Under current plans, the provision of free childcare hours will be extended to all working families from September, provided both parents earn the equivalent of 16 hours on the minimum wage per week, and less than £100,000 per year.
They will be able to use a total of 30 hours free childcare a week for their three- and four-year-old children.
However in today’s report, Targeting Affordable Childcare, Localis urges the government to abandon the extension and re-invest the money saved into providing free childcare on a means-tested basis to lower income families.
This means maintaining the additional planned 15 free hours for three- and four-year-olds in low-income households and offering 15 free hours for one-year-olds in low-income households.
Localis chief executive Liam Booth-Smith said: “Government are right to want to make childcare more affordable but it’s irresponsible to overheat the childcare market by placing an additional financial burden on providers.
“The risk is you create a similar situation to the one we face in social care, where providers aren’t able to make ends meet because the subsidy the government provides doesn’t cover the cost of care.”
According to Localis, Whitehall’s planned extension of 15 hours free childcare will put unnecessary pressure on providers.
The think-tank has identified a £103.5m black hole in the plans for 2017/18 arising out of the increase in the National Living Wage.
Localis has estimated the cost of the government’s planned extension is £1.62bn, but even with this significant investment, 57.1% of children would be ineligible for the new scheme. By contrast, Localis’s proposal would cost slightly less, at £1.55bn.
Booth-Smith said Localis offers an alternative which grants support “to those in need” while saving the Treasury approximately £64m.
