Dear Chancellor/Prime Minister,

We wrote to you in March to highlight the importance of childcare reform and called for a range of changes. Among these proposals were increasing funding to childcare providers providing early years support to help deliver higher quality care, and expanding the free hours provision to children aged under two years old.

So, when the Chancellor announced the expansion of childcare in March, we were optimistic that this matter was finally being addressed.

However, it is becoming painfully apparent that the reforms announced will struggle to be delivered adequately and childcare support is heading in the wrong direction. Figures from Ofsted show there were almost 5,000 fewer childcare providers at the end of March 2023 compared to the same time last year, with a net loss of 650 nurseries leaving tens of thousands fewer childcare places available.

The central driver for these closures is Government funding not keeping pace with the rise in costs for childcare providers, with staff retention a particular challenge given the relatively low level of wages for childcare. While the rise in the living wage is deserved by hard-working staff, it adds further pressure on childcare providers without a commensurate increase in their funding. This means that, despite an extra £400m for childcare, providers are facing a real terms cut in their overall funding according to the IFS. The Government’s new recruitment campaign to boost staffing numbers is welcome but this will also take time to have an impact when qualified candidates are needed now to deliver the expansion in free childcare hours.

Less supply and higher demand will naturally lead to those childcare providers that remain having to charge parents more to cover the shortfall from Government funding.

But parents are becoming increasingly desperate as the situation is worse than last year. Our latest research found that they were having to make very difficult choices, with 70% of parents saying the cost of childcare is affecting their work decisions, up from 64% in January 2023. More than two-thirds also find childcare support inaccessible and confusing.

Childcare costs are continuing to rise, with almost 40% spending more than £200 a week, up from 29% in January. Alongside this, mortgage arrears have increased to the highest rate in six years. With mortgage costs rising alongside the price of everyday goods and services, this will have a crippling impact on family finances across the country.

It is the level of state support that is the critical difference between how much parents pay for childcare in the UK compared to other countries. Recent research by the Social Market Foundation found that, while the cost of providing childcare is lower in the UK than in Sweden, British parents pay five times as much as a proportion of their income because the state covers less of the bill.

We recognise that the Government needs to manage its finances carefully, especially to retain market confidence following recent economic upheavals. But more investment on childcare can help to balance the books by supporting growth, reduce the gender pay gap and loosen the labour market, which has been a major factor in higher inflation.

What’s more, higher quality early years care may also support children’s learning and wellbeing, improving their future earnings potential and in turn the Government’s tax receipts.

Together, we stand with parents, and are calling on the Government to:

Prioritise the national recruitment campaign for childcare workers and the accelerated apprenticeship route into the sector, supported by a competitive minimum wage

Properly fund childcare providers providing early years support with a higher hourly rate so they can actually deliver on the promises made in the Spring Statement

Better communicate the support available currently

Reform the currently complex provision of tax credits and childcare vouchers, making it easier for parents to access support

Increase the eligible number of weeks for free childcare from 38 weeks a year to include school holidays

Explore ways to encourage businesses to make childcare part of their structure, whether through onsite or local provision through tax incentives

When the Government is ostensibly trying to find ways to tackle the UK’s poor levels of productivity, the failure to deliver properly on childcare is an own goal both morally and economically.

If you can find the economic headway for tax cuts, surely you have the room to properly address childcare which could deliver benefits for the UK economy that will deliver a more sustainable, longer-lasting legacy?