Childcare costs to 'sky-rocket' as free scheme expands

Early education is seen is key to educational success later on

Childcare costs could "sky-rocket" in parts of England as nurseries grapple with less funding for a free government childcare scheme, a charity says.

A quarter of councils are set to see falls in government funding when the free 30 hours scheme starts in 2017, the Pre-School Learning Alliance says.

It adds that the new rates will then be frozen until 2020, even though the cost of providing places is set to rise.

Ministers say funding was being allocated "more fairly" across England.

All three and four year olds are currently entitled to 15 hours of free childcare a week, but from September 2017, working parents will be entitled to an extra 15 hours a week, in school term-time, for each child.

The DfE has raised the hourly rates it pays to local authorities, who then pass that on to childcare settings, as an average across the country, but not all areas are getting a raise.

Chief executive of the Pre-School Learning Alliance Neil Leitch said: "The government has tried to sell next year's funding changes as a solution to all the concerns about the 30 hours offer, but this simply isn't true.

"With a quarter of all local councils seeing a fall in funding next year, childcare costs in those areas are likely to sky-rocket as childcare providers face a choice between either raising fees or going out of business."

The alliance was quoting figures published by the DfE in its consultation on funding, which states 38 out of 150 local authorities face a fall in rates.

Mr Leitch said: "Of course, even in areas where funding rates are increasing, providers are still facing a fight for survival, as often funding simply doesn't meet the rising cost of delivering places."

'Rising wage bill'

Details obtained from a Freedom of Information request revealed that nearly 75% of councils had been given funding levels over the past five years that had failed to keep pace with inflation.

This added to future cost pressures would make it very difficult for the nursery sector.

Mr Leitch said: "Take staff costs, for example, which account for 70-80% of overall costs for providers.

"By 2020, the national living wage will have increased from £7.20 to £9 an hour, and yet childcare providers are somehow expected to be able to meet these rising wage costs on the same funding they will have been receiving since 2017.

"The failure of government to fund the so-called 'free childcare' offer adequately is exactly what has caused childcare costs to rise so steeply over recent years, and so we cannot understand how it is being allowed to happen again.

"We are sleepwalking right into a childcare crisis and, if the government doesn't act soon, it's parents and providers who will pay the price."

One nursery manager in Harrogate, Bruce Warnes, said if the proposed rates were implemented, his nursery would be faced with a very stark choice because "we cannot provide places for the government at a loss or subsidise the funded places from our own pockets, or by inflating the fees for non-funded children to an absurdly unaffordable level".

"This is simply not sustainable and will inevitably lead to the closure of our provision," he said, "thus leaving a massive under-provision of three- and four-year old places in the Harrogate district and meaning that North Yorkshire County Council will fail to meet its statutory duties."

The Department for Education said it was investing a record £6bn a year in childcare by the end of the current parliament.

A spokesman added: "As a result of our proposed changes - including allocating funding more fairly across the country and a requirement for local authorities to pass on 95% of funding to the frontline - the vast majority of providers can expect to see their funding increase."