Retailers and milk suppliers stand to lose an estimated £364m over the next 10 years if proposed changes to the government’s Nursery Milk Scheme go ahead.
On Monday, the Department of health issued a consultation on proposed changes to the scheme, which funds the provision of free milk for 1.5 million children under the age of five.
A DH impact assessment carried out last November concluded that, of four options considered, a direct supply contract between the DH and suppliers for the provision of milk to childcare providers would result in the greatest savings.
The DH’s “best estimate” was that this option could save the Exchequer £363.53m over 10 years, based on an assumed negotiated price of 40p per pint of milk and economies of scale.
“The expectation is that a large supplier or suppliers would be able to buy milk at farmgate prices (rather than retail prices),” the DH noted.
Currently, childcare providers buy milk from a range of sources including supermarkets, corner shops, milkmen, markets and at the farm gate, and then claim back the cost.
Three of the four options would result in a financial cost to the private sector due to lower milk payments, but the DH claimed that this would be offset by “non-monetised benefits” from greater competition in the milk market. “Milk retailers and suppliers will be incentivised to be more efficient,” it said.
The other three options under consideration are: do nothing cap the price that can be claimed for milk by childcare providers and issue e-voucher cards for childcare providers to use.
DH figures show that the scheme cost government £53m in 2010/2011, 96% more than in 2007/2008. The DH projects that this could increase to £76m by 2016.
The consultation will close on 11 September.