Government ‘knowingly underfunded free childcare’, EYA investigation reveals

Department for Education data obtained through a Freedom of Information request submitted by the Early Years Alliance (EYA) shows that the government calculated that a funded early years place for three- and four-year-olds would cost an average of £7.49 per hour by 2020/21.

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However, the average rate paid to local authorities for this offer is currently just £4.89, according to independent analysts Ceeda.

This indicates a shortfall of £2.60 per child, per hour for every 30-hour place – or £2,964 over the course of a year, according to the EYA.

Documents seen by the alliance reportedly state that the government expects providers to “move, over time, to full use of statutory staff ratios” to accommodate the shortfall. 

“This is despite low child to adult ratios being associated with higher quality early years provision,” the alliance said.

The Early Years Spending Review Scenarios document, obtained by the alliance, also states: “We will strip out funding for consumables (food, nappies) – and set an expectation that providers charge parents for these.”

A separate redacted briefing note to then early years minister Sam Gyimah, obtained as part of the FOI request and marked as "RE: Early Years Funding Rate Negotiations”, states that the total annual cost for increasing early years funding rates could be: “reduced to circa £500m if ministers are content that we do not fund providers to cross-subside the privately paid rate for children younger than three, and instead accept that prices will rise for these children”.

A second FOI request submitted by the EYA in April 2021 asking for proof that the 1.2 per cent increase in early years funding for 2021/22 would cover the cost of increased national living and minimum wages and the extension of the national living wage to 23- and 24-year-olds has been rejected by DfE on the grounds that the department plans to release the data publicly.

Neil Leitch, chief executive of the EYA, said: “For so long, the government has tried to deflect the blame for rising childcare costs. But these documents prove, in black and white, that it knew that the introduction of the 30-hours policy, along with an insufficient level of investment, would result in higher costs for parents of younger children.

“Only with fair and adequate funding will we ensure nurseries, pre-schools and childminders can continue delivering the quality, affordable care and education that children and families both need and deserve.”

Meanwhile, latest government figures show that more than 2,500 childcare settings have closed over the last six months.

The DfE’s monthly joiners and leavers in the childcare sector report reveals that there were 74,130 childcare providers in England as of 31 December 2020. 

The latest data release shows that there were 71,535 childcare providers as of 31 May this year, indicating a loss of 2,595 childcare providers since the start of the year.

In the last month alone 270 settings closed, according to the figures including 216 childminders, seven settings operating from non-domestic premises and 47 providers operating from their own home.

The statistics are calculated using the number of providers who have resigned their Ofsted registration or had their registration revoked or suspended.

The Labour Party has said the figures suggest their “worst fears are being realised”.

Shadow children and early years minister and MP for Hampstead and Kilburn, Tulip Siddiq, said: “Labour has repeatedly warned that thousands of childcare providers could shut their doors forever without better support.

"This worrying data shows that our worst fears are being realised, with children, parents and our economy suffering as a result of the government’s chronic underfunding and lack of pandemic support.

"The government is failing to listen to families and must now take urgent steps to prevent further childcare closures and rebuild this essential infrastructure after a decade of neglect."

A DfE spokesperson said: "We’ve made an unprecedented investment in childcare over the past decade, spending more than £3.5 billion in each of the past three years on our free childcare offers and increasing the hourly rate paid to councils above inflation for the past two years.

"Through our early years funding formula, which we introduced after consultation with the sector, councils must pass on the vast majority of the funding they receive for the three- and four-year-old entitlements. The number of childcare places available for parents in England has remained broadly stable since 2015, and we are not aware of any significant issues for parents in accessing free places – we work closely with councils to ensure this remains the case."