Briefing: Childcare funding dispute

Derren Hayes
Tuesday, August 31, 2021

For the second time in recent years, the government is being challenged over early years funding policies.

Latest statistics show a fall in the total number of childcare providers in England. Picture: Adobe Stock
Latest statistics show a fall in the total number of childcare providers in England. Picture: Adobe Stock

The Early Years Alliance (EYA) has taken its dispute with the Department for Education over the release of details of early years funding to the Information Commissioner’s Office (ICO).

An appeal with the information regulator has been lodged after the DfE rejected a Freedom of Information (FOI) request made by the EYA to publish calculations behind the government’s £44m increase in early years funding announced last year.

The appeal to the ICO is the latest development in a long-running dispute between the EYA and DfE over early years funding and the calculations on which the department is making its decisions.

What does the £44m cover?

At last November’s one-year spending review, the Treasury announced an additional £44m in 2021/22 to “increase the hourly rate paid to childcare providers” for the government’s funded childcare entitlements. The extra funding translated into a rise of 8p per hour for the rate paid for children under the two-year-old entitlement and 6p per hour under the three- and four-year-olds scheme.

The DfE said that it believed the sums would cover the rises of 1.5 to two per cent in the National Minimum Wage planned in April 2021. However, the sector warned it was insufficient to cover rising staff costs in addition to other pressures linked to the pandemic.

What was the basis of the FOI request and why was it rejected?

The EYA filed an FOI request to the DfE, asking for the calculations behind the government’s claim the £44m was sufficient. It justified this on the basis that children’s minister Vicky Ford had repeatedly made the claims in parliament.

The DfE rejected the alliance’s request on the basis that it already plans to release “a document which considers the rate at which early years providers are funded for delivering entitlements and looks at the average cost of delivering childcare entitlements, based on various relevant inputs – including the minimum wage”. No timescale was given for the publication of this document.

Responding to the decision, Neil Leitch, EYA chief executive, said: “The DfE has been claiming for months that the one per cent increase in early years funding rates was enough to pay for the two per cent increase in national living and minimum wages. Where’s the proof? It is not good enough to say ‘We’ll prove it at some point’ when these rates have been in effect for more than four months.”

Why would a funding shortfall be so damaging?

Latest government statistics show that the total number of childcare providers in England fell from 74,130 in December 2020 to 72,043 in March 2021.

While some of these falls may be down to the impact of the pandemic, early years campaigners and experts have warned that Covid-19 has tipped many providers of all sizes over the edge after many years of inadequate government funding.

The DfE’s decision to calculate spring term funding on the basis of January 2021 census figures has also compounded the financial pressures faced by providers as attendance rates in many areas are still well below pre-pandemic levels.

What is the previous dispute?

The EYA filed a previous FOI in December 2018. This asked the DfE to publish the thinking behind the early years funding rates that were announced in 2015 and which came into effect in 2017. The request was rejected prompting the EYA to complain to the ICO, which backed its claim in late 2019 and ordered the department to publish the information. However, the DfE appealed the ICO’s decision and it took until June 2021 for the reports to be published.

What did the DfE documents show?

The DfE data revealed that civil servants estimated that a government-funded early years place for three- and four-year-olds would cost an average of £7.49 per hour by 2020/21. By contrast, the average rate paid to local authorities for this offer is currently just £4.89, according to independent analysts Ceeda, a shortfall of £2.60 per child, per hour for every 30-hours place – or £2,964 over the course of a year.

The documents also reveal that ministers were aware that the levels of investment proposed would result in higher prices for parents of younger children as providers would be forced to cross-subsidise those on the 30-hours scheme.

Another document suggests there was a deliberate strategy of passing on costs to parents. It states: “We will strip out funding for consumables (food, nappies) and set an expectation that providers charge parents for these.”

Leitch says: “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.”

What has the reaction been?

The National Education Union said: “The government’s current policies and lack of action are a threat to the sector and the life chances of the children they educate.”

The National Association of Headteachers added: “We agree that the early entitlements are underfunded and need to be reviewed. We cannot continue to ask early years settings to provide first-class education and childcare on a shoestring budget.”

What happens next?

The DfE is yet to announce any timescale for publishing the calculations behind the £44m figure. Nor has the ICO confirmed arrangements to review the case.

Leitch says: “Ministers should know that the EYA will not let this go. We recommend that the DfE commits to publishing the calculations at the earliest possible moment.”

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