Government 'knowingly underfunded' the early years sector

The briefing, shared today after a two-year Freedom of Information dispute with the DfE, shows that early years funding rates for 2020/21 were less than two-thirds of what officials estimated to be the true cost of ‘fully funding’ the scheme.

The documents also reveal ministers knew the inadequate level of investment proposed would result in higher costs for parents of younger children, and that nurseries, pre-schools and childminders would be forced to use maximum statutory adult-to-child ratios – despite the impact this could have on the quality of provision.

One briefing document obtained by the Early Years Alliance reveals that in 2015, civil servants at the DfE estimated the cost of providing a Government-funded early years place for a three- or four-year old would reach £7.49 per child per hour by 2020-21.

It suggests that providers should ‘become more efficient’ in order to reduce costs.

The same document also suggests that the 30-hour offer for working parents of three- and four-year-olds would lead to higher price increases for childcare for babies and toddlers.

According to independent analysts Ceeda, the average early years funding rate given to local authorities in 2020-21 was just £4.89 – a shortfall of £2.60 per child per hour, or £2,964 per child over the course of a year for children receiving 30-hour funding.

The DfE rejected a second FOI request filed by the Alliance in April, which asked for proof that the 1.2 per cent increase in early years funding for 2021/22 would cover the cost to the sector of increases in the national minimum and living wages, as ministers have claimed.

More details of the FOI investigation into the sector’s underfunding will be shared at the Alliance’s annual conference later today.

During his keynote speech, chief executive Neil Leitch will say, ‘What these documents confirm is that this Government, for all its rhetoric about levelling up, improving life chances and giving all children the best possible start in life, has been shamelessly, knowingly underfunding our sector for years.

‘They knew that the level of funding they gave to us would impact on quality. They knew it would put prices up for parents. And they did it anyway.’

The findings come as a petition calling for an independent review of childcare funding and affordability has received more than 108,000 signatures.

What the documents reveal

The document, entitled ‘Early Years Spending Review Scenarios’ and marked as ‘official sensitive’, states that:

‘There are a number of factors that could risk the sustainability of the [three- and four-year-old] entitlement – from NLW pressures to supporting children with SEND. Fully funding them all is not affordable – by 2020-21 it would be a 3-4yo rate of £7.49, and potentially cost for the uplift alone of over £2bn. We will make reforms and expect providers to become more efficient in order to reduce this cost.’

The same document also acknowledged that the introduction of the 30-hours policy was likely to result in price increases for parents, stating:

‘Provider costs vary substantially between age groups – primarily because of statutory ratios. Providers generally adopt a more-or-less flat pricing structure across the age phases. Currently this is possible because the free entitlement is only 15 hours. When Gvt purchases the majority of "cheaper" three- and four-year-old places, it will become harder for providers to price in this way. Providers may, therefore, increase prices for younger children – potentially by as much as 30 per cent. This could stop parents returning to work while their children are younger.’

This acceptance of inevitable price increases comes despite the fact that the document goes on to state that, ‘a 10 per cent reduction in the cost of childcare might lead to a 1.4 per cent increase in the employment rate for married mothers with pre-school age children.’

A separate briefing note to then-early years minister Sam Gyimah, obtained as part of the FOI request and marked as ‘RE: Early Years Funding Rate Negotiations’, which has been heavily redacted, states that the total annual cost for increasing early years funding rates could be, ‘… reduced to c. £500m if Ministers are content that we do not fund providers to cross-subside the privately-paid rate for children younger than 3, and instead accept that prices will rise for these children’.

Following the 2015 Spending Review, Government ultimately implemented an annual increase in funding of £300m per year which came into effect in 2017.

The Early Years Spending Review Scenarios document also exposes a deliberate strategy of passing costs on to parents, said the Alliance. It states that:

‘We will strip out funding for consumables (food, nappies) – and set an expectation that providers charge parents for these.’

It also states that the Government expected ‘providers to move, over time, to full use of statutory staff ratios’, despite lower child-adult ratios being associated with higher quality early years provision.

FOI requests – the investigation

The Alliance originally submitted its FOI request – which asked for proof that the early years funding rates announced in 2015 and implemented in 2017 had been calculated to be enough to cover the rising cost of delivering places over subsequent years in December 2018. The DfE rejected this request, even after a ruling by the Information Commissioner’s Office (ICO) that the information should be released, instead appealing to the First Tier Tribunal against the ICO’s decision. 

While awaiting a Tribunal hearing date, the Department claimed that it would be publishing the requested information as part of wider government transparency documents, before eventually withdrawing its appeal and providing the documents to the Alliance.

Second FOI request

The Alliance additionally filed a second FOI request in April 2021 asking for the calculations behind government claims that the 1.2 per cent increase in funding for the early years which came into effect in April would cover this year’s uplift in the national minimum and living wages, as well as the extension of the latter to 23- and 24-year-olds.

However, the Alliance said that the DfE has rejected this request, stating that it is already planning to release this information itself and that it is in the public interest to wait for it to do so.

It said that children and family minister Vicky Ford had stated in January at a meeting of the APPG for Early Education and Childcare that the Government would be releasing this information to the sector.

Response

In response, the Government said that the Alliance data pre-dates the significant uplifts to rates paid by Government for the free childcare offers – with new and increased investment announced by the Chancellor in both 2019 and 2020.

A Department for Education spokesperson said,'We’ve made an unprecedented investment in childcare over the past decade, spending more than £3.5 billion in each of the past three years on our free childcare offers and increasing the hourly rate paid to councils above inflation for the past two years.

'Through our early years funding formula, which we introduced after consultation with the sector, councils must pass on the vast majority of the funding they receive for the three and four-year-old entitlements. The number of childcare places available for parents in England has remained broadly stable since 2015, and we are not aware of any significant issues for parents in accessing free places – we work closely with councils to ensure this remains the case.'

Tulip Siddiq MP, Labour’s Shadow Minister for Children and Early Years,  said, 'These shocking findings confirm the Conservatives’ disregard for early years education and the childcare needs of working families.

'Conservative Ministers knew that they were dramatically underfunding early years, and that this would drive up the cost of childcare whilst driving down quality. Yet they pushed ahead regardless.

'The Government owes parents an apology for this reckless underfunding of early years and for covering it up. Ministers must now change their failed approach to early years, which must start with urgent action to prevent further childcare closures.'