Early years funding fails to keep pace with inflation

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More than a quarter of local authorities’ early years funding rates have seen real-terms cuts over the past five years, Pre-school Learning Alliance research reveals.

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The Alliance's conference panel, from left to right - Neil Leitch, chair and Alliance trustee Graham McMillan, Karyn McCluskey - chief executive of Community Justice Scotland, Paul Johnson - director of IFS

This is despite extra Government spending of £300m for 2017/18 to increase funding rates.

The early years organisation submitted Freedom of Information (FOI) requests to all councils in England asking for average funding rates paid to private, voluntary and independent providers in the financial years 2012/13 and 2017/18. Responses were received from 112 local authorities.

By comparing the funding rates, the Alliance discovered that in 31 of them (28 per cent) average rates had risen by less than the rate of inflation between 2012/13 and 2017/18.

The calculations were based on an overall inflation rate of 7.6 per cent between April 2012 and April 2017, as based on the Office for National Statistics CPIH Index.

(Since March, the ONS has been using the new CPIH as a measure of how much prices are rising that takes into account owner-occupiers’ housing costs and council tax.)

The Alliance’s research found that in six areas funding rates have fallen over the five-year period, including one local authority where the average funding rate had been cut by more than 25 per cent from £6.34 to £4.72.

In November 2015, the previous Conservative Government confirmed that it would be investing an extra £1bn into childcare, including £300m to increase early years funding rates from April 2017. It also said that total childcare funding would be £6bn per year by 2020.

The FOI findings have been published to coincide with the Pre-school Learning Alliance’s annual conference ‘Free childcare” – at what cost?’, which takes place in London today.

Chief executive Neil Leitch said, ‘We have long warned that “more money’” is not the same as “enough money”, and these findings show exactly why. For all the Government’s talk of “record investment” into childcare, funding hasn’t even kept up with inflation for many nurseries, pre-schools and childminders across the country. Is it any surprise, then, that we are seeing so many closing down as a result of underfunding?

‘With the nationwide launch of the 30-hour offer just a few months away, and many childcare providers increasingly uncertain as to whether they will offer many – if any – places, clearly something has to give. The Government cannot simply go on pretending that all is fine and that there is no issue with funding. For many years now, so-called "free childcare" has in reality relied on a combination of the goodwill of providers and parents paying above the odds for non-funded hours. This cannot continue.

‘Clearly we are in uncertain political times, but with “free childcare” pledges featuring in all the main political parties’ election manifestos, it’s vital that whatever political changes we might see over the months and years to come, the long-running issue of early years underfunding is finally addressed.’

The analysis follows a survey of more than 1,300 childcare providers carried out by the Alliance in March, which found that for six in ten their funding for 2017/18 does not cover the cost of delivering funded places.

Commenting on the data, Purnima Tanuku, chief executive of the National Day Nurseries Association, said, ‘This research confirms what NDNA has been demonstrating in our surveys for years, that funding is not keeping pace with inflation and rising business costs. The Government has fallen far short of the step change in funding that is needed and this situation will only worsen as the costs associated with National Living Wage continue to increase. Chronic underfunding must stop – it’s time that “free” nursery hours are truly free and not subsidised by nurseries.’

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