Features

Market View: Questions around the Budget

Management
Arun Kanwar, managing partner at Cairneagle, on the 30 hours extension

The Budget announcement is pretty seismic for the childcare sector. The Chancellor has stolen a march on what would have been one of Labour's flagship policies, and it will be hard for them to offer anything materially different (in fact, the focus from the opposition on school-age breakfast clubs at the Nursery World Business Summit was very disappointing). On the face of it, these policies sound great for parents and for operators, but as ever, the situation is more nuanced than that.

Starting with the increase in funding for three-year olds, this might just help to match this year's inflation levels and therefore slightly ease some of the serious margin pressure being faced by providers, but it still leaves it well below the cost of delivery. Surely it would have been better to make sure that the current offer was more adequately funded before extending it?

While offering 30 hours to under-threes is commendable, progressive and helps to keep parents in work, by reducing cost barriers, there are a few factors to consider. We are in the middle of an unprecedented early years staffing crisis, and that could be heavily exacerbated by trying to serve the additional demand without a plan to help support the recruitment and retention challenges.

And history tells us that if even if the funding for the new offer ends up being ‘sufficient’ to begin with, it could well significantly trail behind inflation year-on-year. However, it will now be harder for operators to find workarounds with less private-pay-only hours. There is also a possibility that the new offer will just further ‘schoolify’ the existing demand for under-threes away from private providers in some areas.

Finally, support for providers’ cost and operating challenges is still seriously lacking.

The changes will no doubt stimulate demand in the long term – which will help underpin the sector and investment in it – but there are some challenges that need ironing out along the way.