Falling occupancy levels and chronic underfunding threatens high-quality nursery provision

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Under-funding of free early education places and the tough economic climate are threatening sustainability of the nursery sector and the viability of the two-year-olds programme, the National Day Nurseries Association has warned.

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The latest NDNA Business Performance Survey, conducted in partnership with Nursery World, has found that circumstances have become more challenging throughout the course of 2012.

Despite increases in quality within the nursery sector, occupancy levels continue to fall. The survey revealed that nurseries have an average occupancy level of 71 per cent, a reduction of 3 percentage points since May 2012, with less than 50 per cent of nurseries expecting to make a profit this year. Forty-three percent of nurseries have taken the step of reducing staff hours in the last six months, compared with 32 per cent in May 2012.

Nurseries continue to report parents reducing their outlay on formal childcare. Sixty-seven percent of nurseries said parents are using more friends and family childcare, 80 per cent of nurseries said they have more part-time children on their books and 52 per cent said more parents are using funded hours only.

Eighty–four percent of nurseries in England said that the hourly rate they receive for provision of funded places for three- and four-year-olds did not cover costs, with an average loss of 96 pence per hour, an average loss of £547 per year, per child.

Purnima Tanuku, NDNA chief executive said, ‘Over 80 per cent of the UK’s nurseries are in the private or voluntary sector, so the government and local authorities must realise that unless the sector is offered the right support it will not be able to deliver government ambitions to support working families and offer disadvantaged two-year-olds high-quality early education places.

‘Chronic underfunding of the free entitlement continues to be an issue. It is critical that funding intended for the free entitlement actually gets through to nurseries on the frontline. As parents continue to reduce the amount of paid for hours they buy, this issue must be dealt with as a matter of priority. It is not sustainable for the sector to continue in this manner.

’77 per cent of nurseries in England receive a good or outstanding rating from Ofsted. Any changes to the childcare system must not compromise quality as this would be doing a disservice to children and families and ultimately create higher costs for schools and local authorities further down the line.’

NDNA has put together seven recommendations to help the nursery sector become more sustainable and offer the children and families the support they need. These include:

  • Funding for free places is complex and does not all reach the nursery which means parents are paying more. Funding should be protected and go directly to the parent’s choice of childcare provider meaning parents pay less. 
  • Adopting a ‘closed loop’ payment system for state-funded childcare benefits such as tax credits to improve efficiency and ensure funding gets through to the frontline, would help make childcare cheaper at the point of purchase.  
  • There should be no compromise on the quality of early education. Any reform, including to current ratios, must not undermine quality. Reducing ratios is unlikely to reduce childcare fees.
  • Over 80% of the UK’s 18,000 nurseries are private or voluntary settings – an essential partner to the government and local authorities. Nurseries deliver a social, educational and economic value to society. In light of this the 80 per cent of nurseries in the private and voluntary sector should receive the same VAT and business rates relief as maintained settings in order to lower parental fees and create a level playing field between providers.
  • Access to funding is vital to enable nurseries to develop provision to meet government plans. Building on the funding already available, nurseries should be supported to access government loan guarantee schemes.  

See Nursery World’s report on the Business Performance Survey

To access the full report visit www.ndna.org.uk/insight-report-Dec12.

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