A consultation on changes to the way government funds local authorities to oversee delivery of the free childcare entitlement closed last week.
The Department for Education proposals would see the introduction of a universal base rate for funding 30 hours of free childcare a week for three- and four-year-olds that, it says, would give three-quarters of councils more money.
This, combined with a new requirement for councils to pass on 95 per cent of government early years grants, would also ensure providers benefit from the proposed new system, the DfE says.
The changes have been developed to incentivise more childcare settings to provide free childcare places in advance of the 30-hour offer being available nationally from September 2017.
But early years groups have major concerns about the plans.
Definition of free childcare
The National Day Nurseries Association (NDNA) says 30 hours should be rebadged "funded", rather than "free", because providers will not be able to offer it without charging parents.
"With tight public finances, investment is falling short and many nurseries will face bigger losses on free places that must be made up in parental fees elsewhere," says NDNA chief executive Purnima Tanuku.
"Thirty free hours can only work in all local authority areas if providers are allowed flexibility in charging for essential extras, such as food, or activities such as language sessions, and over how many hours of the nursery day they can offer as free," she says.
Tanuku suggests nurseries could offer seven "funded" hours and three paid for at a more "realistic rate" to cover the typical 10 hours of daily childcare.
She says the government needs to clarify that funding covers only "basic childcare" and that "anything over and above should be chargeable".
Neil Leitch, chief executive of the Pre-school Learning Alliance, says the government must either fund the offer at a rate that providers and parents incur no extra costs, or promote the offer as subsidised.
"For years, providers have had to scramble to find ways to stay afloat - setting higher fees for additional hours or younger children; charging high rates for optional extras; relying on volunteers and unpaid staff hours," he says.
Funding levels and formula
Ken McArthur, manager of Polly Anna's nursery in York, says the increased funding attached to the reforms does not offset extra costs recently imposed on the sector.
In addition, the Pre-school Learning Alliance warns the universal base rate will not apply until 2019/20, despite the 30 hours offer starting next year.
"For many private, voluntary and independent (PVI) providers, such a lengthy delay will put many in an even more financially precarious situation than they are already in," says the alliance's consultation response.
"Given that much of the impetus behind the proposed changes is to ensure that providers are able to roll out the 30-hour offer in September 2017, it seems contradictory to leave providers in a position where delivering the offer may not be financially achievable until 2019, if then."
McArthur says the proposed DfE formula will not achieve its aim to smooth out variations in funding rates paid by councils to providers, because costs of childcare are much higher in places like London.
Impact on childcare places
There is no correlation between the gaps in the provision of free childcare and the redistribution of funding, the Family and Childcare Trust (Fact) states in its response.
"Some authorities with serious sufficiency will lose a significant amount of funding, while others with high take-up of the free offer will benefit significantly.
"No consideration has been given in the new funding arrangements to the funding needed to address gaps in sufficiency, either in the number of free childcare places or the quality of places offered," it states.
Fact's analysis shows that inner London will lose out more than any other region in England, with 12 out of 14 authorities set to lose an average of five per cent of their funding.
"Inner London already has serious sufficiency problems, with take-up of the two- and three-year-old offer of 53 and 83 per cent compared to 68 and 94 per cent in England," Fact adds.
Nursery schools
The majority of England's 400 nurseries are located in deprived areas, and 99 per cent are rated "good" or "outstanding" by Ofsted.
Nursery schools are typically funded at a higher rate than other types of settings, due to employing higher-qualified staff. But under the new proposed base rate, they would be funded at the same rate.
This change will lead to "enormous" decreases in early years funding for councils with the highest number of nursery schools, the National Association of Head Teachers (NAHT) says. For example, Birmingham's 27 nursery schools will receive 47 per cent less funding, while Durham will see a 38 per cent fall for its 12 schools.
Russell Hobby, NAHT's general secretary, says the government has ignored the fact that nursery schools run at higher costs.
"The DfE's own data shows that any funding approach that does not reflect these costs on an ongoing basis will be a body blow for early years education in nursery schools," he says. "There is additional funding available, but only for two years. After that, England's nursery schools will cease to be financially viable.
"The 30-hour offer will be doomed before it even gets started. Additional places won't materialise and current places will be lost as nursery schools across England close their doors."
According to Fact analysis, the changes will see £60m move from maintained to PVI providers.
