As the Conservative party has promised no additional funding for the 15 and 30 hours of childcare, Ceeda warns the funding deficit would rise 'siginficantly'.
It estimates that under the party’s leadership, providers would face an estimated deficit of £571 million in 2020/21 to deliver funded places for two- to- four-year-olds. This deficit rises to an estimated £824 million when cross-subsidies for younger age groups are factored in.
The estimates are based on the assumption that take-up of funded places continues in line with 2019/2020 trends. They take into account the uplift to funding announced in the 2019 Spending Review, which Ceeda says amounts to approximately 0.08p extra per hour from next April.
Ceeda’s analysis measures the impact of manifesto policies from the three main political parties – the Conservatives, Labour and the Liberal Democrats - on the early years sector against estimated delivery costs for PVI nurseries and pre-schools in April 2020 (see table below).
The analysis is based on Ceeda's own assessment of sector delivery costs captured in April 2019, which have been upscaled for the following year, allowing for rises of 3.6 per cent to pay growth and 1.5 per cent to inflation.
While the other two parties, Labour and the Liberal Democrats, promise a significant expansion of early education and childcare entitlements, they have both committed to increasing funding rates within the manifestos, notes the analysis.
Labour
According to Ceeda, Labour’s proposed funding rates for two-year-olds exceed their estimated cost of a place. However, the proposed rates fall short of estimates for three and four-year-olds. Taken together, this amounts to a funding deficit, at full roll-out on April 2020 rates, of an estimated £80 million.
Labour has promised a rate of £7.57 for two-year-olds and £5.19 for three and four-year-olds in April 2020.
Ceeda says that phased roll-out of the expanded hours and a commitment to annual funding increases could reduce the funding gap.
The analysis does not assess Labour’s plans to offer an additional 60 hours of childcare per year at subsidised rates as Ceeda was unable to obtain any further information. Nor does it look at proposals to offer free provision to one-year-olds, a future commitment of the political party.
Lib Dems
Ceeda finds that the Liberal Democrats offer would see nurseries and pre-schools face an estimated £314 million deficit. This is based on the assumption of full delivery of the offer at pledged 2020/21 rates.
Lib Dems have promised a rate of £7.86 for under-twos, £7.21 for two-year-olds and £5.32 for three and four-year-olds next year.
Ceeda says that the shortfall could reduce depending on future rate reviews.
Dr Jo Verrill, managing director of Ceeda, said, 'On digging into the detail, we were surprised to find that the party offering parents the least in terms of free-entitlement places, is likely to cost the sector the most.
'This analysis of party pledges and sector operating costs throws into sharp relief the challenges which lie ahead for the sector whoever wins the election.
'A new Conservative administration would continue the funding freeze and seriously threaten the sector’s sustainability, particularly in deprived areas. In contrast, the Labour proposals appear well-costed, with significantly lower shortfalls. The Liberal Democrat commitment is the most radical and would need a careful, phased roll-out tied to annual fee increases if large funding deficits and major staff shortages are to be avoided.'
Commenting on the analysis, Neil Leitch, chief executive of the Early Years Alliance, said, ‘Whoever ends up on the steps of Downing Street next month needs to be honest about the true cost of "free childcare".
'No other business sector is expected to deliver a flagship government promise without adequate funding – why should childcare be any different? More of the same is not good enough: we need to ensure funding covers the true cost of delivering quality childcare because anything less will continue to hit parents in the pocket and lead to many thousands more provider closures.'
