Nurseries face escalating funding gap for free childcare offer
Joe Lepper
Tuesday, June 19, 2018
The funding gap for nurseries to deliver the government free childcare initiatives has more than doubled over the past year, according to a survey of providers.
A survey by the National Day Nurseries Association (NDNA) found that government funding for each three- and four-year-old in their care is now £2,166 short of the actual annual cost, compared with a funding gap of £958 last year - an increase of 126 per cent.
The NDNA survey found that 87 per cent of the more than 700 providers said that current government funding for three- and four-year-olds does not meet their costs.
In 2018, nurseries receive an average hourly rate of £4.25 for each three- and four-year-old, which is on average £1.90 less than the cost to nurseries of providing their care.
While in 2017 the funding was less, at £3.94 an hour per child, the average shortfall that year was also lower, at £1.68 per hour.
The increasing funding gap is largely down to the expansion of free childcare entitlement. Last September, the government doubled the free childcare entitlement for working parents of three- and four-year-olds from 15 to 30 hours.
Providers are also facing rising staffing costs, which have gone up seven per cent since April 2017, due to increases in the national living wage, as well as national insurance and pension contributions.
Another issue was found to be late payments from councils. Nearly a third (31 per cent) of nurseries surveyed said they have been paid late, with the average wait being three-and-a-half weeks. Two nurseries said they had to wait 12 weeks for payment.
Around a fifth (19 per cent) of nurseries are predicting they will make a loss this year - an increase of two percentage points on the results of last year's survey.
The survey also found that an increasing number of nurseries are not offering funded places to disadvantaged two-year-olds, due to high costs involved with additional support and higher staff ratios necessary for the age group.
This year, 11 per cent are choosing not to offer funded places to two-year-olds from less affluent backgrounds, compared with nine per cent the previous year.
The NDNA is calling for the hourly funding rate for disadvantaged two-year-olds as well as for three- and four-year-olds to be increased.
Nurseries in England should also be exempt from business rates, as they already are in Scotland, the NDNA said.
In addition, the NDNA is calling for the introduction of a "childcare passport" to make the early years funding system easier to manage and to cut down on paperwork for nurseries.
"One in five English nurseries that responded to our survey expect to make a loss and many fear they may have to close their doors. Our figures show that since the 30 hours policy began, closures have increased by 47 per cent on last year," said NDNA chief executive Purnima Tanuku.
"Nurseries are forced to alter the way they deliver funded hours by restricting the number of places they offer, holding back from hiring highly qualified staff or charging parents for extras to make up the funding shortfall. Neither parents nor nurseries want this to happen.
"Doubling the amount of funded childcare from 15 hours to 30 has more than doubled nurseries' average annual shortfall, which, coupled with late payments from local authorities, is seriously undermining their cash flows."
Last month, a study by Ceeda found that early years providers face a funding shortfall of more than £500m for delivering the government's childcare initiatives.
Children's minister Nadhim Zahawi said: "Almost 300,000 children are now benefiting from a free nursery place thanks to the roll out of our 30 hours offer. That means thousands of hardworking parents are saving an average of £5,000 a year on childcare.
"Our research has shown that more than 80 per cent of providers are willing and able to offer places under this programme, with a third saying they had managed to increase the number of places available and 40 per cent able to increase staffing hours."