Budget 2023: Nurseries warn they 'need to see the sums' as Government plans major expansion in childcare for one- and two-year-olds

In a widely publicised announcement ahead of today's Budget, the Chancellor is expected to announce an extension of 30-hour childcare to one- and two-year-olds, more funding for the entitlement for three- and four-year-olds, as well as pushing ahead with controversial plans to relax ratios for two-year-olds in nurseries and pre-schools.

Many nurseries use fees for babies and two-year-olds to cross-subsidise and cope with the longterm underfunding of 30-hour places for three-and four-year-olds, and are warning that the extra funding will need to cover the cost of expanding places for one- and two-year olds, as well as fix existing funding shortfalls.

Speaking on BBC's Newsnight, Purnima Tanuku, chief executive of the National Day Nurseries Association, said, ‘Any support for parents for the cost of childcare is welcome but the current budget is £3.9 bn, that’s just for 15 hours and 30 hours for three- and four-year-olds, so £4bn to one- and two-year-olds and to address the current three- and four-year-old funding [problems], I think we really need to see the sums, and the devil is in the detail.

'Nurseries can’t just magic out places all of a sudden, because they are in a crisis. The Government needs to fix the current crisis before they make any more promises to parents. If the parents turn up at nurseries after this announcement asking for a place for one- and two-year-olds, nurseries can’t just magic up places because they are having a workforce crisis and staff are leaving, and nurseries are closing down. That needs to be addressed first.’

She added that issues around training and the workforce would also need to be addressed. ‘Delivering high-quality childcare for one- and two-year-olds is expensive and Level 3 qualified staff are those that are leaving.

‘We need a clear workforce strategy, proper planning, not just headline grabbing, we need a phased approach'.

Commenting, Neil Leitch, CEO of the Early Years Alliance, said, ‘While on the surface, news that the Government has reportedly committed to spending £4bn on the early years appear positive, as always, the devil is in the detail, and we await further confirmation about what this will mean for the early years sector over the coming months and years.

‘We know from harsh experience that what can sound like an impressive investment in theory can end up being wholly inadequate in practice, and so understanding exactly how this announcement will translate into hourly funding rate changes, especially in light of the extension of the 30 hours offer to one- and two-year-olds, will be key to understanding the impact on the sector.

‘We know that the sector is facing its most challenging time in decades – settings are closing at record levels, there is a severe recruitment and retention crisis, and costs continue to soar. Unless the Government puts in safeguards to ensure that funding for all early entitlement offers continues to meet the sharply rising costs of delivering places, not only now but in the future, what is currently a crisis will end up in catastrophe.’

Eva Lloyd, Professor of Early Childhood at the University of East London and an expert in the childcare market, said that how these measures are implemented will be crucial to their success.

On extending places for one-and two-years olds, she said, 'Given the current childcare workforce recruitment and retention crisis, this would prove difficult to implement. Unless the Government ensures the increased funding is used in part to improve pay and conditions for early years practitioners, providers will not manage to extend their services.' 

She also warned that unless it was provided 'at cost', increasing funding levels for the funded childcare hours for all age groups will not solve the unsustainable financial situation many providers are in, where they are only breaking even or operating at a loss. 'This particularly affects small chains or sole trader businesses in disadvantaged areas.

'As new public money becomes available for the childcare sector, there may well be a feeding frenzy among large private equity supported chains. New predatory childcare chains are also likely to emerge. Unless the Government enforces regulations concerning how public funding is spent within the sector, no significant expansion of childcare will result and the social segregation increasingly characterising childcare provision will worsen.'

Joeli Brearley, founder and CEO of Pregnant Then Screwed, said, 'After eight years of hard campaigning we are really pleased to hear rumours of significant investment in the childcare sector and the recognition that investing in childcare is good for the economy.

'However the CBI estimates that to do what the Government is planning costs £8.9 billion not £4 billion, so we need to see the detail as to how this money is being distributed. Reports have suggested that they will also give £288 million to make up the shortfall for the current free hours entitlement for three- and four-year-olds – that’s not enough. It will not make up that shortfall and we are concerned that the quality of early years education will deteriorate, that more providers will close and more childcare professionals will leave the sector. It is great that we will have these new free hours but it won't work if parents can't secure a place.'

Nursery World will be reporting on the Budget throughout the day. More news and reaction to follow