Consultation misses key childcare funding issue

The Government has announced a consultation on the introduction of the new entitlements for working parents of children aged nine months to two years.

The consultation focuses on the way entitlements funding for children two years old and under will be distributed from the Department for Education to local authorities from April 2024.

Early years organisations have expressed dismay that the Government is focusing on its offering for two year olds and under rather than three and four-year-olds, which they say have been underfunded for years and which affect many more children.

In the Spring Budget, the Chancellor announced new childcare entitlements to younger children to be introduced in three phases:

• from April 2024, all working parents of two year olds will be able to access 15 hours per week of ‘free’ childcare
• from September 2024, all working parents of children aged nine months up to three years old will be able to access 15 hours per week of ‘free’ childcare
• from September 2025, all working parents of children aged nine months up to three years old will be able to access 30 hours ‘free’ childcare per week.

In documents published today, the Government shows that it calculates that care for nine month olds up to two year olds will cost from £11.06/hour in 2024-25 while two year olds will cost from £8.17/hour in 2024-25.

Its overall costing of around £4.1bn by 2027-28 is based on a calculation that take-up by two-year-olds will be at the higher end of the range, based on take up of existing entitlements offers for three- and four-year-olds, including hours used. For instance, usage of the existing 30 hours entitlement for three- and four-year-olds is typically slightly below the full 30 hours available.

It says most of the costs to parents are the result of staffing costs, meaning places for younger children who require more supervision are more expensive.

It also confirmed that the £600 grant for childminders who register with Ofsted, and £1200 for those who register with a childminder agency, will be payable to any individual who has completed their childminder registration on or after 15th March 2023. New childminders will be able to apply for the grant from autumn 2023.

Commenting on the consultation, Purnima Tanuku, Chief Executive of National Day Nurseries Association, said, “Currently nurseries have around 10 times more three and four-year-old children, so these are the rates that make the biggest difference to the sector. Our research shows that nurseries make on average a £2.13 loss per hour on these funded places. Adding 33p to these rates is a drop in the ocean and unfortunately for those nurseries who have already closed, it’s too little too late. Meanwhile, more nurseries than ever are closing and this is down to their financial burdens or being unable to recruit qualified staff due to low pay rates, also caused by insufficient Government funding.

“We are keen to understand how the single rate for two-year-olds will work and whether this will be top sliced by local authorities in a similar way to the three-year-old rate. We are also awaiting further information about additional funding for areas of deprivation and how this will work in practice. While the announced rates for twos and under sound encouraging, these children do need more support than ever and that is always costly.”

Neil Leitch, CEO of the Early Years Alliance, echoed this, said the funding rates for two year olds suggested some areas might get less funding next year than this. He added: “While we welcome further detail on how the entitlement offers for under-threes will be funded, the fact is if the central pot of early years funding is insufficient, then no matter how well it is distributed, those on the front line are likely to lose out.

“With estimates from the Women’s Budget Group suggesting that the government has significantly underestimated the level of funding needed for both the new and existing offers, we remain deeply concerned that, regardless of what funding formula is used, the decision to extend the early entitlement scheme will only serve to place even greater pressure on an already-struggling sector.”

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