The IFS said that higher than expected inflation means that despite ‘a significant uplift to funding’ for the sector in the spending review, this increase will not compensate providers due to rising costs.
The IFS estimates that childcare providers’ costs are likely to rise by 9 per cent in total between the 2022–23 financial year and 2024–25.
Judged against these rising costs, total funding for the free entitlement for the 15 and 30 hours will be 8 per cent lower in real terms in 2024–25 than it is this year.
The IFS said, ‘A shrinking population of young children means these resources will be spread across fewer people. Even so, our modelling suggests that core funding per hour, which had been set to rise over the Spending Review period, is now likely to be on a downward path in real terms. Under our illustrative scenario, today’s core funding rate of £5.06 an hour for three- and four-year-olds will fall by 14p in real terms by 2024–25.’
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