Three-quarters of nurseries losing money on free early education places

The NDNA's latest bi-annual Nursery Business Performance Survey shows that more than 76 per cent of nurseries make average annual losses of more than £500 per child on free early education places for three- and four-year-olds. On average, nurseries are receiving just £3.66 per hour for the funded places.

It also finds that the economic downturn is prompting parents to turn to family and friends for help in order to reduce their childcare costs. The survey also found that funding levels were a key issue for nurseries in England, Scotland and Wales, which are experiencing rising costs in utilities, wages and business rates.

The report recommends a number of actions for Government and local authorities to give families access to quality, affordable childcare.

NDNA chief executive Purnima Tanuku said, ‘Nurseries are a vital part of the UK’s childcare infrastructure and want to see more done to help children and families.’

Ms Tanuku said, ‘We welcome the Government’s Childcare Commission as a great opportunity to ensure that the good quality childcare that we know matters most for children and parents is also affordable.

‘We are encouraged to hear that David Cameron believes funding streams are too complex. We’d like to see the system made more efficient, with funding going direct to childcarers so that quality childcare is cheaper at the point of purchase for parents.

‘The history of shortfalls in free early education funding means that many nurseries have had to make the offer work in practice by recovering losses on free hours, through fees paid by parents who buy additional hours – inflating the cost of childcare.

‘Unravelling the inefficiencies in childcare funding, so that childcarers receive funding that covers their costs will help ensure the right quality and affordability for parents and children.’

The NDNA is calling for:

• Funding reform - adopting ‘closed loop’ payment systems for state-funded childcare benefits to ensure funding gets through to frontline services.
• Early Education Funding – for nurseries across the country to be able to offer free places for two, three and four-year-olds, funding must cover their costs. Local authorities should direct ring-fenced education funding to early years so that providers are funded at a viable level.
• Childcare regulation - any regulation review must ensure well-qualified staff in the right numbers to ensure children get the best learning experience.
• Workforce development – The survey shows the drop in support from local authorities that nurseries are receiving for workforce development. There needs to be more support and a funding rate that covers the costs of employing more qualified practitioners to work directly with children, engage with other agencies and provide wider family support.
• Action on VAT – PVI nurseries should be able to recover VAT on new capital investment to help create places.
• Relief on Business Rates – The business rates scheme for smaller childcare businesses in Wales should be extended to all UK childcare businesses.
• Access to capital funding – nurseries interested in offering places to two-year-olds need a viable business case that requires access to capital, such as the National Loan Guarantee Scheme and the ‘funding for lending scheme’.

The full report can be found at www.ndna.org.uk/survey2012