As part of its research into education spending it found that total for the funded entitlement nearly quadrupled between 2001 and last year, when it reached £4.1bn.
However, rising costs, including salaries, energy, rent and food, grew by 25% between 2016 and 2023, which is twice as fast as growth in funding rates for three- to four-year-olds over the same period.
The think tanks warns that “once we account for rises in providers’ costs", the funding rate for this age group is “worth about 15% less” in 2024/25 as it was in 2012/13.
“A clearer and more consistent process for setting funding rates is needed – one that accounts for expected costs and ensures equitable access to childcare across all parts of the country,” states the IFS report.
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