Competition and Markets Authority asked to review “childcare market”

The Secretary of State, Bridget Phillipson MP, has written to the Chief Executive of the Competition and Markets Authority (CMA) to request that the CMA review the “childcare market” and ascertain whether “the childcare market is functioning optimally for the benefit of children and parents and enables providers to operate sustainably.”

Much of the coverage of this has focused on what the press release described as “new government action to tackle hidden childcare fees hitting families.” This follows up last year’s guidance on charging in the wake of a High Court judgement, both seeking to tighten up on long-standing regulations about what settings may and may not charge parents and about transparency about fees.

The message about “standing up for parents facing eye-watering childcare costs including non-refundable deposits and basics like nappies and suncream.” is somewhat moderated by Phillipson’s statement that “The vast majority of nurseries and childminders have been brilliant in helping us deliver”, with the focus on “the small minority letting families down and stopping them get what they were promised”. Nonetheless, this reflects the seeming paradox that while government has significantly increased its investment in the funded entitlements, many parents still find the cost of childcare too high, while there is widespread agreement among providers that government funding is not sufficient to cover costs, even when many working in the sector are on minimum wage.

In this context, it is interesting that the CMA are being asked to review “whether the childcare market is functioning optimally”. Some might argue it is barely functioning at all, or to whose benefit it is functioning – indeed Phillipson raises questions directly about the role of private equity in extracting profits and leveraging increasing amounts of debt, leading to potential instability. Many have also questioned the validity of applying the concept of a market to core public services such as early childhood education and care. In practice, the market only operates in affluent areas where profits can be made, and elsewhere the state and the voluntary sector are left to fill the gaps – if they can. The failures of the “market” are evident in the relative scarcity of provision in areas of social and economic disadvantage, and for the most vulnerable children, such as those with SEND.

The CMA have indicated that they will be putting a proposal to their Board to undertake a review, and we wait to see the scope and scale and how many of these issues they will be able to address.

Beatrice Merrick is Chief Executive of Early Education