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Treasury Committee recommends higher funding rate for 30-hours scheme

By Rachel Lawler
Child plays with lego
The government should pay a higher hourly rate for the 30-hours free childcare scheme, according to a report by the Treasury Committee.
The unanimously-agreed Report on Childcare has made a series of recommendations to the government, asking for the childcare voucher scheme to be kept open and improving awareness of tax-free childcare. It has also called for improvements to the Childcare Service website.
The Treasury Committee is a cross-party group of MPs that examines the work of HM Treasury. Its Report on Childcare follows an inquiry into the government's childcare policies and their impact on the economy.
"Misleading" figures
Report on Childcare explains that the £4.94 rate quoted for the 30-hours scheme is "misleading" as the rate passed on to early years providers is often much lower at an average of £4.34.
The report also notes that the Department for Education's estimate that the average cost of childcare, at between £4.25 and £4.37 an hour, was calculated before the introduction of the National Living Wage. The increased wages mean that the average cost to providers is likely to be £4.68 an hour.
Annual funding review
The report recommends that the government pays a higher hourly rate to providers, one that better reflects their current costs. It says this rate should be updated annually and that the government should ensure that local authorities pass on all the money to providers.
Nicky Morgan, MP and chair of the Treasury Committee, said: "The government's own figures on how much it provides per hour to fund 30-hours free childcare are often misleading and out-of-date. One estimate suggests that there would be a total sector-wide shortfall of over £157 million per year from 2017-18.
"As a result, some childcare providers are altering their services, potentially redistributing resources away from low income parents towards higher income parents. If the government wants to avoid these consequences, it should pay a higher hourly rate to providers that more accurately reflects their current costs."
Recognisable concerns
Neil Leitch, chief executive of the Alliance, said: "This important report paints a stark picture of the state of the government's childcare policy. But, unfortunately, it is one that will be instantly recognisable to both parents and providers.
"The report makes clear that the government's current calculations of how much it costs to provide high quality childcare are way off. And, while the Alliance has been saying this since before the 30 hours policy was rolled out last year, there's little satisfaction to be taken from the committee's agreement when every week we hear of more passionate providers being forced close.
"The committee's recommendation of an annual review of the funding rate signals the appearance of a broad consensus between families, practitioners and politicians. There can be few people left outside of the government who are not fearful that this flagship childcare policy will fail if the government does not take action, starting with the implementation of the recommendations made by the select committee today."
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