The free entitlement to childcare for all parents in England should be scrapped in favour of a system aimed at disadvantaged children, a report says.
The Institute of Economic Affairs study says the right to 15 hours free care a week has distorted the market price.
It also argues regulations have made it more costly, with many families on average earnings spending more than a third of their income on childcare.
The government says it is investing £6bn a year on the facility.
The report argues that despite this investment, families are still paying huge sums for people to look after their children.
Lack of preferences
The way early years care is funded means that those who need help the most do not receive it, while many affluent families are generously subsidised, the report found.
It also highlighted what it described as “inequitable cross-subsidisation”, where parents are required to pay high fees for a few extra hours, because the government funding rates are so low that the richer parents, seeking more hours, are effectively topping up the government’s contribution.
Currently, parents of three and four-year-olds in England are entitled to 15 hours free childcare a week, but this is due to increase to 30 hours from September.
And providers say that nursery costs for parents could “sky-rocket” in some areas as providers grapple with less funding for the scheme.
The report also argues that attempts to improve the quality of childcare have ended up increasing the amount of regulation, while failing to produce better outcomes.
However, previous attempts by the government to change the ratio of children to carers were met with resistance from childcare providers, who said the changes would not lead to savings.
The report said the system has also limited choice for parents as alternative forms of care such as home-based childminders are priced out of the sector.
Len Shackleton, co-author of the report, said: “Government interventions in the childcare sector have resulted in both British families and taxpayers bearing a heavy burden of expensive provision.
“Regulation has led to an excessive formalisation of childcare and pre-school, which has not only pushed up costs but paid scant attention to parental preferences.
“Many families may not want the structured form of pre-school that the government requires as standard.
“At a time when many families are facing a cost of living crisis, it is important the government rethinks its involvement in childcare. Rowing back on unnecessary regulation and focusing public funds on those who need it, rather than subsidising the well-off, would be a good way to start.”
Gayle Paris, a mother who contacted us via Facebook, said she found it difficult to use the free childcare allowance as it had to be taken over five days.
“If less affluent families aren’t taking up the place, it is because they have less flexible working arrangements, and are likely not to be able to afford a private nursery to take partnership funding.
“Taking the opportunity of pre-school in the local authority away from those with more income is not a solution. Local authority pre-school is a good step into school for three to four-year-olds.
“Re-arrange the system so those working full time can better access it and the uptake among less affluent families will rise.”
While Craig Chew-Moulding said less parents would go back to work, if the subsidies were withdrawn, as it would not make economic sense.
Neil Leitch, chief executive the Pre-School Learning Alliance, said: “Yes, childcare is expensive, but reducing regulations – for example by abandoning rules around staff to child ratios – is not the way to reduce costs. When the government tried to relax ratios in 2012 parents and providers were overwhelmingly opposed to the proposals.
He added: “While we appreciate there are flaws in the government’s early years policy – not least doubling the free entitlement from 15 to 30 hours without properly analysing how to fund the scheme – to remove state intervention entirely, as this report suggests, would be fool-hardy at best, and downright dangerous at worst.”
A Department for Education spokesman said helping families with high quality, affordable childcare was at the heart of the government’s agenda.
“That’s why we are investing a record £6bn per year by 2020,” he said.
“Our 30 hours free offer for three and four-year-olds is set to save working parents up to £5,000 per year and we’re also supporting the most disadvantaged families through our free 15 hours offer for two-year-olds and our pupil premium – worth over £300 a year per eligible child.
“We make no apologies for regulations which keep children safe and well.”