New research reveals free childcare scheme funding “crisis”

12th November 2014

The Pre-school Learning Alliance has warned that the government’s free childcare scheme is “in crisis” after a new independent study revealed that government funding only covers the cost of four out of every five children accessing free early education places — forcing childcare providers to make up the shortfall.

Neil Leitch, chief executive of the Alliance, has advised that failure address the growing funding gap could lead to childcare cost rises in the future.

The study, which was commissioned by the Alliance and conducted by independent research consultancy Ceeda, tracked the costs of delivering more than 180,000 hours of early years education and childcare for 5,635 children in randomly selected nurseries and pre-schools in the private, voluntary and independent (PVI) sector.

It found that:

  • The average hourly cost of providing a funded childcare place for a three or four-year-old was £4.53, compared to an average funding rate of £3.88 - a funding shortfall of 18%, rising to 21% when the cost of unpaid staff hours was taken into account.
  • The average hourly cost of providing a funded childcare place for a two-year-old was £5.97, compared to an average funding rate of £5.19 - a funding shortfall of 15%, rising to 18% when the cost of unpaid staff hours was taken into account.

The research also revealed that the new Early Years Pupil Premium for three- and four-year-olds, set to be introduced in April 2015, will only make up 11% of the total current funding shortfall for this age group across the PVI sector.

To supplement this study, the Alliance also filed a Freedom of Information Act request to every single local authority in England requesting information on any recent changes to free entitlement funding rates. Of the 126 local authorities that responded:

  • 29% have not made any change to base rates of free entitlement funding for PVI providers in the last three to four years
  • 5% have lowered their base rate of funding.
  • 70% of local authorities haven’t collected any data from providers on the cost of delivering free childcare places in the last three to four years.

Commenting on the research, Neil Leitch, chief executive of the Pre-school Learning Alliance, said:

“This research demonstrates what we in the sector have been saying for many years now: government funding for the free entitlement offer does not meet the cost of providing places. For every four children that access a government-funded place at a PVI setting, providers have to fund a fifth out of their own pocket. This is clearly not sustainable.

“We know that the first five years of a child’s life are crucial to their long-term development, and yet the government remains unwilling to give the support that providers need to be able to offer affordable, quality childcare. Chronic underfunding has left us with a free entitlement scheme in crisis, one where many childcare providers are reliant on fundraising and the work of volunteers just to stay afloat. It’s important to note that the figures from the independent study do not include any allowance for profit or investment in provision - these are the very minimum amounts that providers have to spend themselves to cover to costs of a scheme that the government claims to be adequately funding.

“If this continues, childcare providers may be forced to choose between increasing fees or facing possible closure.

It is vital that the government now accepts the reality of the situation and recognises that significant investment into the early years sector is needed to address a problem that has gone on for far too long. It simply cannot continue to expect more for less.”

Download the Counting the cost report

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Notes for editors

 

The study tracked the resources expended in delivering 186,712 hours of early years education and childcare for 5,635 funded and non-funded children over a two week period: 23 June to 4 July 2014. Profile data collected in anonymised staff and child registers was linked with detailed records of activity in daily room diaries, completed over this period.

ABOUT THE ALLIANCE

  1. The Pre-school Learning Alliance is the largest voluntary sector provider of quality affordable childcare and education in England.
  2. Through direct provision and its membership of 14,000 nurseries, sessional pre-schools and parent and toddler groups, the Alliance supports over 800,000 children and their families in England. The Alliance also develops and runs family learning programmes, offers information and advice, runs acclaimed training and accreditation programmes and campaigns to influence early years policy and practice.
  3. For information about the Pre-school Learning Alliance, visit our website:

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