According to analysis commissioned by the Press Association from business rent and rates specialists CVS, business rates will rise to £110.72m per year, adding up to a total property tax bill for nurseries and pre-schools over five years of £553.6m by 2022.
Before the revaluation, nurseries and pre-schools paid £87.56m last year between them, CVS said, meaning the sector will have to pay an extra £23.2m per year until 2022 to meet the extra costs.
A revaluation of business rates this April saw rateable values, the property values used to calculate tax bills, rise by 32 per cent for many nurseries, threatening their sustainability.
The CVS analysis of government data found that 11,204 nurseries and pre-schools had a rateable value of £183.20m before the revaluation, but this has risen to £242.54m as part of the new valuation system.
In August, the Scottish Government commissioned a report on the business rates review, which recommended a new 100 per cent business rate relief be introduced for nurseries to support childcare provision.
Jane Morrissey, managing director of Rosehill Children’s Nursery in Bolton, has been lobbying her local authority and MPs in Westminster for business rate relief for nurseries after she saw her rates go up from £37,500 per year to £54,000 under the new valuations.
‘I had already been fighting with the council before the revaluation because I couldn’t afford it then,’ she said. ‘When rates went up in April it became completely unmanageable. If Scotland get it dropped then hopefully the rest of the UK can follow them. With the new 30 hours and the increase in rates the numbers don’t add up. We get funding from the Government but they don’t give enough and expect us to pay too much. We’re paying over the odds and it’s just not manageable.’
The Valuation Office Agency, the impartial government agency which sets rateable values, said childcare providers are valued like any other business based on rent or open market rental value.
A VOA spokesperson said, ‘Rateable values are based on an open market rental value on a fixed date - for this revaluation it is 1 April 2015. If those open market values have changed, then rateable values will change with them.’
The proposed rate relief in Scotland, which would come into effect from April 2018, would save the Scottish childcare sector around £8m a year.
The report said, ‘We believe that one of the most important ways to supporting economic growth is ensuring that the workforce is supported by convenient, affordable and accessible childcare. This applies to carers of young children across the public, private and third sectors. Although rates are only one overhead for this sector, we believe a reduction in the rates burden may help enable more of the workforce to return to work after starting a family.’
Purnima Tanuku, chief executive of the NDNA, said, ‘The review in Scotland has recommended that nurseries be given an exemption to business rates.
‘England and Wales should follow suit – particularly in England where nurseries have the added financial burden of delivering 30 hours expanded childcare next month.
‘We have long campaigned for exemption. Our argument is that nurseries offer a social and economic good in providing good quality early years education and allowing parents to work. Increasing business costs, including national minimum wage rises, mean many nurseries are struggling to stay in business and fees are rising for parents whose children don’t qualify for free hours.
‘Our latest Annual Nursery Survey revealed that 51 per cent of nurseries in England said that removing business rates costs would help them deliver 30 hours in lieu of an increase of their hourly rate. In Wales, cost of business rates was listed as third biggest challenge facing nurseries – along with achieving profit or surplus and cost of utilities.’