in August. And why did you become a childminder? I'd worked in private day nurseries, schools, school preschools. for 15 years and I just felt like it was time for the next move. There's been a bit of a drop in the number of childminders in the UK. Why do you think that is? It's quite hard, obviously if you have a poorly.

You don't get sick pay, so the financial side of it is that. The funding as well, it's a bit of a grey area. I personally in my borough haven't had any issues with it, but I know other childminders have. And if you've got so many children on funding and you're waiting for that payment once a month and it's delayed, doesn't happen, obviously you've still got your outgoings.

OK, we're finished. Let's go and have a play and we'll have some snacks in a minute, guys. I'd like a snack in a minute. That was some Warrington childminders at the Jungle Soft Play Centre. Jonathan. One of those childminders said there can be a tension with parents because they want to negotiate down the rates, which you can understand. We've been talking about how high the bills can be. Does it cause an issue for nurseries as well?

I think there's a fundamental tension in the policy, which is that when the government... uh talk about it and offer it they talk about free uh child care we stay away from the uh the f word because actually uh the offer is for the hours of child care it doesn't include things like food snacks consumables so that quite a lot of parents you know come to it thinking this is going to be free and you heard that in laura's example as well actually

There are things outside of the offer, especially if parents need childcare year round and it's only for 38 weeks of the year. So there is an inherent tension there. And we know that we know that. when they're looking at their fees. They're thinking about families' positions. You know, we talk to members and they say that they're worried sick about sending the information out that they know they need to do. So we spoke to providers and said, what is happening with your staffing costs?

And they were going up by over 14%. And what were you doing about fees to parents? They were going up about 8.5%. Now, that's a big jump for parents. We know that. And it's really challenging. the costs on the other side for whatever type of provider you are, everybody's been facing, you know, inflation, rising costs. Yeah, so that is...

something that providers are doing to help parents. Yes. We heard an email from Helen who says good quality childcare should be expensive. Highly qualified staff, ratios to adhere to, food, heating, rental toys, etc. And she makes the point most nursery staff won't be getting paid.

anywhere near what some of the parents are earning thank you very much for that let's squeeze in another call katie's on the line katie hello hello so tell me about your situation you're living in a rural area you have two children

Yeah, so I've got a four nearly five-year-old that's at school and a nine-month-old. Are you using childcare? At the moment, I'm still on maternity leave. I was meant to go back to work, but the... nursery that I was looking to send my nine-month-old to shut down just before Christmas or just after Christmas and I couldn't find another place that had the available hours.

for me to go back. So I had to leave my last job and look for another one. I mean, it's a really difficult situation. Have you looked around at other local childminder setting or childcare settings? Yeah, so most of them have got waiting lists. Where we are, the whole town pretty much had to find childcare. And the nursery that shut down was pretty much full as well.

So there was a lot of kids that had to find new childcare providers. So is there just a shortage of places to actually apply to, to look for? Yeah, around here you've got now... One child minder in the town and one nursery that takes from birth. Two nurseries if they're from two years old. Otherwise you've got at least a 10-15 minute drive. before you reach the next nursery or childminder. And is that possible for you? It is. I've had to find a nursery and childminder near...

A job, I've had to go all the way to Ipswich and look for jobs in Ipswich which is an hour away from us. But because it's a bigger town there's a lot more childcare providers around for us to choose from. Well, Katie, thank you very much for telling us about your situation. I'm glad you've found somewhere, even if it's a long way away. Jonathan, is that unusual? Is that an issue with rural areas, a lack of childcare provision for a working parent to actually use?

But I think what Katie's example shows is that, you know, if you have a system where everybody's operating right at the limit, right at the edge... If something breaks, then there's no backup there. And it's really challenging then for parents like herself. We've known settings in rural areas have to close, not just for financial reasons.

but actually because it's difficult for them to have all the staff and all the qualified staff that they need in that local area as well. So it's not just funding, it's being able to keep and retain the staff in those areas. So I think in rural areas, you're a bit more fragile. I think that's the concern.

A Department of Education spokesperson told us that we're confident in the strength of our childcare market to deliver the largest ever expansion in childcare in England's history. We're already seeing providers looking to expand their placements across the country. Hopefully some of that will... will help Katie in Suffolk.

Well, it's tidy away time in the Moneybox Live podcast studio. Huge thanks to everybody who took part and shared their stories. And thanks, of course, to today's experts. We've been hearing from Ellen Broome from the children's charity Quorum and Jonathan Broadbury from the National... If there's a financial story you want us to take a look at, please do get in touch now. You can email moneybox at bbc.co.uk. Include a phone number if you can.

In this podcast, our producers were Will Harris and Neil Morrow. The production coordinator was Sandra Hardiel, studio manager Cameron Ward. Our editor was Beatrice Pickup. I'm Felicity Hanna and this was a BBC News money and work production for BBC Sound. you Forgive us, listeners, for we have sinned. And we want to know why. I'm Becky Ripley. And I'm Sophie Ward. And we're here to tell you about our new podcast series, Seven Deadly Psychologies, now available on Seriously from BBC Radio 4.

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Vivint lets you keep an eye on your kids from anywhere, so it's a smarter way to care. Because Vivint adjusts your thermostat when it knows you're out, it's a smarter way to save. When Vivint guards your packages from Prowlers, it's a smarter way to protect. And when you can lock the doors and dim the lights for movie night with a single tap, well, that's a smarter way to live. To get the smarter home system that just gets you, go to Vivint.com or call 1-855-4VIVINT. Live intelligently.