Parents are likely to see an ongoing increase in childcare costs as a result of government underfunding , says the Preschool Learning Alliance.
The warning comes after the publication of new figures which reveal that the childcare sector is facing a funding shortfall of more than £500 million.
Research by independent sector experts Ceeda shows that the average hourly cost to private, voluntary and independent nurseries and pre-schools of providing funded two-year-olds places is £6.90, compared to an average government funding rate of £5.23 – a shortfall of £1.67 or 32%. For three and four year olds the funding shortfall is reported to be 17%.
As a result, Ceeda calculates that there is currently an overall annual funding shortfall of £370 million for the various free entitlement offers for two, three and four year olds. This figure takes into account additional early years funding providers can receive via the Early Years Pupil Premium, Disability Access Funding and SEN inclusion funding.
Ceeda’s research also says that the majority of early years providers use the income from three-and four-year-old places to cross-subside significant losses made on places for younger children. Factoring this into its calculations, the independent research company estimates that the total annual shortfall across all care delivered by PVI nurseries and pre-schools is £536 million.
With the government having confirmed that currently early years funding levels are set to remain frozen until at least 2020, the Pre-school Learning Alliance is warning that parents are likely to see an increase in fees in the coming months and years as childcare providers struggle to break even in the face of rising business costs, including increases in the national living wage.