Early years providers dismayed by hourly rate for disadvantaged two-year-olds

The government wants funding for places, which will be channelled through councils, to be targeted at settings rated good and outstanding by Ofsted.

According to the Department for Education, the Daycare Trust has calculated that “the market rate” for a place in childcare is £4.13 per hour. Childcare minister Elizabeth Truss argued that government funding for the two-year-old offer represents a significant increase on that rate.

But Neil Leitch, chief executive of the Pre-school Learning Alliance, warned that hourly funding of £5.09 was insufficient to deliver the offer in the majority of early years settings – proven by the experience of providers who have been piloting the two-year-old offer on behalf of government.

“A number of providers delivering pilot schemes have argued that the current level does not reflect the true cost of caring for these children, particularly when you consider that many will require specialist care,” he said.

Leitch added that the government’s use of Daycare Trust figures on the cost of childcare implies that funding for the free entitlement allows settings a 20 per cent profit margin.

“Having spoken with many providers, including some of the largest in the country, we believe this is a disingenuous reference,” Leitch said.

“The vast majority of providers confirm that the charge rates for two-year-olds do not reflect the costs associated with delivery, as in many instances this would make the costs to parents almost prohibitive. For example, settings often absorb the additional costs associated with higher staff-to-child ratios.”

Leitch said a recent survey of the alliance’s members found that 87.5 per cent believe that they will be underfunded as a result of the two-year-old entitlement.

“Our figures show that when compared to funding for three- and four-year-olds, the minimum hourly rate required is significantly higher than £5.09 per hour,” he said.

“Particularly when you take into account the smaller staff-to-child ratio of 1:4 for working with two-year-olds, which is half the 1:8 staff-to-child ratio required for children aged three and over. In other words, providers halve the ratios and double the costs.”

“Indeed, one setting taking part in the pilot project said that the funding it was receiving of £6 per hour was ‘grossly inadequate’, as many of the children needed one-to-one care.”

David Simmonds, chair of the Local Government Association’s children and young people’s board, urged government to make sure that the two-year-old entitlement does not create further pressures on council budgets.

He added that “it should not be down to Whitehall to stipulate the criteria for identifying which children are eligible for free early education from September 2014”. ?

“Councils know the needs of local children best and it should be down to their discretion to decide which children benefit from the increase in provision,” he said.

“They have the knowledge and understanding of their communities to be able to tailor the scheme to local circumstances. What may be appropriate in one area may not be the best approach in another.

“By taking the funding for free education for two-year-olds into the ringfenced dedicated schools grant, the government is further restricting councils’ ability to prioritise locally. When set against the top-slice of £150m from the Early Intervention Grant, this represents a substantial reduction in the resources.”

Truss called on schools, nurseries and childminders to “step up to the challenge”, so that all two-year-olds from low-income families can attend good or outstanding childcare settings.

“We know that only high-quality early education has a long-term impact on school readiness,” she said.

“Therefore, I am urging local authorities to pass on all the funding for places to the frontline, so that providers are able to retain and recruit the top-quality staff that our youngsters deserve.”