The Education Committee report published new findings warning the government of the significant amount of work needed to deliver high quality care

The findings come in a new report which concludes the cross-party Committee’s inquiry. It was launched amidst signals that state and private providers had been closing at an alarming rate.

There is strong demand for childcare but the currently, many parents are struggling to afford the costs. This has been coupled with a major recruitment and retention challenge and a large decline in the number of childminders over the past couple of years.

While the inquiry was proceeding, the government announced a financial package to invest in childcare. This was through an extension of its funded hours.

Education Committee report key findings

The Education Committee report praises the expansion of childcare investment and it is a step in the right direction. However, it highlights a number of policy areas that the government should address.

Increase the childcare entitlement subsidy for providers 

During the Spring Budget, it was announced that from September 2025, the entitlements to 30-hours “free childcare” would be extended over time to children from the age of nine months up to four years old. However, the Committee has heard serious concerns that the funding is not enough. The report calls on the Department for Education (DfE) to “work closely and consistently with childcare providers and local authorities… to set the funding rate at a sufficient level.”   

Abolish business rates for nurseries 

The Committee recommends that all nurseries should be exempted from business rates and zero-rated for VAT. This is in recognition of their role in delivering a key government policy.  Due to the large amount of space needed, early years settings often pay high business rates. Removing business rates and easing the VAT burden could help to address the significant financial problems facing the sector. Many settings noted that they would use the change to pay staff more.

Simplify tax-free childcare offer 

The Committee calls for a “fundamental review” of the Tax-Free Childcare scheme. This was notably absent from the Spring Budget announcements. 

The scheme offers working families 20% off childcare costs. Or up to £2,000 per child per year, but it is seen as complex and is underused. Its forecasted cost in 2019 was £865m, but only £236m was issued to families due to low take up.

Staff:child ratios 

The Spring Budget also announced a divisive change to the minimum staff:child ratios for early years settings. For two-year-olds, the ratio will change from 1:4 to 1:5. This change is part of the government’s plan to save on staff costs. But providers have rallied against this stating it could negatively impact quality.

The Education Committee report recommends this reform be closely monitored and reversed if quality and education outcomes suffer. 

Mandatory SEND training  

Early intervention is absolutely crucial for getting the right support as quickly as possible. This means that more SEND professionals are needed in the sector. To address this, the report argues that more staff should receive mandatory training in identifying SEND. It goes further stating it is “clearly inadequate” only Level 3 qualified (A Level or BTEC) staff currently get training.

Boosting staff career development 

Career development for early years practitioners should be an urgent priority for DfE to attract and retain more people. The charity Coram’s 2023 annual Childcare Survey heard from 71% of local authorities that local childcare providers are finding it “very difficult” to recruit staff. They struggle even more with the required qualifications and experience. needed.

The report states that the Early Careers Framework, used to define training for new teachers, should be expanded to apply to all staff working in Ofsted-registered early years settings. This would improve retention and boost their career development. Furthermore, to support staff progress, the report recommends the introduction of a Leadership Quality Fund to incentivise the workforce.

Sector response

Education Committee Chair Robin Walker MP said: 

“Nothing can be more important than the start we give children in life and early education should be at the forefront of education policy. We know that high-quality childcare can have a significant impact on young children’s development and can be an investment in their future. Our inquiry took a deep dive into how the sector could function better and how well it serves young children and parents. 

“The childcare market is facing significant challenges in affordability and availability, with unprecedented staff turnover and nurseries closing, despite massive demand from parents who want a career and to provide for their families but struggle to find affordable services. It is clear that ministers have more work to do to address this. 

“Simply extending the number of hours that the government calls free will not work unless the funding rates accurately reflect the costs of providing high quality early education and childcare. We have heard that many settings rely on charging more for the children who attend them outside of the funded hours. It is therefore essential that ministers reduce burdens on the sector and provide adequate funding for all the stages of early education.”

 Megan Jarvie, head of Coram Family and Childcare stated:

“The Education Committee report have recognised that the childcare system is not working for parents, childcare providers or employers. Our own research finds that parents are struggling with high costs, a complex system and a shortage of places. There is an urgent need for action. They rightly point out that childcare should be viewed as part of our national infrastructure. As essential as the roads and rail to helping our country run.

“The recommendations are essential in supporting families and helping the government’s planned expansion of ‘free’ childcare live up to parents’ expectations. But to achieve childcare’s full potential, we need to go further. Reforming the system to make it simpler, higher quality and one that supports all families and children.”

Commenting on Neil Leitch, chief executive of the Early Years Alliance, said:

“As the Education Committee states the education and care a child receives during their first five years is absolutely crucial. Yet the infrastructure, funding and support simply isn’t there to enable providers to easily deliver this.   

“We, therefore, welcome the inquiry’s focus on the array of critical challenges facing the sector. Not only have years of severe underfunding plagued the sector but the worst staffing crisis in decades has created a perfect storm which must be addressed if the sector has any chance of survival in the coming years.  

“If that wasn’t bad enough, it’s likely that the upcoming sector expansion will be dangerously underfundedand will place unrealistic expectations on providers already on the brink. But, if the government had properly listened to our countless calls for sector support and funding, they would have known this.”