Childcare fees hike ‘inevitable’ without urgent action new Alliance survey reveals

  • 9 in 10 childcare providers plan on increasing fees because of minimum wage increases
  • Frozen funding levels have left two in five providers fearing closure in the next 12 months 

New research from the Early Years Alliance has found that almost two thirds of providers have increased fees in the last 12 months - and two in five plan to do so in the next year.

The survey, which received over 1,600 responses, found that 9 in 10 providers planned on increasing fees either entirely or in part because of upcoming increases to the national living and minimum wages. 

Current government funding levels for early years education are based on a cost analysis in 2015 using data from 2012-’13,  and do not take into account any subsequent cost increases, such as business rate hikes, new employer pension contribution rules and consecutive annual minimum wage rises. 

Elsewhere the survey revealed:

  • Over two thirds of respondents (70%) say their funding rate is lower than the cost of delivering the ‘free’ entitlement to three and four-year olds 
  • 9 in 10 (88%) warned that, if their funding rate stays the same next year, it will have a negative financial impact on their provision. For two in five providers (44%) the increase in the national and minimum wages may mean they may have to close in the next twelve months 
  • Parents returning to work after parental leave could see increased fees - over half of the survey’s respondents (53%) warned childcare prices would also go up for very young children 
  • Providers themselves are paying a heavy price for underfunding with 81% of respondents reporting worries about financial viability having a negative impact on their stress levels and mental health. Six respondents said they had had thoughts of ending their own life.

Neil Leitch, chief executive of the Early Years Alliance, said:

“The government has walked the early years sector to a cliff-edge and only the government can pull us back. This survey lays bare just how disastrous government inaction on childcare funding has been: it’s led to increased prices for parents and continues to leave providers with no choice but to close. Beneath these headline figures there are hundreds of stories of people at risk of losing their livelihoods having dedicated their career to giving children the best possible start in life and thousands of families simply being priced out of quality childcare.

“We should be celebrating a pay increase for our dedicated workforce – but for most providers this is just the latest in a long list of mounting costs they are expected to absorb without a corresponding increase in government funding. This simply can’t go on. It’s now inevitable that, without urgent action on funding, the early years workforce and families will suffer:  parents will pay more and more for childcare and even more settings will close. If ministers want to talk about the importance of a quality early education then they need to put their money where their mouth is and start making sure funding keeps pace with rising costs.”

ENDS 

 

Notes for editors 

Background

From 1 April the National Living Wage for people aged 25 and over will increase 4.9% from £7.83 to £8.21. The National Minimum Wage for other groups, including apprentices, will also rise significantly.

This increase represents a financial cliff edge for the early years sector because, despite the above increases, government funding for early years education has been frozen at current levels until 2020. For childminders, nurseries and pre-schools, staff wages account for three quarters of all outgoings, according to early years experts CEEDA.

Underfunding has meant many providers have already closed their doors for good, while others have been forced to increase parent prices or have introduced extra charges to cover the make-up the government’s funding shortfall.

As the largest and most representative early years organisation, the Alliance has conducted a survey to find out how the national living and minimum wage increases will affect providers and understand the wider impact of underfunding on the viability of their business.   

 

Methodology

The online survey was open to anyone working in the early years sector and ran from Tuesday 12 March to Monday 25 March 2019. A total of 1,615 nurseries, sessional pre-schools, childminders and out of hours clubs took part.

Of those who answered, 91% offered funded hours for two-year-olds, 96% offered funded 15 hours for three and four-year-olds, and 87% offered the funded 30 hours for the same age group.

The survey contained 17 questions ranging from multiple choice, specific questions about settings’ funding rates, and a question that invited open comment.

 

Key findings

  • Two thirds (67%) of respondents have already increased parent fees for non-government funded hours in the past 12 months
  • 42% say they are likely or very likely to reduce staff numbers over the next 12 months. Of those, 90% say this is due either entirely or in part to the rising national living/minimum wage

When settings were asked about other specific measures they expect to take as a result of the upcoming increase to the National Minimum and National Living Wages

  • 63% expect to increase parent fees for non-funded hours taken up by two, three and four-year-olds 
  • 53% expect to increase fees for younger children who don’t receive funding
  • 19% expect to restrict the sessions parents can use for funded hours
  • 40% expect to introduce or increase additional charges for goods and services such as lunch, snacks and trips
  • 70% expect to spend less on equipment and resources
  • 15% expect to take on less children with special educational needs and disabilities (SEND)

Of those who answered questions about financial viability and the impact of funding rates:

  • Two thirds (70%) say their funding rate is lower than the cost of delivering the ‘free entitlement’ to three and four-year olds
  • 88% say that if their funding rate stays the same next year (April 2020) it will have a negative financial impact on their setting
  • 12 settings confirmed they are closing their doors, with 14% saying there is a significant chance they will close in the next 12 months, and 30% a small chance. 96% of those who answered saying this is related either entirely or in part to a lack of adequate funding
  • Concerns about the financial viability of settings has had a negative impact on the stress levels and mental health of 81% of respondents – with six respondents saying they had had thoughts of ending their own life
About the Alliance

  • The Early Years Alliance (formerly the Pre-school Learning Alliance) is the largest and most representative early years membership organisation in England. A registered educational charity, it also provides high-quality affordable childcare and education to support children and families in areas of deprivation throughout the country.
  • The Alliance represents 14,000 member settings and supports them to deliver care and learning to more than 800,000 families every year. We deliver family learning projects, offer information and advice, produce specialist publications, run acclaimed training programmes and campaign to influence early years policy and practice.
  • The Alliance website is www.eyalliance.org.uk