IN A desperate attempt by the government to show it cares about families and children, Chancellor Jeremy Hunt announced a £4 billion increase for childcare reform in the spring Budget. 

It included plans to increase the number of childminders by piloting incentive payments of £600 to anyone signing up to the profession, rising to £1,200 if joining via an agency. 

The plan backfired when it was revealed that the Prime Minister’s wife, Akshata Murty, is a shareholder in Koru Kids, which is among the private childcare providers likely to benefit from the scheme, a fact that Rishi Sunak failed to declare.

Behind this seemingly minor embarrassment for the Prime Minister is a much bigger story. The frightening reality is that having plundered the NHS and adult social care, with disastrous results, private equity companies have now firmly got their sights on the childcare sector. 

Profiteering in childcare

The Guardian newspaper revealed in August that private equity firms have more than doubled their stake in the childcare sector. In 2022 at least 1,048 Ofsted registered nurseries were fully or partially controlled by investment companies, including private equity and venture capital firms — 75 per cent of all nursery places, up from 4 per cent in 2018.

In January 2022, University College London (UCL) published a report spelling out the dangers of private-profit financing of childcare. Dr Antonia Simon, lead author of the report, explained: “Many of the companies that are able to buy up parts of the nursery sector, because of the government’s funding model, are heavily reliant on private equity funding and have growing debts and low to negative operating reserves, placing such provision at risk of collapse.

“The complex financial structures of these companies involve foreign investors and shareholders which are used, alongside public money, to expand their market share. While shareholders in the private equity companies and their senior executives may profit from investing in such companies, little of this money is being reinvested back into the sector.”

The findings highlight the stark contrast in the way not-for-profit childcare companies are run, with charitable nurseries supplying transparent accounts to the Charity Commission, compared to the more limited accounts larger private companies need to file with Companies House. 

Not-for-profit companies cannot carry substantial debts and must also reinvest any surplus into the childcare business. 

The UCL report also shows that staff costs in these not-for-profit companies could be as much as 14 per cent higher than in the for-profit childcare sector — indicating how low pay for staff, who are mostly women, is built into the private childcare sector.

Government sowed the seeds for privatisation

Since the 1970s, local authorities have seen a steady erosion of their strategic and financial autonomy. Increased central government control has resulted in local authorities no longer being seen as the primary service provider in their areas. 

The introduction of the nursery voucher scheme in 1997, which gave parents £1,100 to help with childcare, paved the way for the rapid development of the private childcare sector. 

Conservative MP Gillian Shepherd, Secretary of State for Education and Employment, heralded the introduction of the scheme by saying: “The point of the nursery voucher scheme is that it will encourage many providers to register for it, as has already happened. Six hundred providers have joined the scheme from the private and voluntary sector, 40 of them new providers.” 

But the voucher scheme cost £20 million and failed to increase provision. The incoming Labour government abolished it in 1998, replacing it with an “entitlement” of 12.5 hours free part-time nursery education for four-year-olds. 

To ensure sufficient number of childcare places, for the first-time joint planning at local level was required between councils and the private/voluntary/independent sector (PVI). 

This created tensions and an element of competition between the various providers who up until then had not had to work together.

Since 2010, successive Tory governments have found a variety of ways to make local authorities fund maintained and non-maintained childcare providers at the same rate. 

This attempt to create a level playing field takes no account of the different staffing costs or the quality of provision on offer. By 2017 the PVI sector was providing 62 per cent of free places for three-year-olds compared to 35 per cent in the maintained sector. 

When the entitlement was raised to 15 hours per week in 2010 then to 30 hours for working parents in 2017 it put further strain on local authority funding. 

The UCL report found that opening up the childcare market to private investors has not led to an increase in places. Their incentive is profit so they are unlikely to invest in areas of deprivation where low-income families are unable to financially top up on the basic provision.

Soaring costs and shortage of places

There is no government childcare support for children under the age of three unless they have additional special needs. The charity Coram Family and Childcare found that a part-time place (25 hours per week) for a child under two now costs an average of £151 a week, putting it out of reach for many families. 

PriceWaterhouseCoopers showed that childcare costs in the UK relative to average income were one of the highest out of the 38 OECD countries and represented almost a third of the income of a family on the average UK wage (£32,000 full time) compared with as little as 1 per cent in Germany. 

In addition to rising costs many families are finding it impossible to find a nursery place. Of the local authorities in England only 48 per cent have enough childcare places to meet the demands of parents working full time, down from 59 per cent in 2022.  

Between March 2021 and March 2022, 4,000 providers closed down and, according to the Early Years Alliance, the sector is facing its worst recruitment crisis — unsurprisingly given that working with children is undervalued and pay is low. 

Women priced out of the workplace

The TUC estimates that 1.46 million women are prevented from working because of caring responsibilities, with 450,000 of them in their thirties. 

Only 1 per cent of men in this age group are affected in this way. The lack of free, flexible childcare affects women throughout their working life, having an impact on pay, promotion, training and pensions. 

A report this year by Pregnant Then Screwed into the childcare crisis revealed that a staggering three in four mothers (76 per cent) who pay for childcare say it no longer makes financial sense for them to work. 

The survey of more than 24,000 parents showed that increased costs now takes up the same as or more than their take-home pay per day. 

As well as detrimentally affecting the life choices of millions of women and depriving young children of valuable early years experiences, it makes no economic sense.

Equality and economics

For too long, childcare has been seen as a “women’s issue” and clearly the lack of free childcare has had a greater impact on women than men. 

Back in 1980, Sir George Young, secretary of state for social services in Margaret Thatcher’s government made his views clear by saying: “I do not accept that it is the state’s job to provide daycare to enable parents of young children to go out to work.” 

Echoing the dominant social and political view in government at the time — that women should stay at home to look after the children. But this wasn’t always the case. 

During the second world war, it was the Ministry of Labour that called for the setting up of nurseries so that women could support the war effort and the economy. 

By September 1944 there were 1,450 full time nurseries (0-5-year-olds); 109 part-time nurseries (two-to five-year-olds) and 784 nursery classes in schools (two-to five-year-olds). 

Dr Paul Smethwick, chief medical officer at the time, also noted how the nurseries helped to maintain the health and wellbeing of the children.

In February this year, Labour MP Stella Creasy, a long-standing campaigner on childcare, led a cross-party debate on the issue, powerfully making the point that investing in childcare is good for economic growth: “There is no area of economic policy in which investing leads to saving so clearly as in childcare, yet in this country we still act as if it were an add-on to an economy that is already struggling with productivity issues.” 

Drawing attention to the complicated systems that parents have to use to claim support, she called on the Treasury to use the £2.8 billion of unclaimed tax-free childcare money to be spent right now on improving childcare. 

With a government only interested in personal gain and private profit, we are unlikely to see any real improvements in childcare, and Jeremy Hunt’s latest promises are merely a cheap attempt to buy votes at the next election. 

What we need is a complete overhaul of the current childcare sector and a plan to create a system that works in the interests of parents and children, not big business. 

Which is what the newly formed Early Education and Childcare Coalition (www.earlyeducationchildcare.org) is trying to do. Hosted by the Women’s Budget Group and launched yesterday, it brings together 30 organisations, representing parents, children, providers, early years workers and the wider business community. 

It aims to build public and political support for an early education and childcare system that works for all children and parents as well as the wider economy. Something we have been demanding for far too long. Let’s hope the next government listens.

Anita Wright is a member of National Assembly of Women and former primary head teacher. This article is in the latest edition of Sisters, journal of the NAW (www.sisters.org).