According to the new analysis by Ceeda, after adjusting average funding rates for inflation, 60 councils in England paid childcare providers less per hour for funded three- and four-year-old places in 2017/18 than in 2013/14.
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It finds this has impacted 10,698 nurseries and pre-schools (44 per cent of the total registered) and 17,260 childminders (43 per cent of the total registered) who are based in these local authority areas.
Ceeda warns that parents are likely to see increased childcare costs with falling funding rates unless something is done and calls upon the Chancellor to invest more in childcare within today's Budget.
The data for funding rates is taken from the Department for Education’s Early Years Benchmarking Tool.
Local authorities with the highest funding decreases are the Isles of Scilly, which paid childcare providers 17 per cent less in real terms in 2017/18 compared to 2013/14, North Lincolnshire, which paid 15 per cent less over the five-year period, and Sunderland,14 per cent less.
The research shows that across all local authorities in England, there has been an average real-term increase in three- and four-year-old funding rates of just 1.8 per cent between 2013/14 and 2017/18.
As a result, private and voluntary day nurseries and pre-schools face a funding deficit of £616 million in 2018, says Ceeda.
The findings have been published just hours before the Chancellor’s 2018 Budget this morning. Early years organisations are calling on the Treasury to increase investment in the childcare sector to avert a ‘funding crisis’ and prevent costs increasing for parents.
Dr Jo Verrill, managing director of Ceeda, said, ‘Our analysis reveals systemic underfunding of the early years, affecting local authority areas across the country.
‘This not only has a significant impact on providers at a time when rising business costs and the expansion of the funded offer are putting pressure on their sustainability, but also parents, many of whom are facing extra charges and increased fees as a result.
‘Without prompt action, continued Government under-investment is likely to hit disadvantaged children the hardest: low-income families are least able to pay for "extras" when accessing funded hours, and providers in deprived areas struggle to generate private fee income to help them stay afloat. We are already seeing the impact, with places declining in the most disadvantaged communities and increasing in more affluent neighbourhoods.
‘A new approach to childcare policy, underpinned by adequate funding and investment, is urgently needed if we are to have any chance of reversing these worrying trends.’
Neil Leitch, chief executive of the Pre-school Learning Alliance, said, ‘As these shocking figures show, despite the Government's insistence that all is fine with the 'free childcare' offer in this country, an ongoing lack of adequate funding has meant that many early years providers are actually in a worse financial position than they were five years ago.
‘The Department for Education may talk about 'record investment' into the childcare sector, but with rents, wages, and other costs all on the rise, unless funding rises at least in line with inflation, it's all just meaningless rhetoric. Worse still, with early years funding levels frozen until at least 2020, many of those providers managing to make it work now are likely to struggle in the years to come.
‘Without change, we're going to see parents facing ever-rising childcare costs as nurseries, pre-schools and childminders are forced to increase fees and additional charges in order to plug this growing funding gap – and, in the worse cases, providers who simply cannot make the books balance will be forced to close their doors for good. This isn't an exaggeration; it's already happening.
‘The Autumn Budget is a critical opportunity for the Government to address this issue once and for all. As such, we hope the Chancellor will commit to delivering the funding that the early years sector needs, not just today, but in the long term.’