The private nursery sector is often referred to as a mixed market economy. That's to say it allows for a level of economic freedom in the use of capital for those companies operating within it, but also enables Government to interfere in economic activities in order to achieve social aims.
With its free entitlement expansion plans launched in the Spring Budget, the Government plans to radically move its goalposts in this regard (see page 12). As the Institute of Fiscal Studies has highlighted, based on existing patterns of childcare use, the Government will double its control of the price of childcare for children in England, acquiring an 80 per cent controlling interest. Plans to offer ‘free’ care for children from nine months to four years will leave nurseries heavily reliant on Government income, like never before.
While opinion has been voiced that this raises the stakes for getting the funding right – otherwise businesses will fold and supply will be further jeopardised – there has yet to be any analysis of how it will affect the business shape of the market. Groups have grown substantially in the wake of free entitlement expansion – and public investment has played a part in the willingness of private investors to finance them. Where to from here?
Another point worth considering is the move away from any pretence that a universal offer is the overarching social aim. Currently just under half of total spending on childcare subsidies goes on universal programmes, mainly comprising the free 15 hours for all three- and four-year-olds. But with the focus firmly on working parents, the universal share of funding will plummet to a quarter by 2027 (again, according to the IFS).
This Budget may be about many things, but clearly what it is not about is supporting a childcare sector that can deliver high-quality early education and care to our youngest children.