94.In this Chapter, we consider the challenges faced by the childcare sector pre-pandemic in terms of finances, workforce and recruitment issues and challenges posed for parents by the design and operation of the subsidised childcare schemes. We then look at how the sector fared during the pandemic, the sufficiency of Government support and what is needed in terms of a short- and long-term strategy for the sector.
95.The childcare sector relies on a mixture of private and public funding. Approximately a quarter of the sector’s funding comes from free entitlement funding for children, 64% of funding comes from parent fees (subsidised through various schemes), and the remainder comes from a variety of other sources including local authority grants. Since 2017–2018, public funding has remained largely frozen. The IFS estimated that around a quarter of childcare providers overall (11% of private nurseries, and 34% of childminders) were in significant financial deficit on the eve of the pandemic.
96.Liz Bayram of the Professional Association for Childminders and Early Years (PACEY) told the Committee that an ongoing challenge had been:
threadbare financial existence that they have had to cope with due to the prolonged absence of long-term strategy from Government for children and young people.
97.The sector has faced long-standing problems with workforce training and retention. These issues have become increasingly salient as funded childcare provision has expanded and demand has increased. The early years workforce is predominantly female, young, and low paid. In August 2020, the Social Mobility Commission found that: 96% of staff were women; 40% of staff were aged under 30; and 13% of the workforce earned less than £5.00 an hour.
98.Dr Costa Dias told us that the extension of the Government subsidised childcare scheme to 30 hours allowed more women to work. However, she argued that the absence of assistance for mothers with very young children harmed women’s career opportunities:
If mothers are not going back to work during these very early years—zero, one and two—they will miss out; they will leave their job. They will then go back to looking for a new job and starting again at the bottom of their careers. That is a big cost.
99.Professor Rubery told the Committee that “we have some of the most expensive childcare in Europe”, and that eligibility and availability of the 30 hours’ childcare was problematic:
100.On 18 March 2020, the Education Secretary, Gavin Williamson, announced the closure of schools and early years providers from 20 March, save for children of keyworkers and vulnerable children, where possible. At that time, the Government had not yet announced the CJRS nor the SEISS. The Government confirmed that providers would continue to be paid in full for the publicly funded free entitlement hours they expected to deliver, regardless of actual take-up or even whether the setting remained open.
101.On 17 April 2020, the Department for Education released further guidance on the interaction of the CJRS scheme with the free entitlement funding: providers with (uninterrupted) public funding available to pay staff wages were not allowed to access additional public money through the CJRS to cover those wages. This guidance was described as a ‘U-turn’ by the shadow Minister for Children and Early Years. Childcare providers were able to re-open from 1 June 2020.
102.There was no mention of childcare in either the Summer Economic Statement or the Winter Economy Plan. This was astonishing given the vital importance of childcare provision for women’s participation in paid work, and the precarious position of the childcare sector. As Dr Costa Dias told us:
Having a proper policy on how to build up more care and more affordable care for parents is crucial to allowing women to work in a more uninterrupted way through a longer period of their working lives.
103.Witnesses argued that despite the continuation of public entitlement funding, financial support for the childcare sector has been insufficient and has not reflected the specific needs of the sector.
104.Ahead of the Chancellor’s Summer statement, an open letter to the Chancellor from the Fawcett Society, co-signed by the Chairs of the Women and Equalities Committee, the Education Committee and Liaison Committee and others, urged the need for additional financial support for the childcare sector.
105.The IFS concluded that Government support has not sufficiently mitigated financial problems for providers. It concluded that:
[T]he lockdown period is likely to have significantly damaged the finances of many childcare providers with income from parent fees. Under the pessimistic assumption that all fee income from parents dried up, we estimate that a quarter of private nurseries might have been operating at a significant deficit (with more than £5 of costs for every £4 of income). This compares to 11% of providers pre-crisis.
106.The research also found that childminders, who are mostly self-employed, have also been badly hit. Even presuming all childminders received self-employment grants, the total loss of parent fees could see an additional 30% of childminders now earning less than £4 of income for every £5 of costs (counting what they usually pay themselves in the costs). In practice, the IFS said many childminders will see their earnings negatively affected, which could jeopardise their ability or desire to stay in the market.
107.In oral evidence, Liz Bayram argued that the Government consistently ignored heterogeneity in the needs of providers across the sector, which meant that many providers did not benefit from what Government support has been available. She emphasised that “Early years settings, preschools, childminders and nurseries are different. One of the challenges that we have faced is not recognising that those sectors have different experiences and needs.”
108.As PACEY pointed out in a letter to the Chancellor on 25 March 2020, childminders did not benefit from the continuation of public entitlement funding as only 3% of children eligible for a funded place take up that place with a childminder. PACEY stated that childminders had told them that “closure is having a devastating impact on their immediate livelihood and on the sustainability and viability of their businesses.”
109.The IFS estimates that 50% of providers rely on a mix of private and public funding. These settings were not necessarily eligible for support for staff wages through the CJRS (as originally designed) given the 17 April guidance.
110.We heard also heard of gaps in eligibility for SEISS in the sector. Liz Bayram told the committee that surveys conducted by PACEY highlighted that the self-employment scheme did not give the vast majority of childminders the financial help they needed. Some childminders were newly registered and unable to provide the tax information; others could not benefit from the scheme because the available grant was based on yearly profit, and many registered childminders do not earn profit. In response to a written parliamentary question about how many childminders and nannies were eligible for the scheme, HMRC said they were unable to report this from the information available.
111.The Government told us that that childcare providers were supported by the general support packages that are available to businesses across the economy and that the sector is not alone in facing decreased demand. Kemi Badenoch MP, the Minister for Equalities, told us:
If you are talking about the childcare sector specifically, it has not been impacted as much as other sectors like aviation, for example, or if you were a nightclub that had been closed since March. There are many sectors that have been impacted by this pandemic. I recognise that we should analyse how the various interventions are taking place based on protected characteristics, but we are not going to get a full picture if we just look at things through that lens.
112.PACEY urged the Government to take this opportunity to make “transformational changes” to early years education and childcare. Liz Bayram stressed the need for a long-term strategy which recognised the need to invest in early years education
113.We asked the Minister for Equalities about the need for a long-term cross-government early years strategy, given the pre-pandemic and current difficulties. She responded “We have a long-term strategy and we have been seeing that policy in action so far. Again, we do not change policy every month.”
114.A reliable and affordable childcare system is a prerequisite of a gender equal economy and a gender equal recovery from the pandemic. Yet, the childcare sector could hardly have been in worse financial shape on the eve of the pandemic and a system already not working for many parents buckled during the pandemic. A chronic lack of investment has resulted in long-standing workforce and financial challenges for the early years sector.
115.Given this backdrop, many childcare providers were vulnerable to the economic turmoil generated by the pandemic. The Government’s financial support for the sector has not been sufficiently generous nor has it been targeted to the specific needs of providers. Even with Government support, the significant drop off in private fees means many providers are likely to have run at a significant loss. Given that women make up the vast majority of the childcare workforce, and that mothers continue to bear the main responsibility for childcare, there is a clear gendered impact. The Government must commit to urgent short-term financial support and a sustainable and holistic long-term strategy.
116.We recommend the Government publish, by June 2021, an early years strategy which sets out how childcare provision can best support not only working parents, but also those who are job-seeking and re-training. The review must also consider the feasibility of extending eligibility for free childcare provision for children under the age of three years.
145 Social Mobility Commission, The stability of the early years workforce in England: An examination of national, regional and organisational barriers, August 2020. The average wage in early years is £7.42 an hour. This compares to £11.37 for the female workforce and £12.57 for the total population.
146 Gov.uk, ‘’, accessed 19 January 2021. The childcare offer differs depending on whether the parent lives in England, Scotland, Wales or Northern Ireland. In England, 30 hours childcare with an approved provider for 38 weeks of the year is available if the child is 3–4 years old, where the parent (and partner, if applicable) is: in work (or starting/restarting work in the next 31 days); on sick leave or annual leave; on shared parental, maternity, paternity or adoption leave. People on certain benefits may also be eligible if their partner is working. The offer is also contingent on income requirements and immigration status.
149 HC Deb, 18 March 2020,
150 “”, DfE press release, 17 March 2020 (accessed 19 January 2021)
151 “”, The House magazine, 20 April 2020
152 Early Years Alliance, ‘’, 24 May 2020 (accessed 21 January 2021)
154 See, for example, Q51 [Liz Bayram]; Q126 [Professor Rubery]; Women’s Budget Group (Mrs0071); Young Women’s Trust (Mrs0242)
157 Ibid., p 9
159 PACEY, ‘’, 25 March 2020 (accessed 21 January 2021)
160 IFS, Challenges for the childcare market: the implications of COVID-19 for childcare providers in England, September 2020, p 40
161 Ibid, p.25. The report authors explain: “Providers with a mix of funding streams were asked to calculate the share of their income that came from private sources; they were then able to access the furlough scheme to cover up to the proportion of its wage bill that was notionally paid from private income… the design of the furlough scheme left gaps in the support for staff costs, as it initially prevented employees from being furloughed for part of their hours. This meant that some providers with an employee ‘almost-but-not-quite’ eligible for furlough, because a small part of their wages was covered by public funding, would not have been able to claim any money from CJRS for that employee.”
162 UK Parliament, ‘’, written answer 47383, tabled on 15 May 2020, accessed 25 January 2021