Two-year-old funding rate 'a third less than needed'

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Settings are collectively facing a funding shortfall of hundreds of millions for delivering funded childcare for two-, three- and four-year-olds, new data shows.

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Released today, topline findings from the 'About Early Years' annual report from Ceeda has pitched government-set funding rates against rising delivery costs and found a £600m gap for settings delivering both ‘free’ entitlements.

The analysis finds that the average cost of early education and childcare for two-year-olds is now £6.90, 32 per cent more than the average funding rate paid to PVIs for these places.

For three- and four-year-olds, funding rates have increased by just 1.8 per cent in real terms since 2013/14, with average hourly costs 17 per cent higher than average funding rates.

The total impact of this is a funding deficit of £616.5 million, the report finds.

These average funding rates do not include the cost of graduate-led provision, or even when 80 per cent of staff are level 3 and above.

The Government, which says it is spending a ‘record’ £6 billion per year by the period 2019 to 2020, including £1 billion a year for 30 hours, has been criticised by the Treasury Select Committee over 30 hours pay rates, saying they should pay a higher hourly rate to local authorities for the 30 hours entitlement and that existing rates were misleading.


Neil Leitch, chief executive of the Pre-school Learning Alliance, said: 'Successive ministers have turned their heads as providers have queued up to tell them how they’re struggling to balance the books. But it’s here in black and white. The more than £600m shortfall in funding has meant childcare providers and practitioners are losing their livelihoods, while disadvantaged families are increasingly at risk of missing out on high quality childcare.'

Childcare minister Nadhim Zahawi said, ‘The department (for education's) increased level of investment was based on our ‘Review of Childcare Costs’, which was described as ‘thorough and wide ranging’ by the National Audit Office. The review looked at the costs of childcare provision, including business rates. We have commissioned new research to understand provider’s current costs.

'The government has also increased Small Business Rate Relief and provided local authorities with funding to support £300 million of discretionary business rates relief. Local authorities are able to use this to support local nurseries.’

About Early Years, is a sector-backed early years data research programme. Data is based on 300 settings.

  • Read in-depth analysis of the full About Early Years annual report in Nursery World 1 October.
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