Nurseries and childcare groups have warned they may have to increase the price of unfunded childcare hours, nappies, food or trips for parents if an expanded free childcare entitlement for the under-threes is not funded properly by the Government.
The Chancellor announced a £4.1bn pound expansion of free childcare to parents of all children under three from the moment parental leave ends. The plan offers 30 hours a week of free childcare for all children aged between nine months and two years old, and will come fully into effect from 2025 – with the provision being rolled out in stages. This will expand the present system, which offers 30 hours of free childcare for three- and four-year-olds.
Nurseries that currently offer free childcare to three and four-year-olds will get a funding boost of £204m from this September, with £288m a year provided in 2024-2025.
Groups in the childcare sector have previously warned the sector would collapse if the Chancellor failed to stand up funding. Providers have reported a funding shortfall for these free hours which left nurseries running at a loss as costs for staffing and utilities rise, forcing them to hike fees for parents.
Recent research from the National Day Nurseries Association (NDNA) estimates that the funding shortfall for places for three- and four-year-olds comes to £2.31 per hour, up from £1.87 in 2021. For children receiving 30 hours of free care per week, it comes to a shortfall of £69 per week each, or £300 per month.
Shannon Pite, communications and external affairs director at the Early Years Alliance, said the new funding announcements would not put the sector at ease.
She said it was not clear what the £4.1bn for expanded free childcare meant in terms of an hourly-funding rate for providers. If this was underfunded “even slightly” that would have serious consequences for the sector and families. Caring for younger children was more expensive and could require additional staff members, she said.
“Where funded hours are underfunded, providers have no choice but to look at any additional hours the parents take up or any additional services the parents take up – including lunch, nappies, or trips – and push the prices of those up,” she told i.
“Historically when the early entitlement was centred around three- and four-year-olds, what a lot of providers did was look to one- and two-year-olds and increase the cost there. Now that one- and two-year-olds are going to be eligible for funding, it will be things like any extra hours that parents take outside of the funding or any extra goods and services.
“There’s a good chance that parents will see extra costs if the funding isn’t adequate, or providers will not be able to make up the funding shortfall and they will have to close.”
The funding boost of £204m in 2023-2024, and £288m in 2024-2025, looked like it “underestimated” the funding shortfall hole the sector currently had for the existing free offer- which has been estimated at £1.82 billion by the Women’s Budget Group, Ms Pite said.
Andrew Howarth, the director of Paint Pots Nurseries, which has three nurseries in Manchester and Cheshire, said the “devil would be in the detail” after viewing Wednesday’s budget, but he also expected he would have to hike fees if the free childcare expansion was “poorly executed again”.
“I am not against the policy [of more free childcare hours]. I think it is a great idea and could encourage more women back into work and have a knock-on effect for the whole economy, but the devil is in the detail, and I would expect it would continue at the current funded rates,” he said.
Mr Howarth said the free childcare hours were not funded properly at present, with his 90 staff to be paid at least a living wage and daily costs increasing due to inflation, which meant he was running at a loss for the free childcare hours. The only way he could recover that, was through raising the prices on the unfunded hours, or hot meals.
“I am subsidising my hourly rates for three- and four-year-olds to the tune of about £10 per child, per day – but if you want a system – just fund it properly. I am not asking to pay me £10 an hour for something which costs me £5 to deliver I am asking them to cover the cost of delivery and it doesn’t get anywhere close,” he said.
Samina Shabir, manager at Jubilee Park Nursery in Enfield, agreed, saying she wanted to see more about how the £4.1bn would be rolled out. “They are saying it’s 30 hours – and that’s great but there are no figures there for us to look into properly. It’s not clear to be honest.”
June O’Sullivan, chief executive of London Early Years Foundation, which operates 40 social enterprise nurseries across the Capital, said the news the minimum staff to children ratio would increase from 1:4 to 1:5 was also “very disappointing”.
She said the quality of care that children got was vital – and depended on numbers of staff to children. “Children shouldn’t suffer for government policy where they are trying to cut corners on finance,” she said.