‘Government knew free childcare was underfunded’

New documents obtained by the Early Years Alliance show the Government knew its ‘free’ childcare plan was underfunded and would mean parents of younger children having to pay more.

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Funding rates for the so-called ‘free childcare’ offer for three- and four-year-olds are less than two-thirds of the amount that the Government believes is needed to fully fund the scheme, according to documents obtained by the Early Years Alliance which show the Government knew parents would have to pay higher rates for younger children as a result.

The private documents, obtained after a more than two-year Freedom of Information (FOI) dispute with the Department for Education, include one which reveals that in 2015, civil servants at the Department for Education estimated the cost of providing a government-funded early years place for a three- or four-year old would reach £7.49 per child per hour by 2020-21. According to independent analysts Ceeda, the average early years funding rate given to local authorities in 2020-21 was just £4.89 – a shortfall of £2.60 per child per hour, or £2,964 per child over the course of a year for children in receipt of 30-hour funding.

The document, entitled ‘Early Years Spending Review Scenarios’ and marked as ‘official sensitive’, states: There are a number of factors that could risk the sustainability of the [three- and four-year-old] entitlement – from NLW [National Living Wage] pressures to supporting children with SEND. Fully funding them all is not affordable – by 2020-21 it would be a 3-4 year old rate of £7.49, and potentially cost for the uplift alone of over £2bn. We will make reforms and expect providers to become more efficient in order to reduce this cost.”

The same document also acknowledged that the introduction of the 30-hours policy was likely to result in price increases for parents, stating: Provider costs vary substantially between age groups – primarily because of statutory ratios. Providers generally adopt a more-or-less flat pricing structure across the age phases. Currently this is possible because the free entitlement is only 15 hours. When Gvt purchases the majority of ‘cheaper’ three- and four-year-old places, it will become harder for providers to price in this way. Providers may, therefore, increase prices for younger children – potentially by as much as 30%. This could stop parents returning to work while their children are younger.”

This acceptance of inevitable price increases comes despite the fact that the document goes on to state that “a 10% reduction in the cost of childcare might lead to a 1.4% increase in the employment rate for married mothers with pre-school age children”.

A separate briefing note to then-early years minister Sam Gyimah, obtained as part of the FOI request and marked as ‘RE: Early Years Funding Rate Negotiations”, which has been heavily redacted, states that the total annual cost for increasing early years funding rates could be “… reduced to c. £500m if Ministers are content that we do not fund providers to cross-subside the privately-paid rate for children younger than 3, and instead accept that prices will rise for these children”.

Following the 2015 Spending Review, government ultimately implemented an annual increase in funding of just £300m per year which came into effect in 2017.

The Early Years Spending Review Scenarios document also exposes a deliberate strategy of passing costs on to parents, stating: “We will strip out funding for consumables (food, nappies) – and set an expectation that providers charge parents for these.”

It also states that the government expected “providers to move, over time, to full use of statutory staff ratios”, despite lower child-adult ratios being associated with higher quality early years provision.

FOI struggle

The Alliance originally submitted its FOI request – which asked for proof that the early years funding rates announced in 2015 and implemented in 2017 had been calculated to be enough to cover the rising cost of delivering places over subsequent years – in December 2018. The Department for Education rejected this request, even after a ruling by the Information Commissioner’s Office (ICO) that the information should be released, instead appealing to the First Tier Tribunal against the ICO’s decision.

While awaiting a Tribunal hearing date, the Department claimed that it would be publishing the requested information as part of wider government transparency documents, before eventually withdrawing its appeal and providing the documents to the Alliance.

The Alliance additionally filed a second FOI request in April 2021 asking for the calculations behind repeated government claims that the 1.2% increase in funding for the early years which came into effect in April would cover this year’s uplift in the national minimum and living wages, as well as the extension of the latter to 23- and 24-year-olds.

However, the Department has rejected request, stating that it is already planning to release this information itself and that it is in the public interest to wait for it to do so. This is despite children and family minister Vicky Ford stating during a January 2021 meeting of the APPG for Early Education and Childcare that the government would be releasing this information to the sector.

Further information about the Alliance’s investigations into early years sector underfunding are set to be shared during the charity’s Annual Conference, taking place online this evening. They come as Ofsted figures show that nearly 400 group providers and 2,000 childminders in England have closed or shut up shop in the last 11 months – 4% of the total nurseries and childminders – with 221 childminders and 21 group settings going in the month of May alone.

During his keynote speech, chief executive Neil Leitch will say: “What these documents confirm is that this government, for all its rhetoric about levelling up, improving life chances and giving all children the best possible start in life, has been shamelessly, knowingly underfunding our sector for years.

“They knew that the level of funding they gave to us would impact on quality. They knew it would put prices up for parents. And they did it anyway”.



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