Professor Helen Penn: ‘Radical reform’ of Ofsted and the childcare market is needed

The Joseph Rowntree Foundation has launched a project, Changing Childcare, about the major shifts in provision in the UK. More than 70 per cent of all childcare places are now provided by nursery chains, and – as the Daily Mirror has recently highlighted – some are run by some very fat cats. Childcare, like many other sectors, is now dominated by large, financialised companies, which fund their expansion by extensive borrowing from private equity companies. As Nursery World shows in its annual Nursery Chainssupplement, these companies continually expand and consolidate their provision through mergers and acquisitions, and turnover of ownership is rapid. The largest companies own more than 300 nurseries each. These chains increasingly are owned and run by foreign investors. Companies are seriously in debt to their investors, as well as needing to pay their shareholders dividends; the low financial reserves of these companies is risky.

Childcare companies determine their policies at a company rather than local level, and their considerations are primarily in terms of financial returns. Many functions are outsourced, or dealt with at a head office level, so the autonomy, flexibility and accountability of an individual nursery within the company is limited. Childcare fees are very high, yet financialised companies typically cut expenditure on staffing from around 80 per cent to 55 per cent of outgoings, while senior company executives (usually male financiers) give themselves very generous salaries.

Recruitment and retention of staff are a major problem in the sector. The quality of the childcare workforce is essential to achieving quality provision. Several recent childcare workforce studies, including the industry's own reports, point to low pay, low qualifications, and relatively poor recruitment and retention, and very little representation or unionisation. Research suggests a supportive work organisation, along with high-quality initial and in-service training, is an important factor in improving recruitment and retention and in providing a high-quality service for children.

Ofsted's original remit was to oversee the standards of free public sector education, but it has subsequently taken on the inspection of market-based childcare that is part-subsidised by government. Because of the high level of government subsidy – £3.7 billion and rising – and the excessive profits made by some companies, there is a strong argument that Ofsted, the industry's only watchdog, should monitor and adjudicate over competition, fees and fairness of access. The poorest and most vulnerable families mostly don't use childcare, yet childcare plays a crucial role in enabling women to work, so why doesn't Ofsted monitor value for money more closely?

Setting the bar low

Unlike other industry regulators, Ofsted does not deal with any financial or customer service issues. It does not collect information about fees, or the fairness of admissions policies, or the levels of training and remuneration for staff. It does not distinguish between company providers operating large chains, single or small businesses, or charitable provision. Each inspection of a nursery is conducted as if it were a single provider.

Ofsted sets regulatory standards for childcare. It prescribes developmental standards, using research, to justify standards. Its recent childcare research review claims to be evidence-based, and to inform regulation. But other countries make strikingly different assumptions about childcare and early education, including ideas of risk and safety, parental decision-making, fair allocation of places – especially to SEND children – and about staffing. Ofsted has some requirements about minimum qualifications for childcare staff but there are no stringent checks on qualifications or information about pay, training, or workforce conditions.

There are only four categories of assessment: Outstanding, Good, ‘requires improvement’, and ‘inadequate’. The reports on every nursery can be read online, but the comments are usually very general. In 2021, 17 per cent of providers were Outstanding, 80 per cent Good, 2 per cent were ‘requires improvement’, and 1 per cent were ‘inadequate’ (Ofsted, 2021). A provider can be rated as Good even if, for example, it has no outside space for children to play.

If 97 per cent of private nurseries are described as Good or even Outstanding by an ‘independent’ inspection regime, this can be interpreted as a credit to the private sector. One leading agency specialising in the sale of nursery chains claims that one of the reasons inward investors are keen to buy into UK childcare is because, in effect, Ofsted offers investors guarantees of quality without asking difficult questions.

The childcare market is failing, driving up prices and driving down quality. The overall number of places is falling. Ofsted (and by extension the Government, which controls its remit) carries on regardless with its programme of almost pointless inspections. The funding and delivery of childcare and early education requires radical reform. Financial regulation across all services, including asset holding, offshore accounts and tax regulations, needs major scrutiny and reform. In the meantime, Ofsted could at least become a regulatory body with more bite, one which monitors fairness as well as quality, and records the working conditions and remuneration of staff alongside value for moneyfor parents and children.