Childcare subsidy cut for wealthy families as council reforms ‘outdated’ fees

Hackney Council’s cabinet is to decide next week on sweeping reform to the borough’s fee structures for childcare.

The highest band of the means-tested fees currently starts at £55,000, but would be lifted to over £100,000 if the changes are successfully voted in.

The lowest band would be lifted to households earning under £34,000 (the average London wage), from its current banding of “up to £25,000”.

High-earning parents are set to lose out on their current council subsidy as part of the changes, after Town Hall analysis found that families earning more than £55,000 were benefiting from council support despite being in a position to “contribute more”.

A council report on the changes said: “The fee structure would therefore be fairer in that the new fee structure would reflect a better balance between an ability to pay towards the actual cost of childcare in children’s centres whilst maintaining support to lower and middle income families.

“Analysis of childcare occupancy and income suggested that families earning more than £55k benefited from subsidised fees when they may be in a position to contribute more to the cost of their childcare.

“This was particularly the case as there was no differentiation of family income for anything above £55k.”

If successfully voted through, the changes would be implemented in September.

Parents received letters informing them of the changes last month, which also sparked concerns that fees would see a rise next year.

According to Cllr Chris Kennedy (Lab, Hackney Wick), cabinet member for families, eary years and play, no decision has been made on an across-the-board fee increase, with parents able to use their free 15 or 30-hour entitlements as usual.

The three current bands for children’s centre childcare fees are:

• Band 1 – household income up to £25,000
• Band 2 – household income £25,000-£55,000
• Band 3 – household income over £55,000

Under the proposed changes, the bands would appear as:

• Band 1 – household income under £34,000
• Band 2 – household income £34,000-£55,000
• Band 3 – household income £55,000-£70,000
• Band 4 – household income £70,000-£100,000
• Band 5 – household income over £100,000

The council currently provides 627 full time equivalent places, at a subsidy of over £6m a year.

According to the Town Hall, the new Band 1 would attract a subsidy of up to 63.5 per cent, aimed at supporting single parents.

Those earning over £100,000 would have only 4.5 per cent of the fee for a place for a three to five-year-old subsidised, whereas currently such a place would attract a 26.3 per cent subsidy.

Commenting on an across the board fee increase, council officers said: “This would not have addressed the need to review the overall income bands and fees given this structure had been in place for the last decade.

“Neither would it have addressed the levels of current subsidy in the existing fees structure.

“As part of the fee structure modelling an option to maintain a greater level of subsidy was considered. However, this would not have achieved sufficient savings for the council.”

Cllr Chris Kennedy said: “The existing bands are outdated, with the highest commencing from £55,000. As a result, families earning anything over £55,000 have been paying less than half of what it costs us to provide childcare in our baby rooms.

“The [new] bands group household incomes up to £100,000+ – three times the average London salary. In the top band, the council will still subsidise a quarter of the cost of providing childcare in a baby room.

“A small number of parents have written to me to say that while they understand our reasons [for the changes] in principle, they object to the removal of some of their subsidy.

“I am mindful that the changes are more significant for some of our higher earners, which is why we have given them as much notice as possible. Our children’s centres will continue to offer competitively priced, high quality childcare, and we will continue to subsidise them for all users.

“However, these changes are needed. With pressure on our resources, we have few choices to allow us to increase accessibility to affordable childcare and make savings needed within our budget.”