Why are so many childcare providers in the UK feeling the financial strain, and are the government's budget promises enough to tackle the issue? Listen in as we chat with Ian Morgan from the campaign group Champagne Nurseries for Lemonade Funding and director of Little Ducklings Nursery in Berkshire. We delve into the challenges that the UK childcare industry is facing due to inadequate funding. We explore the increasing cost of staffing, the struggle to retain staff, and the impact of soaring costs for energy and food on providers.
Ian shares his 16 years of experience in the industry and his hopes for its future, as well as the challenges faced by childcare providers . We also discuss the feelings amongst people in his group, Champagne Nurseries, Lemonade Funding, and potential solutions for providing quality childcare at an affordable cost for parents. Tune in to find out if the government's recent efforts will be enough to ease the burden on childcare providers and if the industry can adapt and thrive amidst these challenges.
Why are so many childcare providers in the UK feeling the financial strain, and are the government's budget promises enough to tackle the issue? Listen in as we chat with Ian Morgan from the campaign group Champagne Nurseries for Lemonade Funding and director of Little Ducklings Nursery in Berkshire. We delve into the challenges that the UK childcare industry is facing due to inadequate funding. We explore the increasing cost of staffing, the struggle to retain staff, and the impact of soaring costs for energy and food on providers.
Ian shares his 16 years of experience in the industry and his hopes for its future, as well as the challenges faced by childcare providers . We also discuss the feelings amongst people in his group, Champagne Nurseries, Lemonade Funding, and potential solutions for providing quality childcare at an affordable cost for parents. Tune in to find out if the government's recent efforts will be enough to ease the burden on childcare providers and if the industry can adapt and thrive amidst these challenges.
32,000 women left the work force last year. Many of them say they simply can't afford the cost of childcare. Childcare here in the UK is among the highest in the world. That's according to the OECD, that's the Organisation for Economic Cooperation and Development. Full-time nursery fees for a child under two are around £13,000 a year. That's more than half of the average salary. But nurseries say they're struggling too. The government's introducing a range of measures to tackle the issue, but do they go far enough? I'm journalist Angela Walker, and in my podcast I talk to inspirational guests and discuss under-reported issues. Today I'm in conversation with Ian Morgan from the campaign group Champagne Nurseries for Lemonade Funding, who's also the director of Little Ducklings Nursery in Berkshire. Thanks very much for joining me, it's a pleasure.
Angela Walker:
So I mentioned in the introduction that nursery places are costing upwards £13,000 a year. From a parent's point of view that feels like such a lot of money, but obviously we don't know all of the costs that are involved in running a nursery. What costs are there that you are forking out for?
Ian Morgan:
I think the biggest cost is staffing. For me, it equates to about 70% of my annual revenues and it's an ever-increasing cost.
Angela Walker:
You set up this support group for nurseries called Champagne Nurseries for Lemonade Funding. What's that all about, Ian?
Ian Morgan:
We basically were challenging the government and their funding scheme when they brought in the 33 hours. Our premise is that the hours aren't free, they're funded And it's a big issue because the funding the free hours, the government force us to give the hours free to parents and the cost of the free hours that the government pay us doesn't actually cover our costs.
Angela Walker:
Yes, as a parent, it feels like free childcare, but you really dispute that, don't you? So tell me about this disparity, then, between what the government is giving you towards and how much the service is actually costing to provide.
Ian Morgan:
Well, for example, the government give my local authority a certain amount of money and that comes down to me. So in Wokingham I get just over £5.35 an hour when actually my hourly rate is £6.80 an hour. So there's a discrepancy there And it's well known that the government expect us to cross subsidise with our private fees to fill that gap.
Angela Walker:
And is that feasible? I mean, you're subsidising it sounds like you feel like you're subsidising the childcare Yeah, and we are, and it's a well known fact.
Ian Morgan:
In fact, there are research documents in the House of Commons library that actually state that For me I can do that to a certain extent because I'm a very busy nursery and government funding doesn't. Actually it only takes about 30% of my revenues. So I have a large proportion of private fees but for smaller preschools, where maybe 100% of their revenues are funded money that there is no scope for them to cover that difference.
Angela Walker:
So, ultimately, what's going to happen to those nurseries?
Ian Morgan:
Well, we've seen over numerous years now that regularly nurseries are closing because financially they can't afford it And with minimum wage increasing that pressurises the salaries for those nurseries.
Angela Walker:
It seems crazy. There's a real shortage of childcare provision and yet nurseries are shutting down because they can't afford to keep going. What can be done about this?
Ian Morgan:
Well, obviously one thing is to fund us better, and there are certainly promises coming along to give us more money. But another big problem is the amount of available staff. I am constantly recruiting and it's a problem nationally. People don't want to work in childcare because we can't pay the salaries.
Angela Walker:
So it's like a catch-22 situation. It's not enough money for you to pay the staff so that they're leaving, and then that puts a greater pressure on the nurseries. What can we do then?
Ian Morgan:
Well, as I said, I think the funding is a major thing in terms of the amount of it. We have campaigned tirelessly for six years saying it's not enough. The government know it's not enough. There have been recent Freedom of Information Act requests which have shown government documentation saying they know that it's not enough. But they know that we will struggle on.
Angela Walker:
So what do the government say to you, because I'm sure you've been in talks with them. What are they saying?
Ian Morgan:
They always maintain that their formula of how they've calculated what we should get is adequate. We maintain that it's not. Anything like this should allow us all settings to make a profit, because profits get reinvested into our businesses for resources, but also for those bad times. I mean take COVID, when our businesses had to close down. Companies need reserves to get through these times and with the current formula, there just isn't any fat in what the government are giving us.
Angela Walker:
In the budget, the Chancellor announced that the provision for childcare will extend to even younger children and the hourly rate paid to childcare providers who deliver free hours will increase. What's that in reality? How's that working out?
Ian Morgan:
Okay, as of today, we know nothing. So it's a great promise and if I was cynical, i would say it's electioneering. It's a good idea. It's going to be a great thing for parents. However, i think there are some real risks for us and, for example, i said that funding takes about 30% of my revenues. When this new model comes in and it's completely implemented, my funding might actually take up 80% of my revenue. So that actually means that the fat that I used to have to cross subsidise has been diminished. So it's a very precarious situation.
Ian Morgan:
We're going to have to see how that pans out.
Angela Walker:
You mentioned electioneering. Is this a political issue? Do you think Labour could do any better?
Ian Morgan:
Do I think they can do any better? I think they will do something different. I think I've met the shadow team a number of years ago. I know that they'll do something different. But my worry is, with any government we will have issues with, and it really will depend on how much they actually understand what our problems are.
Angela Walker:
What do you think is the answer to providing quality child care at an affordable cost to make it viable for women to work? I mean, I remember when I had my first child, financially it wasn't viable for me to work more than two days a week because of the cost of child care. That was a few years ago. I don't think that's changed and I know that they're now offering £600 incentive for people who sign up to be childminders. It feels like a very piecemeal approach.
Ian Morgan:
Yeah, i think we think, as Champagne Nurseries for Women Aid Funding, we've always campaigned that rather than the funding be for free hours, we say that it should be a contribution The government in lots of their documentation talk about the free hours are worth £4,500 to parents.
Ian Morgan:
For us, if you said that it was £4,500 rather than 30 hours for 38 weeks it means that parents can choose how they spend it, and I think that's the key here. If they can choose what provider and how they're going to spend it, it may be less hours, but the parent will get what they want.
Angela Walker:
That's really interesting. I might get, for example, £500 worth of vouchers, and then it's up to me. I can choose a more expensive child care provider and have fewer hours, or I could choose somewhere that's more affordable or closer to where I live. That seems like a very sensible idea.
Ian Morgan:
It really is, and if you've been in child care long enough, you will remember that over 15 years ago, the free hours was a voucher. Many people still call it the voucher because it used to be a paper voucher with a monetary value.
Angela Walker:
Let's go back to Champagne Nurseries, lemonade Funding as an organisation. What prompted you to set it up? I mean, it's all very well when you're in an industry and you've got some frustrations and we all get that wherever we work but to actually think, oh my goodness, i've got to set up a campaign group. You must have felt so strongly and you must have felt that other people felt the same way too. So how did it kind of come about?
Ian Morgan:
Yeah, well, the original group. I came in quite early on, but I wasn't one of the founders. It was founded by three other people who were providers and they invited me because they saw how vocal I was. I came on board because I wanted to give back. My nurseries are very successful and I do well, which is not like other providers in a lot of cases. So I wanted to give back and I'm good at numbers and I like reading about legislation and things like that. So we just formed the group and we made a new sense of ourselves to get heard, and we've I mean, we've now got 24 and a half thousand people in our Facebook group who follow us regularly, and we try and keep them informed and tell the truth.
Angela Walker:
As we see it, You run two successful nurseries, but at the same time, other nurseries say they can't afford to keep going because of the childcare funding and they're shutting down. Why is it, if why is that the case, that they're struggling and you're not? what's what's going on there?
Ian Morgan:
I think the difference is is that childcare is a second career for me. I came from another business career and I came into it as a business person. But I understand who my customer is and my customer is the child. So I come in and I run it as a business but for the benefit of the children. So, and a lot of people in this industry they don't have that background in business, they do it because they had a child, they needed childcare so they thought they'd start up a preschool and things like that. They don't have the grounding so they don't necessarily see some of the business pitfalls.
Angela Walker:
That's really interesting actually. Yeah, because a lot of nurseries are run by people who've got background in childcare and not business like yourself. Yeah, exactly you see that all the time. Tell me a bit about the changes that are happening with the world that are being promised. What is the government promising for parents now? the increased provision.
Ian Morgan:
So they're promising 30 hours for anyone from nine months onwards. It's going to be phased in. Two year olds will be phased in in April next year and then in September the younger children will be phased in and then they'll go to the full 30 hours. They have to be working parents, so pretty much like the 30 hours is now in terms of that, both parents have to work and they have to work a minimum of 16 hours of minimum wage and things like that. We believe that those are going to be the criteria, which means that there's a whole lot of administration that we as providers and parents need to do to actually get this and admin costs money, doesn't it?
Angela Walker:
It does because time is money. Yeah, i mean we're talking about a three-fold increase in the number of children claiming these these hours and what is the feeling amongst people in your group Champagne Nurseries, lemonade funding about this kind of influx of extra children that they need to have?
Ian Morgan:
I think there's mixed feelings. You know there's not enough spaces potentially so there's and I think the government talk about it as being a great opportunity to provide new care, new settings to provide care. Well, i'd say that that's most probably quite limited. Is it a good thing or a bad thing? A lot of the children that they say are already in the system, if you like. You know, as I said, about Two-thirds of my children are from working parents, so they're already in my nursery, so it won't be much of an influx. But we don't have the staff, and that's the biggest problem.
Angela Walker:
It all comes back to this issue of staff retention.
Ian Morgan:
Yeah.
Angela Walker:
And how much you can pay people from the sounds of it.
Ian Morgan:
Absolutely, And you know I actively try and pay above minimum wage. I think some of the wages that I pay are most probably industry leading. But the low pay commission deems us as one of the worst sectors for having the lowest pay, And that's right, because the money that we get from the government is so low. So every year when minimum wage goes up we have an incredible pressure put upon us. I mean, this year the living wage went up by 9.7%. The next level, the 21 to 22-year-old age, actually went up by 10.1%. So my entire salary floor every year at the moment, for the last several years, is increasing by 10% And I can't control that.
Angela Walker:
Well, and you also can't control spiralling energy costs, you know, and the cost of living, the cost of the food that you have to provide, that's also going up at the same rate. You know that's going up, i think it's food inflations at 17% We've seen a fourfold increase in energy prices. And these are all costs that are hitting you and your business.
Ian Morgan:
Yeah, and I would say for energy costs I've been quite lucky because I was well into a contract, so my costs have been relatively OK. But yes, food costs have been increasing And sometimes we have to sit there where we're ordering online and just go, wow, that's increased dramatically in the last week or so and have to rethink on.
Angela Walker:
And talking about value for money as well. One of the things they're thinking of doing is changing the ratios of carers. At the moment there's one carer to four children. The government wants to move that to one to five children. Is that safe?
Ian Morgan:
Is it safe? Well, i don't think anyone in our industry is going to want to move to one to five. I think this whole ratio thing is a bit of a red herring, because that one ratio is just about two year olds, so actually doesn't actually affect parents that are receiving funding. So this is a different band of children. Is it safe? It could be. No one wants to go there. Working at one to four with a two year old one at a four two year olds is a hard job, and babies are at one to three as well. So it's a hard enough job as it is. If we reduce these ratios, we put much, much more pressure on the staff that are underpaid.
Angela Walker:
Yeah, of course I've got a toddler and I find him hard to look after on a one to one basis because you know they're so kamikaze. they're going around calming over things, getting into trouble, putting things in their mouths. I know that obviously nurseries are designed to be safe spaces and the children are contained, but really I cannot imagine looking after four, let alone five or six, toddlers.
Ian Morgan:
And you can't really contain them. That's the whole thing is that they've got to go and explore and they've got to experience things where maybe there is a bit of danger. So increasing the ratio is a nonsense and I have no idea why we've really done it, you've come up with this interesting noun about economics.
Angela Walker:
Tell us about this monopsony.
Ian Morgan:
Monopsony. So it's not a monopoly, but a monopsony is where you have a dominant purchaser in a market and they abuse the market by setting their own rate at which they will buy. Now our claim, for many years now, is that the government is abusing the childcare market. They are the largest purchasers of childcare and they set the figure that they will pay us. We did a competitions and markets authority complaint back in 2017 to this extent and they came back and they said they couldn't do anything because they can't regulate a government body. We're now moving into an era where I'm saying to you that 80% of my revenues are going to come from the government and they're telling me how much they're going to pay me. That is a monopsony.
Angela Walker:
But we do have regulators for energy prices and water prices and things like that, but they're arguing that they're not going to do that for childcare.
Ian Morgan:
No, because it's the government that are paying for the childcare. Energy regulators regulate energy companies, so it's for the consumers benefit. Here we're not the consumer, we're the supplier of a service, but it seems like the CMA aren't prepared to protect us.
Angela Walker:
We've talked a lot about how nurseries are appealing. What feedback do you get from parents?
Ian Morgan:
I think most parents are grateful for the hours, the funding that they get. I can tell you that on day one after the budget we had inquiries about all. I want to put my child down on the waiting list. He's not even born yet, but when he reaches one I want to make use of the hours. I think parents are grateful for it. I think most parents actually understand our issues.
Angela Walker:
I must say I'm the parent of a toddler myself. We used to have a great little preschool literally over the road that shut down, and my nearest preschool is on the other side of town and it's more than a 40 minute round trip in Russia. If I want to drop him off there and then just dropping him off and coming home will take me more than 40 minutes. There's a desperate shortage of preschool places and he's been on the list. I've got him on the waiting list for that preschool, even though it's miles away, because that's the only option I've got.
Ian Morgan:
I have waiting lists at both my nurseries for places in 2024 and 2025 and we are full and when people come to us, we have to let them down every single day because we only have very few sessions that we can offer people and for people that want to work, we mostly don't have enough sessions to make it work for them. So, yes, there is most probably a need for more places. I think nurseries have to be of a certain size to be viable, but we need to be paid a good rate to actually afford the staff because, as I said earlier, the staffing is our biggest single cost.
Angela Walker:
Ian, you've already complained to the competitions and markets authority about this monopsony. Is that something that you're going to take further?
Ian Morgan:
I think it's a line that we definitely have to follow. As the amount of childcare increases that the government are going to fund, it becomes more critical and their abuse of the market could be substantial. I think it's a very credible line to actually go back to the government and complain about So yes definitely.
Angela Walker:
So if you've got one message that you can give to the government today, what would that be?
Ian Morgan:
You need to drastically increase what we're being paid And don't go quoting figures, because we all know that what you quote isn't what we get. And it could work, but the likelihood is we'll be disappointed.
Angela Walker:
Are you optimistic about the future of childcare in this country?
Ian Morgan:
I am. I've been in this for 16 years now. I enjoy it. It's been a great career change for me And I wouldn't want to get out of it. I think if you have a business head on you, you can get through most things. At the moment, we need to be paid more. We need to find ways of returning more money to the settings so they can make profits and survive. Lots of people are getting out of this industry, but certainly I'm confident I'll be around for a lot longer.
Angela Walker:
Thank you very much for joining me.
Ian Morgan:
It's a pleasure, thank you.
Angela Walker:
I'm Angela Walker and I've been in conversation with Ian Morgan from the campaign group Champagne Nurseries, lemonade Funding and the director of Little Duckling's nursery in Berkshire. I hope you've enjoyed the show. For more information, check out my website on AngelaWalkerReportscom, where you'll find information about other podcasts in the series and you can see more of my work. And if you know someone who's inspirational or if there's a story that you think is underreported, drop me a line through my website. Until next time, take care.