Early years sector 'systemically underfunded', study finds

Research agency Ceeda looked at rates handed by English councils to providers of 30 hours funded childcare places for three- and four-year-olds, and found that 44 per cent are received less in real terms in 2017/18 than in 2013/14.

The area with the biggest decreases is the Isles of Scilly, where there has been a 17 per cent cut in the funding rate. Taking into account inflation providers on the islands received £4.58 per hour for each child in 2017/18, compared with £5.55 in 2013/14.

Others to see a dramatic fall in real terms funding are North Lincolnshire, where funding has fallen 15 per cent from £4.74 to £4.04 over the same period.

In Sunderland and Bradford the fall has been 14 per cent and providers in Torbay have seen a 12 per cent cut in funding for funded three- and four-year-old places. Overall there has been a real-terms increase across all council areas, by 1.8 per cent.

Ceeda is calling on the Chancellor Philip Hammond to ensure the Treasury increase investment in childcare in today's autumn budget.

"Our analysis reveals systemic underfunding of the early years, affecting local authority areas across the country," said Ceeda managing director Dr Jo Verrill.

"This not only has a significant impact on providers at a time when rising business costs and the expansion of the funded offer are putting pressure on their sustainability, but also parents, many of whom are facing extra charges and increased fees as a result.

"Without prompt action, continued government under-investment is likely to hit disadvantaged children the hardest: low-income families are least able to pay for ‘extras' when accessing funded hours, and providers in deprived areas struggle to generate private fee income to help them stay afloat.

"We are already seeing the impact, with places declining in the most disadvantaged communities and increasing in more affluent neighbourhoods.

"A new approach to childcare policy, underpinned by adequate funding and investment, is urgently needed if we have any chance of recreating these worrying trends."

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Neil Leitch, chief executive of the Pre-school Learning Alliance, described Ceeda's findings as "shocking".

"Despite the government's insistence that all is fine with the 'free childcare' offer in this country, an ongoing lack of adequate funding has meant that many early years providers are actually in a worse financial position than they were five years ago," he said.

"The Department for Education may talk about 'record investment' into the childcare sector, but with rents, wages, and other costs all on the rise, unless funding rises at least in line with inflation, it's all just meaningless rhetoric."

The real-terms funding analysis forms part of research carried out for its 2017/18 annual report. This found that nurseries and pre-schools face a total funding gap of £616m in 2018/19. In addition, funding rates for two-year-old places have been cut by 8.5 per cent in real terms since 2013/14.

Last month a study by the Institute for Fiscal Studies found that the total amount spent by government on early years services had risen for the first time in three years in 2017/18, but is still down on 2014/15 levels.

The study said the rise was largely down to the extension of funded childcare for three- and four-year-olds in working families, from 15 to 30 hours a week.

Also last month, the National Day Nurseries Association (NDNA) said there had been an increase in nursery closures since the introduction  of the 30 hours childcare scheme.

The NDNA said 121 had closed between September 2017, when the 30-hour scheme launched, and August 2018. Over the same period the previous year 73 settings closed.

Purnima Tanuku, NDNA chief executive, said Ceeda's findings echo her organisation's own research.
 
"Ministers have made promises to parents about their childcare offer but they are not prepared to meet the costs of those nurseries they expect to deliver it," she said.

"What is worse is that many of the increasing costs like staffing, pensions and business rates are as a result of government policies which they fail to acknowledge in their funding decisions.
 
"In his budget the Chancellor has the opportunity to properly fund childcare and early years as well as addressing some of those rising costs by exempting nurseries from business rates. Failing to treat the sector fairly will send a clear message to providers and parents about how much ministers value our children."

The Department for Education has been contacted for comment.