Spending Review: Early years sector to receive a rise of £44m in 2021-22

Rishi Sunak set out his one-year Spending Review plans, which will come into force from April 2021, in Parliament earlier today.

In his speech to MPs, the Chancellor said the Government is spending £280 billion to get the country through the Covid-19 pandemic.

The Office for Budget Responsibility is forecasting that the UK economy will shrink by 11.3 per cent this year – the biggest fall in 300 years, he said.

Mr Sunak said it would take until the end of 2022 for the economy to return to its pre-pandemic size.

The Spending Review 2020 document said that the Government will invest ‘£44 million in funding for early years education in 2021-22 to increase the hourly rate paid to childcare providers for the government’s free hours offers’.

This is down from the £66m increase announced in the 2019 Spending Review. 

Spending Review - Key points:

• The budget deficit will be £394bn this year, or 19 per cent of GDP – the highest level in peacetime.
• The National Living Wage will rise by 2.2 per cent to £8.91 from April - with workers aged 23 and over eligible for the first time - with comparable rises to the National Minimum Wage for younger workers.
• 2.1 million public sector workers who earn less than the median wage of £24,000 a year will receive a pay rise of at least £250.
• The schools’ budget will increase by 2.2 bn.
• The Chancellor announced a new £4bn fund for ‘levelling up’ - any local area can bid for the funding of local projects.
  
  

Sector response

Neil Leitch, chief executive of the Early Years Alliance, said, ‘While we welcome any new support for the early years sector, at a time when so many early years providers are on the brink of closure, it is frankly insulting that the government is continuing to tinker at the edges rather than committing to properly funding early years provision in this country

“With the Treasury today committing to billions of pounds in spending on schools, it has to be asked: is this the best that we can do for our young children? 

'Nurseries, pre-schools and childminders have been on the frontline throughout the pandemic, providing quality care and education in the most challenging of circumstances – but that harsh reality is that without a substantial investment into the early years sector, we will start to see providers shut their doors, parents lose vital childcare and children prevented from accessing critical early education.

'The Government had an opportunity today to show that it values early education and it failed to take it. For the sake of providers, children and families across the country, we urge them to rethink this decision, and commit to providing the significant investment that the sector actually needs.’

Purnima Tanuku, the National Day Nurseries Association chief executive said, ‘We welcome any increase in investment for the early years sector by the Chancellor. A further £44 million amounts to an increase of just over 1.2 per cent. However, this won’t help providers meet all the rising costs of delivering the Government’s childcare policy while also responding to the pressures of the current pandemic.

‘Childcare providers, who have worked so hard throughout the pandemic for parents, key workers and vulnerable children, deserve support and recognition. Childcare places will be essential in any economic recovery, but this won’t be possible if those who deliver these places are put into financial hardship.

‘Nurseries are facing a double whammy of reduced income and maintaining measures to keep settings as Covid-secure as possible.’

Beatrice Merrick, chief executive, Early Education, said, ‘This increase in funding for the early years sector is welcome, but is unlikely to keep already struggling providers open.

‘The increase in minimum wage will eat up much of the increased funding. A root and branch review of early years funding is needed to target government money where it is most needed, especially in disadvantaged areas where high quality early years provision makes most difference but is least viable on a market model.  Increased costs and falling fee income during the pandemic have not been addressed. 

'Nor have longer term issues about the funding rates needed to deliver high quality early childhood education through a well-qualified and properly paid workforce.’

Voice Community - the education and early years section of the Community Union - said that the lack of any significant investment in the private, voluntary and independent (PVI) early years sector was shocking.

Deborah Lawson, Community’s assistant general secretary (Voice Section), said, 'While there will at least be something for those on less than £24,000-a-year, this is a kick in the teeth for thousands of dedicated teachers, headteachers, support staff and early years professionals who have been working under extreme pressure during the pandemic, with more and more expectations placed on them.

'Although the furlough scheme – as an emergency measure – has helped to save jobs, more must be done to secure the future of the sector and retain the qualified and experienced staff we need to ensure children benefit from high quality early education and childcare provision.'

Courteney Donaldson, managing director of childcare & education at Christie & Co, said, 'During recent months we have seen more and more settings urgently needing to recruit additional members of staff in order to maintain and manage setting "bubbles", alongside needing extra staff to provide cover while colleagues [are] self-isolating, alongside the need to maintain ratios – the combination of which, amid funding and income shortfalls are placing great strain on workforce and financial sustainability alike.'

Impact of National Living Wage and National Minimum Wage rises

From April 2021, the National Living Wage will rise by 2.2 per cent from £8.72 to £8.91 for those aged 23 and over (previously 25 and over).

The Government has accepted the National Living Wage and National Minimum Wage rates that were recommended made by the Low Pay Commission at the end of October.

The NDNA, provided evidence of the current pressure on the sector as part of the Low Pay Commission’s research.

The commission noted that childcare is an area where employers “continued to struggle to afford increases” linked to public funding.

The NDNA warned that failure to factor wage uplifts into providers’ hourly rates threatens to make childcare businesses unsustainable, and would result in the policy aim of improving low pay undermining other policy areas, such as delivering funded early education and childcare.

Commenting on the wage increases, Ms Tanuku said, ‘Although today’s 2.2 per cent increase is good news for the lowest paid workers, governments need to make sure this is reflected in funding they make available for early years employers. 

‘By reducing the age at which people are eligible for the National Living Wage to 23, we estimate an additional 7.5 per cent of the early years workforce could get a 71p pay rise. This amounts to an 8.7 per cent increase, which may cause further financial worries for employers.

‘These increases can only happen sustainably if governments include this uplift in hourly rates for funded places. These inflationary increases must be factored into sustainable rate setting in Scotland as well as the review of the Childcare Offer and Foundation Phase rates in Wales. Already in England, we are looking at just a 1.2 per cent increase in funding for providers which won’t cover these costs.

‘Nurseries in Scotland delivering 1140 hours of funded childcare to three and four-year-olds will be required to pay their employees the Real Living Wage under the National Standard. Councils will need to take note of the gap between the Real Living Wage and the new legal minimum wages when setting sustainable rates.’

Meanwhile, the commission said that the increase in the NLW will mean that low-paid workers’ incomes rise broadly in line with predicted wage growth, and modestly ahead of projected increases in prices, meaning low-paid workers’ living standards should be protected. 

Schools

Dr Mary Bousted, Joint General Secretary of the National Education Union, said, ‘The Chancellor said he wants stronger public services but has delivered a body blow to staff in our schools and colleges. 

‘Education workers are key workers who have kept the country going during the pandemic, but pay cuts are their only reward from this Government.   

‘Teachers and support staff are working in schools and colleges without PPE, without social distancing and without adequate cleaning. Teachers are teaching their normal timetable and then preparing remote learning for pupils isolating at home. They are supporting pupils who are anxious and stressed because of the increased challenges Covid is bringing to their families. 

‘It is not enough for Government ministers to thank teachers for their vital contribution during Covid. Such sentiments ring hollow when they are then subject to a pay freeze which follows previous pay freezes and years of below-inflation pay increases which have eaten into the real value of their pay since 2010.  Support staff face the prospect of yet more below-inflation pay increases.  These pay cuts will hit education workers just as inflation is expected to pick up in late 2021.’  

Paul Whiteman, general secretary of school leaders’ union NAHT, said, ‘Keeping schools open is leaving school leaders frayed and exhausted. Today they and other public sector workers were looking for relief from the government. But the Chancellor has not provided a single additional penny to cope with the costs of Covid.

“Salaries are being supressed, Covid-costs are being left unmet and the needs of the most vulnerable students are being ignored.

‘Undoubtedly the costs of Covid have been significant, but hard-working public sector workers, who have been on the front line of the pandemic response should not be forced to pay for the recovery out of their own pockets.’

Families

Anna Feuchtwang, chief executive of the National Children’s Bureau, said, ‘The Chancellor has rightly directed some of the spending in the next 12-months toward children and families. In particular, measures to improve schools, colleges and apprenticeships may enable young people to look to the future with a little more hope.

‘But there are persistent blind spots too. The wider social catastrophe that the pandemic could leave in its wake can only be averted by properly levelling up council budgets so that children’s services can reach out to children, young people, and families before their problems become emergencies.

‘Similarly, the Government still seems unable to grasp that child poverty is out of control. There are over four million children in the UK growing up in families who can barely afford the basic necessities and working families are far from immune.

‘We need a fundamental re-think of what support this generation of children and young people need, and we must start by asking them what that is. Only by working in partnership with children and young people can we begin to repair the damage and prevent the pandemic from causing long-term harm to their futures.’

Councillor Ian Hudspeth, Chairman of the Local Government Association’s Community Wellbeing Board, said, ‘The coronavirus crisis has demonstrated the crucial value of councils’ adult social care and public health services. 

‘Extra funding for children’s and adult social care will help address some short-term pressures, but we need a clear plan on the future of care and support and how we pay for it, which recognises low pay in the adult social care workforce and finally delivers parity of esteem with the NHS. The social care council tax precept remains a sticking plaster which will not address long-term pressures.

‘No new public health funding, despite this incredibly challenging period, also runs contrary to addressing the stark health inequalities exposed by Covid-19 and levelling up our communities. Keeping people healthy and well throughout their lives reduces pressure on the NHS and social care.’