Funding black hole for childcare could push up young families’ bills, say campaigners

The Government’s scheme to offer free care for young children is in “crisis”, it is suggested, as the money available does not cover the cost of providing good quality places.

As a result, nurseries and pre-schools are being forced to make up the difference out of their own pockets.

Under the current system, all three and four-year-olds in England are entitled to up to 15 hours of free childcare a week, and this is also being extended to the most disadvantaged two-year-olds.

Money to pay for the free childcare hours is given to local councils by central government to hand to nurseries and pre-schools that have children taking up the entitlement.

But a new study, commissioned by the Pre-School Learning Alliance, concludes that Government funding for the scheme only covers four out of every five children taking up the offer.

Researchers examined the cost of providing more than 180,000 hours of pre-school education and childcare for 5,635 children being cared for by a randomly selected group of nurseries and pre-schools.

The findings show that the average hourly cost of providing a funded childcare place for a three or four-year-old is £4.53, but nurseries and pre-schools are funded at a rate of £3.88 per hour per child on average.

This is a shortfall in money of around 18 per cent, which rises to 21 per cent when the cost of unpaid staff hours is taken into account, the report concludes.

For two-year-olds, the average hourly cost of providing a place is £5.97, but nurseries and pre-schools get around £5.19, a gap of 15 per cent, which rises to 18 per cent when unpaid staff hours are included, it adds.

“This research suggests that if settings do not or cannot absorb funding deficits, the consequence of continued underfunding is likely to be increased childcare costs for families and/or a retraction in the supply of funded places; both being scenarios which undermine policy objectives to increase the affordability, quality and accessibility of early years education,” the study, by research consultancy Ceeda, says.