Two-year-old offer costs nurseries £7,000 a year
Laura Frankland
Thursday, February 27, 2014
Early years settings providing free childcare places for disadvantaged two-year-olds are losing on average nearly £7,000 a year because of underfunding of the scheme, research suggests.
Findings from the National Day Nurseries Association (NDNA) annual survey of its UK members reveals nurseries are losing £604 annually for each two-year-old place provided under the free childcare scheme. On average, nurseries provide 11 places to disadvantaged children making the average loss £6,644.
The survey also shows that those providers offering free two-year-old places receive an average hourly rate of £4.77 from local authorities, £1.06 per hour lower than it costs to deliver the place.
Last September, the 130,000 most disadvantaged two-year-olds became entitled to receive up to 15 hours of free childcare from a local nursery.
But the NDNA report suggests underfunding of the free childcare offer is making it “impossible” for some nurseries to provide more places under the scheme. Those that are providing places are being forced to charge higher fees for childcare not covered by the free scheme to offset losses from council underfunding.
Regional figures for the two-year-old offer shows the average hourly rate in southern England was £5.42, which 37 per cent of nurseries said failed to cover their costs.
In the north of England, the average hourly rate was £4.25 with 43 per cent of providers saying it fell short of covering the cost of providing the places.
Despite this, 53 per cent of nurseries will be offering the same number of funded places over the next 12 months with 42 per cent reporting they will be increasing the number they provide. Only five per cent said they would be offering fewer places.
NDNA chief executive, Purnima Tanuku, said in the report: “Instead of encouraging schools to take more two-year-olds, funding should be targeted at private, voluntary and independent provision to cover the actual cost of the place.
"It is critical funding intended for the free entitlement actually gets through to nurseries on the frontline. We strongly recommend the government looks at ringfencing the funding so nurseries can continue to support families.
“A shortfall of this extent threatens the sustainability of the sector and makes it impossible for nurseries to offer more two-year-old places despite having the capacity.”
The survey also reports that three- and four-year-olds' funded places are losing £929 per child, per year and given an average hourly rate of £3.77, a £1.63 per hour loss.
