Nurseries reveal true cost of free entitlement

According to the NDNA's business performance survey of more than 900 early education settings, 84 per cent said the hourly government rate for places funded under the free entitlement does not cover the costs of care, leading to an average loss of £547 each year for each child.

The survey also found that the number of nurseries reducing staff in the past six months has increased by nine per cent, with 67 per cent of nurseries saying that parents are increasingly using friends and family for childcare.

Less than half of the nurseries surveyed said they expected to make a profit in 2013.

Claire Schofield, policy director at NDNA, said the results suggested families under financial pressure are trying to avoid paying for additional hours beyond the free childcare offer, with serious implications for providers.

She said the government's childcare reforms must drive more money to providers to address funding shortfalls pushing nurseries to the brink.

“In terms of the government wanting everyone to access their free hours, that uptake is high,” she said.

“The problem for the nurseries is if you’re losing on average £500 a child a year on your three- and four-year-old places, and then the parents don’t add on any additional hours, you’ve got nowhere to go to make up that loss.”

NDNA’s chief executive, Purnima Tanuku, said the government needed to take urgent action or risk failing children and families.

“More than 80 per cent of the UK’s nurseries are in the private or voluntary sector, so the government and local authorities must realise that unless the sector is offered the right support it will not be able to deliver government ambitions to support working families and offer disadvantaged two-year-olds high-quality early education places,” she said.

Tanuku called on the government to address the report’s findings in its forthcoming policy announcements due in the Childcare Commission response.

“Any changes to the childcare system must not compromise quality as this would be doing a disservice to children and families and ultimately creating higher costs for schools and local authorities further down the line,” she said.

Labour’s shadow education secretary Stephen Twigg backed the survey’s findings.

“Families need help now, but after two years, while family budgets have been squeezed, the government still hasn’t come up with a plan to assist parents with childcare costs,” he said.