BREAKING NEWS: Campaign group reports Government ‘abuse’ of the childcare market to competition authority

by Parenta | Feb 20, 2017 | Childcare news

PRESS RELEASE on behalf of

Champagne Nurseries on Lemonade Funding

Members of the campaign group ‘Champagne Nurseries on Lemonade Funding’ (CNLF) have made a formal complaint to the Competition and Markets Authority (formerly known as the Monopolies and Mergers Commission) about the Government’s abuse of the childcare market.

The complaint outlines how the Government has abused its legislative powers by regulating the childcare market, stating that “[the] price fixing of both the purchase and sales price is an abuse of market control”.

In September 2017, the Government will roll out its 30-hour offer to eligible 3 and 4-year-old children of working parents in England. However, due to the shortfall between the true cost of providing the ‘free’ hours and the deficit in funding from the Government, many childcare providers believe they will be unable to deliver childcare in a sustainable manner and will be forced to close.

This effect is in direct opposition to the Government’s aim of providing more childcare for the estimated 400,000 families who will become eligible for the additional 15 hours in September.

The complaint by CNLF, which has almost 7,000 members, states that the childcare sector is already in jeopardy due to factors such as the introduction of workplace pensions, consistent increases in the National Minimum and Living Wages and Business Rates revaluations.

It goes on to state that the Government has “ploughed on with its political agenda based on non-representative data” in reference to a survey commissioned by the Department for Education to establish the true cost of childcare, which only received 284 responses.

CNLF’s action comes in the wake of a recent survey of councils in England by the Family and Childcare Trust which found that over half (54%) said they did not know if they would have enough childcare available for eligible pre-schoolers using the 30 hours.

A spokesperson for the CNLF campaign group, said:

“We looked at various ways to challenge the Government on the issue of underfunding in Early Years. This route is a direct way of getting the legislation around funding investigated. 

“As private businesses, PVI’s (private, voluntary and independent childcare providers) have been absorbing and trying to manage the costs associated with delivering the ‘free’ Early Years Education since its introduction. The extension to 30 hours for working families brings with it the real threat of closure for some settings who simply can’t absorb or manage further losses.

“As providers, we fully support the Government helping families with childcare costs, however, the policies around funding mean that we have no choice but to cross-subsidise by charging inflated fees for hours outside of funded hours and charging for additional services for things that the Government say should not be provided within the funding. 

“This is not something we want to do and not something we feel parents should be faced with. It is a consequence of a policy which the Government has not funded properly and which childcare providers cannot afford to subsidise but know that they run the risk of being forced out of the market if they do not offer the funded hours.

“Research showed that only 51% of nurseries in England were expecting to make a profit in 2016, with the average nursery losing an astonishing £957 per child, per year on the 15 hour offer. 

“This level of loss on 15 hours of funding means that the increase to 30 hours is simply untenable for the whole sector at the current funding rates, the only way to ensure the ongoing viability of the whole sector is to remove the word free and allow the funding to be used as a subsidy.

“We are confident that the CMA will carry out a thorough investigation and we await their response.”