Budget failings to cost nursery sector nearly half a billion pounds

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The cost to private and voluntary nurseries of last month’s budget is £437m according to an analysis by the National Day Nurseries Association.

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Purnima Tanuku: 'This budget is set to cost the sector almost half a billion pounds next year alone'

The NDNA says that business rates, lack of adequate funding for 30-hour childcare, and above-inflation rises to the National Living and Minimum Wage mean that the average private nursery will be short-changed by £42,000 a year.

The figures have been released to coincide with the meeting today of the All-Party Parliamentary Group for Early Education and Childcare inquiry.

The NDNA said that ministers must factor the cost implications of their Budget decisions into the childcare settlement for 2019/20, as failure to do so would lead to more nurseries closing.

Purnima Tanuku, chief executive of the National Day Nurseries Association, said, ‘This Budget announcement was disappointing on all fronts and is set to cost the sector almost half a billion pounds next year alone. Ministers must allow for this in the upcoming funding settlement or this becomes a massive funding cut. 

‘Despite the momentum of our campaign for the Government to follow the examples of the Welsh and Scottish Governments who have given 100 per cent business rates relief to nurseries, the Chancellor gave no concessions at all to the nursery sector on this unfair tax. 

‘The Department for Education cannot rely on costings data from 2012/13 to inform their funding rates, when the legal minimum wage was more than £2 lower than it will be from April.

‘Ministers must factor the cost implications of their decisions into the childcare settlement for 2019/20. Failure to recognise these impacts will result in more nurseries having to make the heart-breaking decision to close their doors. 

‘They must stop pretending that this policy is working. We speak with members every week who find themselves in desperate situations solely because of this underfunded childcare policy. They must act now to give meaningful hourly rates to providers for the coming year.

‘Despite providing plenty of evidence, the minister is unwilling to acknowledge this as a serious issue. It’s good to see MPs through the APPG taking a keen interest in the sector and the Minister will have to pay attention to the inquiry findings.’

Nicole Politis from the North West, one of the directors of Portico Day Nurseries and chair of NDNA’s St Helen’s network, is speaking at the APPG inquiry today.

Ms Politis said, ‘Nursery businesses have been suffering for years now trying to do their best for children and families on pitiful hourly funding rates which don’t even cover our delivery costs. 

‘Children need high quality early years education so they can achieve their full potential and develop a lifelong love of learning. The funding in its current format is unsustainable. If the grant was delivered directly to parents through the existing Tax-Free Childcare system, it would relieve the administrative burden on Local Authorities and providers, and improve parental choice.’

Chair of the APPG Tulip Siddiq MP said, ‘From looking at this year’s Budget, one would assume that this Government is content to allow the funding crisis in the early years sector to continue. With over 250,000 childcare places lost, this budget was an opportunity to provide relief, but the costs for childcare settings are only growing. The APPG’s inquiry arrives at a vital time, and we will be looking at exactly what the Government needs to do to change this concerning outlook.’

The NDNA's calculations:

  • The cost of not granting business rates relief to PVI nurseries is estimated nationally at £155m. NDNA members reported average costs of £10,778 per nursery in 2017.
  • The cost of increasing the National Living Wage to full-time staff is £44,286,485, based on 70 per cent of the workforce receiving full-time NLW. The Low Pay Commission’s estimate that 22 per cent of the workforce is covered by Living Wage now and 37 per cent will be covered when it increases in April. NDNA has not included part-time staff or those under 25, who will also have higher wages when the NMW rises.
  • The impact of continued under-funding of the 30 hours is £238m based on NDNA’s latest annual nursery survey shortfall figure of £1.90 per hour per child or £2,166 per year.  This only includes children taking up the 30 hours not the universal 15 hours. It also doesn’t include the impact of under-funding of two-year-old places in nurseries.
  • For an average nursery with 45 children, 11 staff members and 13 funded three- and four-year-olds, the total shortfall is £42,033.83 based on the NLW for full-time staff at £2,550.91; business rates of £10,778; and under-funding of the 30 hours at £28,704.92.
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