3.6.1 Settings’ views on the expansion
The vast majority of settings were positive, in principle, about expansion to 30 hours of free early education for working parents of three- and four-year-olds, although most were keen to highlight the importance of an increase in the hourly rate that they received from the local authority for providing this childcare, if they were to remain viable and sustainable whilst offering the 30 hours.
The vast majority of settings stated that they were intending to deliver the 30 hours of free entitlement, although for some of these, this intention was predicated on the assumption that the local authority fee rate would rise. Without a rise in fee rates, a small number of settings stated that they would not be able to deliver 30 hours of free entitlement. Approximately one-fifth of settings stated that whether or not they decide to offer the 30 hours expanded free entitlement will depend on the fee rate that they would receive from the local authority.
Approximately one-quarter of the settings that took part in this study stated that they had started to prepare and conduct business planning ahead of the introduction of the 30 hour entitlement. The remaining settings stated that they were waiting for more clarity and detail about the specific eligibility criteria relating to ‘working parents’, and would begin to plan once they were clearer about this.
KEY FINDINGS
• The vast majority of settings were positive, in principle, about expansion to 30 hours, although most were keen to highlight the importance of an increase in the local authority rate.
• Findings suggest that the implications for settings will depend on a complex range of factors, including: occupancy rates; settings’ current fee rates and how these
compare with the local authority funding rate; number of hours typically sold by settings over and above the current free entitlement; and the mix of age ranges typically cared for within the setting.
• A key concern for settings regarding the expansion to 30 hours was the effect that it would have on their ability to generate revenue by selling additional hours of
childcare.
• Many settings were concerned that an increase in the free entitlement to 30 hours would mean they would be able to offer childcare to fewer three- and four-year-olds, and fewer children overall.
• A number of preschool settings that offered fewer than 30 hours of childcare per week expressed concern about their ability to remain sustainable when the free entitlement is increased to 30 hours.
• For a few settings the potential impact of the expansion to 30 hours appeared to be minimal.
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Settings that had begun to plan for the expansion to 30 hours, typically tended to be those settings that currently offered sessional care only, particularly where they did not currently offer 30 hours of childcare per week.
3.6.2 Implications of expansion to 30 hours for settings
During interviews, settings were probed about the implications of an expansion to 30 hours for their setting. Findings suggest that the implications for settings will depend on a complex range of factors, including:
• Settings’ occupancy rates.
• The proportion of settings’ current childcare hours that are taken up by children accessing the free entitlement.
• Settings’ current fee rates, and how these rates compare with the local authority funding rate.
• The number of working parents whose children currently access the setting, and how this is likely to change over time.
• The likelihood of local parents who are currently not working, entering the labour market as a result of the expansion to 30 hours.
• The number of hours typically sold by settings, over and above the current free entitlement
• The mix of age ranges typically cared for within the setting.
A key concern for settings regarding the expansion to 30 hours was the effect that it would have on their ability to generate revenue by selling additional hours of
childcare. A number of settings, and particularly those that had high levels of occupancy, were concerned that unless the local authority fee rate rose to a level approaching their own fee rate, they would lose a significant amount of revenue, as the number of hours that they had available to charge for at their own fee rate fell. As one setting stated:
“If they all suddenly get 30 hours, then that’s it, I’m gone [out of business], if it [local authority fee rate] doesn’t go up…I’ll be out of business in three months…
They’re shrinking the bit that I can actually make that money back on.”
PVI setting representative Another particular issue of concern for many settings was that an increase in the free entitlement to 30 hours would mean they would be able to offer childcare to fewer three- and four-year-olds, and fewer children overall, as each three- or four-year-old child would now be potentially entitled to 30 hours of free childcare rather than 15. A number of settings were concerned about their capacity to provide enough childcare for all of the children within their setting that might require it, and about the
‘displacement’ effect that the expansion to 30 hours might have. As one setting said:
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“It [expansion to 30 hours] would mean that for us we’d be able to offer less children places, because ultimately you either take two children on for 15 hours each or two children for 30 – you can’t sort of say, ‘oh, I’ll have two children at 30 hours’, because there’s not the room to do that.”
PVI setting representative A number of settings that offered full day care highlighted the importance of younger children within their setting to their business model and sustainability, and felt that the expansion to 30 hours might threaten their ability to maintain the balance of babies and under-twos within their setting. For these settings, increasing the number of three- and four-year-olds within their setting, as a result of the expansion to 30 hours, would inevitably mean a reduction in the number of younger children within the setting, and a likely reduction in revenue, especially in settings with large numbers of fee-paying two-year-old and babies.
Some settings were also concerned with the prospect of having a relatively large proportion of the children within their setting aged 3 and 4, due to fact that this could result in low occupancy within the setting if large numbers of children left during the summer to attend school. As one setting said:
“If you have the 30 hours and the children are all 3 and 4 year olds, which they possibly will be, those 3 and 4 year olds will all leave in the summer which will then wipe me out totally, and I have to replace all those children and that’s a lot of children to replace. And you haven’t got the younger children feeding
through.”
PVI setting representative A number of preschool settings that offered fewer than 30 hours of childcare per week expressed concern about their ability to remain sustainable when the free entitlement is increased to 30 hours. This was particularly the case for those that stated they would be unable to increase the number of hours of childcare that they delivered each week. For these settings, an expansion to 30 hours would mean that they would either need to find new or additional premises from which to deliver childcare, or else not offer the expanded 30 hour entitlement. These settings were clear however, that failure to offer the expanded entitlement would be likely to result in them losing clients to other settings that were able to offer it. One such setting, that was potentially able to expand its hours to 30 commented:
“For us, the way we’re running at the moment, we couldn’t offer the 30 hours, so we would have to totally look at the way we run, we would have to look at extending our hours…we wouldn’t want us to lose out because parents would go to other settings that are offering those 30 hours and we’re not. But we would need to be sure that we would actually get that number of people to make it worthwhile.”
PVI setting representative Another preschool setting, that was concerned about the risks of expanding its
provision to 30 hours per week said:
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“My concern is that we set this up to run at 30 hours per week and then we sit here with empty places and then the cost of that wipes us out. That would be our concern.”
PVI setting representative For a few settings, however, the impact of the expansion to 30 hours appeared to be minimal. For instance, for settings whose clients were typically not working parents, and who would be unlikely to be encouraged back into the labour market as a result of the expansion to 30 hours, the effect of the expansion to 30 hours may be
minimal. This was especially the case for settings where few parents purchased additional hours above the free entitlement. As one setting said:
“It will have very minimal impact on our families because we have very few families where both parents are working, so we don’t expect it to have a big impact. Most of our parents will stay on 15 hours…for us it’s those who have chosen to buy places already for children under 3 who we think would then expand into taking up the full 30 hours, but the number who do that is very limited.”
PVI setting representative Interview data was used to construct a typology of settings, in order to illustrate some of the variation in settings’ characteristics, and the potential implications that an expansion to 30 hours might have for them.
For instance, setting type A in table 14, demonstrates the potential impact of an expansion in the free entitlement for a setting with a relatively low occupancy rate, and hourly fee rates for three- and four-year-old childcare below the hourly rate paid by the local authority for the free entitlement. Data from this study showed that 15 of the 57 settings that participated in this study, had a fee rate for three- and four-year-old childcare that was below that of the local authority fee rate for the free
entitlement. In these cases, settings typically stated that the expansion would be beneficial for their setting, as it would help to increase occupancy, and allow the setting to receive a higher fee rate than it typically charged for additional hours outside of the free entitlement.
Table 14 presents a range of other setting types identified through this study, and the potential implications of the expansion to 30 hours for them.
Table 14: Setting types and possible implications of an expansion of the free entitlement to 30 hours
Type of setting Impact of expansion to 30 hours
A • Fee rate below local authority delegated rate
• Relatively low occupancy levels
• Some working parents of three-and four-year-olds buying additional hours increases to local authority rate
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Type of setting Impact of expansion to 30 hours
B • Pre-school setting
• Delivering only 15 to 25 hours per week
• Not able to deliver additional hours within current setting
• Potentially detrimental to setting if unable to deliver 30 hours
• May lose clients to competitors
• Sustainability under threat
C • Nursery or preschool
• Potential reduction in revenue from additional hours if local authority rate does not meet setting’s fee rate
• May lose clients to competitors if fails to offer 30 hours
• Reduction in the number of hours available to ‘cross-subsidise’ any shortfall in local authority funding
• Potential loss of large numbers of three- and four- year old children in summer leading to low autumn occupancy
D • Community based setting
• Very few working parents
• Very few families buying additional hours
• Potentially little impact on setting unless entitlement encourages parents into labour market
E • Nursery setting
• Most children only accessing 15 hours of childcare
• Few additional hours purchased by parents
• Potential ‘displacement’ as three and four-year-olds access 30 rather than 15 hours
• Potential capacity issues for setting
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