15 June 2021

Ministers knew parents would face ‘higher childcare costs’ amid lack of funding

15 June 2021

Ministers knew parents would face higher childcare costs because of insufficient investment in the sector, an early years organisation has said.

Government documents, obtained and released by the Early Years Alliance (EYA), recognise that introducing the 30-hours free childcare for three and four-year-olds in England was likely to result in price increases for families.

The documents, which have been released after a lengthy Freedom of Information (FOI) dispute with the Department for Education (DfE), suggest that early years funding rates for 2020/21 were less than two-thirds of what Government officials estimated to be the true cost of “fully funding” the sector.

Neil Leitch, chief executive of the EYA, will accuse the Government of “shamelessly, knowingly underfunding” the sector during his keynote speech at the EYA’s annual conference on Thursday.

The EYA originally submitted its FOI request – which asked for proof that the early years funding rates announced in 2015 and implemented in 2017 had been calculated to be enough to cover the rising cost of delivering places over subsequent years – in December 2018.

Early years providers and parents have had enough of being forced to pay the price for this underfunded policy year after year

A briefing document to the ministers, entitled Early Years Spending Review Scenarios and dated October 27, 2015, said: “Provider costs vary substantially between age groups – primarily because of statutory ratios. Providers generally adopt a more-or-less flat pricing structure across the age phases.

“Currently this is possible because the free entitlement is only 15 hours. When Gvt [Government] purchases the majority of ‘cheaper’ three- and four-year-old places, it will become harder for providers to price in this way.

“Providers may, therefore, increase prices for younger children – potentially by as much as 30%. This could stop parents returning to work while their children are younger.

“There is some evidence that a 10% reduction in the cost of childcare might lead to a 1.4% increase in the employment rate for married mothers with pre-school age children.”

The same document  marked as “official sensitive”, adds: “There are a number of factors that could risk the sustainability of the [three- and four-year-old] entitlement – from NLW pressures to supporting children with Send.

“Fully funding them all is not affordable – by 2020-21 it would be a 3-4yo rate of £7.49, and potentially cost for the uplift alone of over £2bn.

“We will make reforms and expect providers to become more efficient in order to reduce this cost.”

Mr Leitch said: “For so long, the Government has tried to deflect the blame for rising childcare costs.

“But these documents prove, in black and white, that it knew that the introduction of the 30-hours policy, along with an insufficient level of investment, would result in higher costs for parents of younger children.

“Early years providers and parents have had enough of being forced to pay the price for this underfunded policy year after year.”

He added: “There is still time for the government to do the right thing, but at this point, the only way for it to maintain any credibility with parents and early educators is by agreeing to a full review of early years policy in this country.

“That means delivering the substantial investment the sector needs in the upcoming Spending Review.

“Only with fair and adequate funding will we ensure nurseries, pre-schools and childminders can continue delivering the quality, affordable care and education that children and families both need and deserve.”

The Government owes parents an apology for this reckless underfunding of early years and for covering it up

Sir Peter Lampl, founder and executive chair of the Sutton Trust, said:  “It’s disappointing to have confirmation that the government were aware that the current early years funding would not be enough to fully support their scheme, but that it was implemented anyway.

“The 30 hours policy is directly disadvantaging low-income families, who already face additional barriers to accessing good early years provision.”

Cllr Anntoinette Bramble, chair of the Local Government Association’s (LGA) children and young people board, said: “We have long highlighted that the early entitlements are underfunded.

“This underfunding, alongside a fall in income from parents during lockdowns, was a key factor in the challenges face by early years providers throughout the pandemic as they worked hard to support children and families.

“The forthcoming Spending Review should properly resource all early years settings so that councils and providers can support the Government’s ambition to reduce the attainment gap and ensure that every child has the best start in life.”

Tulip Siddiq, Labour’s shadow minister for children and early years, said: “These shocking findings confirm the Conservatives’ disregard for early years education and the childcare needs of working families.”

She added: “The Government owes parents an apology for this reckless underfunding of early years and for covering it up.

“Ministers must now change their failed approach to early years, which must start with urgent action to prevent further childcare closures.”

A DfE spokeswoman said: “We’ve made an unprecedented investment in childcare over the past decade, spending more than £3.5 billion in each of the past three years on our free childcare offers and increasing the hourly rate paid to councils above inflation for the past two years.

“Through our early years funding formula, which we introduced after consultation with the sector, councils must pass on the vast majority of the funding they receive for the three and four-year-old entitlements.

“The number of childcare places available for parents in England has remained broadly stable since 2015, and we are not aware of any significant issues for parents in accessing free places – we work closely with councils to ensure this remains the case.”

The best videos delivered daily

Watch the stories that matter, right from your inbox