NDNA survey: 'Crunch time for nurseries'

According to the data received from 128 local authorities, nurseries will receive an average hourly rate of £4.37, up from £3.97 in 2016/17.

Moreover, seven local authorities that responded gave average rates for three- and four-year-olds of less than £4, despite the Department for Education pledge that local authorities would be able to pay providers an average of ‘at least £4 per hour’.

The NDNA warns that the rise is 'totally inadequate' and says that it will cause some providers to opt out of providing the expanded entitlement, which comes into force in September.

It says it is now ‘crunch time’ for a sector faced with bigger losses on funded places, as costs such as business rates continue to rise.

The early years organisation is calling for an increased hourly rate that continues to rise in line with business costs and a change in the rules to allow nurseries to make mandatory charges for meals and other extras to help balance their books.

The charity also recommends the Government delay the 30 hours scheme if necessary for a revision and rethink.

The survey's findings are based on responses to a Freedom of Information request from the NDNA to all local authorities in England, and are released ahead of the NDNA’s annual conference in Manchester on Friday.

The research also shows that Camden and Wandsworth councils are retaining more than the allowed 7 per cent of central funding in 2017/18 having applied for an exemption – 11 per cent and 9 per cent respectively.

However, not all local authorities answered this question. (Nursery World knows of at least two other councils that have been through the disapplication process.)

Of those that did, half of all local authorities who responded are passing 95 per cent of funding or more to providers with one third retaining less than 5 per cent.

On the model agreement, which the Department for Education has developed with local authorities and expects them to use with childcare providers, 55 per cent are using it, 37 per cent say they are still considering their approach and 9 per cent are not using it.

Change in funding rates

Source: NDNA local authority survey

The other findings show that:

• average hourly funding rates for eligible two-year-old places have only increased by 17p from £5.13 to £5.30 across England and just 2p in London;
• providers in Liverpool are receiving the biggest loss in funding, on average 53p less per hour for three- and four-year-olds than last year;
• Southwark providers receive the biggest rise, with their rate for three- and four-year-olds up by £1.75 on average from £4.20 to £5.95;
• nine local authorities have dropped their average funding rates this year.

Chief executive Purnima Tanuku said she hoped that the new minister Robert Goodwill MP was up for the challenge as the urgent matter of funding for 30 hours must be a priority.

‘Despite repeated Government assurances that enough money would be made available for nurseries and talk of “record” funding, the reality is that the average nursery will receive just a few pence more per hour, less than the price of a second class stamp,’ she said. It’s totally inadequate.

‘More funded hours will mean greater losses. The average nursery is short of delivery costs for the current 15 hours by almost £1,000 per child per year.

‘An average increase in funding for 15 hours is £228. That is only a quarter of the current shortfall, never mind bigger losses caused by twice as many free hours.’

Nursery funding is fixed until 2020, while nurseries face National Living Wage rises by 20 per cent reaching towards £9 per hour in 2020, and average rateable values of nurseries have gone up 24 per cent this year, leading to a rise in Business Rates.

’The Government said it would be investing an unprecedented £6 billion into early years by 2020 but there is nowhere near enough money in the system to allow nurseries to offer 30 hours and survive as businesses. It is now crunch time,’ Mrs Tanuku added.

Minister for Children and Families Robert Goodwill said, 'We are determined to support as many families as possible with access to high-quality, affordable childcare, which is why we are investing £6 billion every year by 2020 in childcare – more than ever before. This includes an additional £1 billion per year to pay for the free offers and to raise the total hourly funding rate for three- and four-year-olds to £4.94 per hour.
 
'This rate is based on a comprehensive review of childcare costs, which took into account current and future cost pressures. They are also far higher than the average hourly cost of providing childcare, which recent research has found to be £3.72.
 
'Our early delivery programme has already been a huge success - including in the four areas using our increased funding rates – and many thousands of hardworking parents are seeing the benefits of access to 30 hours of free childcare.'
 

Highest funding rates

Rates under £4 an hour