Providers facing real-term funding cut while costs rise

It has come to light that many local authorities are opting to freeze their rates for the next financial year, which starts on 6 April, while others are increasing their rates by nominal amounts. In some cases, local authorities are dropping their rates.

For example, Devon County Council is increasing its rate by 8p from £3.62 to £3.70 and Torbay from £4 to £4.08. Kent County Council is increasing its rate by just 1p.

Local authorities that have frozen their funding include Lincolnshire County Council and Trafford Council.

A spokesperson for Trafford Council said the funding is remaining the same as 2014/15 because the dedicated schools grant has not increased.

For many providers, funding has not gone up for a number of years or has only risen marginally.

Research by the Pre-School Learning Alliance (PLA) last year revealed that private, voluntary and independent providers were being left with more than a £400 shortfall in funding per child per year under the free entitlement. A National Day Nurseries Association survey, published in January 2015, indicated that on average nurseries lose £809 per funded threeor four-year-old place per year.

According to childminder Rebecca Martland, funding in West Sussex, which is remaining at £3.77 per hour for 2015/16, has not gone up since 2010.

Brighton and Hove City Council, which has also frozen funding for the next financial year, has increased its rate by just 12p per hour since 2010.

All the while, costs for providers are continuing to rise, including staff wages, rents, utilities and training costs.

Keith Appleyard, treasurer for Fiveways Playcentre in Brighton, said, 'Over the past six years, early education funding in Brighton has risen from £3.83 to £3.95 - this is a 3.1 per cent rise. If the rate had increased in line with the Consumer Price Index it would have risen by 13.5 per cent to £4.35.

'During this time, we have increased our entry-level keyworker hourly wage by 14 per cent from £8.15 in 2010 to a forecasted £9.30 in 2015. We have also increased our basic hourly rate for fourand five-year-olds by 19 per cent to compensate for the 60p-an-hour underfunding.

'On top of this, we have to accommodate for the automatic enrolment of workplace pensions in October.'

While the sector has welcomed the forthcoming national minimum wage rise in principle, concerns have been raised that some nurseries will struggle to find the extra money to pay staff.

Jennie Johnson, chief executive of Kids Allowed, which runs an academy for apprentices, said the move to increase the national minimum wage and rate of pay for apprentices is a step in the right direction, but warned it could prove challenging for some nurseries, particularly those offering just funded places.

She said, 'We have already made the decision to start paying apprentices £5 an hour if they have GCSEs A-C in maths and English.

'For those that don't, but who we believe we can help achieve the grades, we pay the apprentice rate. In the next 12 months we are also going to start paying staff the living wage.

'However, I appreciate that for some nurseries paying the increased rate will be difficult.'

She added, 'Currently, we are only aware of Manchester City Council's funding rate for the next financial year - it is not increasing. How can local authorities justify not increasing their rate when the national minimum wage is going up?

'The sector is facing huge challenges, although we are all in the same boat, so it will work itself out. It might mean that providers have to push up their fees slightly to recoup costs.'

Neil Leitch, chief executive of the PLA, said, 'It is extremely concerning to see that so many local authorities have frozen funding rates for another year, meaning a real-term cut for early years providers.

'With business costs - including wages, rents and training costs - continuing to rise, it is simply not feasible to expect providers to continue to deliver services that are both high-quality and affordable without greater investment.

'The Department for Education claims that current funding levels are sufficient and that the problem is that local authorities are not passing on this funding in full, whereas councils say that they themselves aren't getting enough funding from central Government. But while both sides argue, providers are left in an impossible situation where they are expected to provide a high-quality service without being given the funding needed to do so.

'It's clear that the entire early years funding system must be reviewed as a matter of urgency. Anything less does a great disservice not only to providers but to the parents and children they work so hard to support.'

The National Day Nurseries Association (NDNA) echoed Mr Leitch's comments.

Claire Schofield, NDNA's director of membership, policy and communications, said, 'The picture across the country is that funding rates are stagnant, and in some cases even in decline.

'When this is set against a rising cost base for nurseries, with wages the biggest factor, it is set to put even more pressure on nurseries to deliver high-quality places and remain sustainable.

'In our Childcare Challenge campaign ahead of the election, the NDNA is calling for a full review of funding, with early years budgets protected, keeping track with inflation and a consistent, viable level of funding across all local authority areas.'

Liz Bayram, chief executive of the Professional Association for Childcare and Early Years (PACEY), said, 'The chronic and continued underfunding of early years provision is an issue that we continue to raise with Government.

'We know that nationally the money childcare providers receive is not enough to fund providing that place. Our concern is that when we know local authorities are struggling to provide sufficient childcare provision to meet need, there is a high-risk that providers will be forced to either cease to offer free funded places, or increase their charges for non-funded places in order to cover their costs.'

Rising costs for early years settings

The automatic enrolment of the workplace pension scheme is being phased in by October 2018.

Under the scheme, every employer must automatically enrol workers into a workplace pension scheme if they are aged between 22 and state pension age, and earn more than £10,000 a year. Each employer has a date by which they need to comply with the new law.

As well as this, there are large increases to the national minimum wage, effective from October.

Last week, the Prime Minister and Deputy Prime Minister announced that the national minimum wage is to rise, including a 20 per cent increase to the amount apprentices are paid an hour (see page 12).

The adult rate is to increase by 20p to £6.70 per hour. Apprentices will see their wages rise from £2.73 to £3.30.