Concerns the expanded offer isn't 'workable in practice' due to limited space and providers capping places

According to a survey of 1,196 providers by the Early Years Alliance:

• 68 per cent of respondents’ settings are currently full.
• More than half are full with a waiting list.
• Of the 86 per cent planning to offer funded two-year-old places who predict an increase in demand, 71 per cent aren’t planning to increase the number of spaces they offer.
• Just over one in ten are planning to delay the rollout of the new funded two-year-old places to a later date, with the majority of those (63 per cent) opting for September 2024.
• Of the 95 per cent of providers (nurseries, pre-schools and childminders) currently offering non-funded two-year-old places, just over two-thirds (69 per cent) are planning to deliver the expanded offer for this age from April. A total of 15 per cent are undecided what to, while 13 per cent plan to offer a limited number of funded places and charge privately for the rest and 3 per cent are going to opt out of the funded offer completely.

The findings also reveal that at the time of the survey (25 January – 8 February) just over two in five (41 per cent) settings currently offering places to two-year-olds and planning to continue to do so under the expended offer had received confirmation of what their funding rate will be.  

Earlier this month, the Department for Education said it has made clear to all local authorities that they should confirm funding rates that come into force from 1 April, no later than the end of February.

Nine-month-old offer

Of those providers (59 per cent) currently delivering places to under-twos, two thirds (67 per cent) are planning to offer these places via the Government’s early entitlement offer from September. A total of 4 per cent plan to charge for places privately, 12 per cent plan to offer a limited number of funded places, while 17 per cent are undecided.

Despite 84 per cent expecting an increased in demand for places when the offer comes in, three-quarters are not planning to increase places.

One provider said, ‘Parents think that there are spaces available, but our setting - like the majority of settings in our area - is having a staffing crisis with no suitable applicants coming forward to fill our vacancies which then in turn puts pressure on our staff. I am also worried about delivering the 30 hours from September 2025 and its financial impact on our setting.’

Financial pressures

The survey also looked at providers’ costs, revealing around a quarter of respondents believe it is ‘likely’ or ‘very likely’ that their setting will close over the next 12 months due to sustained financial pressures.

One provider said, ‘Chronic sector underfunding has zapped me of all innovation and enthusiasm to keep the plates of a PVI [private, voluntary or independent] early years setting spinning. Our loyal staff and our children deserve the best and we are unable to deliver that. It’s criminal.’

Key findings include:

• Of the 41 per cent who had received confirmation of their two-year-old funding rate, over a third (35 per cent) said that their new rate would be less than the cost of delivery places, rising to 60 per cent for nurseries and pre-schools.
• Of the 46 per cent of settings who had received confirmation of their three and four-year-old rate, 76 per cent said it would be less than the cost of delivery, with more than a third (38 per cent) expecting it to be ‘significantly less’.
• 86 per cent of nurseries and pre-schools warned that the upcoming increase in the national living wage would have a ‘somewhat negative’ or ‘very negative’ impact on their finances. Of those, eight in 10 plan to increase fees to mitigate this, while 52 per cent intend to introduce or increase optional charges to cover trips, meals and snacks, for example.

Due to financial pressures,  a quarter of all respondents said it is ‘likely’ or ‘very likely’ they will start limiting the number of funded places they offer by September 2025. Close to a fifth said it is ‘likely’ or ‘very likely’ that their setting would have opted out of at least some of the funded offers entirely by this date.

'The Government needs to urgently address the financial and capacity challenges facing providers'.

The Early Years Alliance’s chief executive, Neil Leitch, said that their survey findings should ‘send alarm bells ringing through Government’.

‘We have long warned that no expansion of the early entitlement offers would be workable in practice unless pre-existing challenges were properly addressed’, he said.

‘While we recognise that ministers have taken some steps to try and address the sector’s concerns – including the recent recruitment campaign – there is still so much more to do to address the wider systemic issues with the current system. 

‘If the extended entitlement policy is going to have any chance of success, the Government needs to urgently address the financial and capacity challenges facing providers.

Ahead of the Spring 2024 Budget the Alliance is calling on the Government to commit to: 

• A further increase in early years investment to ensure that providers are able to meet rising cost pressures while keeping parent fees as low as possible.
• Establishing a mechanism to ensure that funding rates continue to increase in line with provider costs going forward 
• The development of a clear workforce retention strategy to stem the flow of existing early educators out of the sector.

Commenting, Save the Children UK said it is ‘clear the Government’s plan to expand funded childcare is in jeopardy’. The charity urged the Government to ‘listen harder’ to experts in the sector and said ‘rapid’ action is needed so funding covers actual delivery costs.’

It also called for childcare support for single parents who are disabled or carers and no in work, as well as those studying or in training.

Daniel Kebede, general secretary of the National Education Union, said, ‘The Early Years Alliance’s survey shows the consequences of long-term underfunding.

‘Everyone, except the Government, saw the pitfalls in plans to expand funded hours. Systemic and significant underfunding of the early years has meant providers have struggled to provide existing funded hour agreements. This survey reveals that plans for expansions are also unworkable.’