The childcare blame game

In the week that the Government announced that parents can register for more free childcare, an analysis shows many councils are not passing on all the money to providers due to chronic underfunding.

Children at nursery raising their hands


This week saw the opening up of applications for childcare codes for 15 hours a week of ‘free’ childcare for nine month olds during term time. The free childcare is being extended to working parents of children over nine months from September who are earning more than 16 hours a week on National Minimum Wage.

The Government says parents should register early for a code and contact a provider to ensure there are places, but experts point out that the code needs to be reapplied for every three months so those who apply now will have to reapply in August.

While free early years education is good news for many, there have been calls this week to ensure that it is not limited to only working parents, with a ‘Rescue and Reform’ manifesto to this effect, backed by leading employers and unions, released by the Early Education and Childcare Coalition backed by dozens of leading employers and unions. There are also concerns about the capacity of nurseries to provide places, with staffing being a crucial issue.

What’s more, the news come amid a report from the National Day Nurseries Association [NDNA] that nurseries are not only suffering because the amount paid by the Government to fund ‘free’ childcare for three and four year olds – the most likely age group to attend nursery for a number of reasons – is less than the cost of funding a place, but because councils are often not passing on the full amount that the Government gives them for ‘free’ childcare to providers. This is in large part due to the dire financial straits of many councils.

Council funding issues

The analysis by the NDNA found 11% of councils in England are passing on less than 88% of the funding for two year olds and 23% of councils are passing on less than 88% of funding for three and four year olds. In 57 councils the base rate funding for two-year-old places to providers is now actually lower since April 2024 than it was last September.

Councils can currently retain up to 5% of the hourly rates for children in their area to fund the administration of the ‘free’ childcare policy and give extra support to providers. They are also able to create additional budgets to support children in areas of deprivation and children with SEND among other things.

Purnima Tanuku, Chief Executive of the NDNA says the problem is that councils and providers face “a very complex and outdated funding system that doesn’t mean money to fund early education and care reaches the providers who are working with our youngest children”.

She adds that rising costs mean nurseries are having to do more with less. She is calling on the Government to properly fund councils so they don’t have to top-slice money meant for early years providers, with many using that money to address overspend on children with high needs.

What is clear is that the whole system needs a rethink and that taking from one area to address shortages in another just leaves more problems. In this case it is councils using money meant for providers, but providers also similarly charge extra for younger children to offset funding shortages for three and four year olds, with parents picking up the bill.

A comprehensive approach is necessary which addresses all parts of the system. Instead we have a smoke and mirrors system where Government can pass on the blame for shortfalls to councils, one in five of which are teetering on the brink of bankruptcy. Such widespread issues suggests this is not a problem of individual councils, but has its roots much higher up the system.

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