Private government documents show ministers knew that underfunding early years would mean higher childcare costs for parents

  • Private government briefing documents, obtained by the Early Years Alliance after a two-year FOI battle, show that early years funding rates for 2020/21 were less than two-thirds of what government officials estimated to be the true cost of ‘fully funding’ the sector.
  • The documents also reveal ministers knew the inadequate level of investment proposed would result in higher prices for parents of younger children, and that nurseries, pre-schools and childminders would be forced to use maximum statutory adult-to-child ratios.
  • The Department for Education rejected a second FOI request filed by the Alliance in April 2021 asking for proof that the 1.2% increase in early years funding for 2021/22 covers the cost to the sector of increases in the national minimum and living wages from April, as ministers have repeatedly claimed.
  • Alliance chief executive Neil Leitch will accuse the government of “shamelessly, knowingly underfunding our sector” during his keynote speech at the Alliance’s annual conference, taking place later today (Tuesday 15 June).

Shocking private government documents, recently obtained by leading early years organisation the Early Years Alliance and released today after a more than two-year long Freedom of Information (FOI) dispute with the Department for Education, reveal that funding rates for the so-called ‘free childcare’ offer for three- and four-year-olds are less than two-thirds of the amount that government itself believes is needed to fully fund the scheme.

One briefing document obtained by the Early Years Alliance reveals that in 2015, civil servants at the Department for Education estimated the cost of providing a government-funded early years place for a three- or four-year old would reach £7.49 per child per hour by 2020-21. According to independent analysts Ceeda, the average early years funding rate given to local authorities in 2020-21 was just £4.89 – a shortfall of £2.60 per child per hour, or £2,964 per child over the course of a year for children in receipt of 30-hour funding.

The document, entitled ‘Early Years Spending Review Scenarios’ and marked as ‘official sensitive’, states that:

“There are a number of factors that could risk the sustainability of the [three- and four-year-old] entitlement – from NLW pressures to supporting children with SEND. Fully funding them all is not affordable – by 2020-21 it would be a 3-4yo rate of £7.49, and potentially cost for the uplift alone of over £2bn. We will make reforms and expect providers to become more efficient in order to reduce this cost.”

The same document also acknowledged that the introduction of the 30-hours policy was likely to result in price increases for parents, stating:

“Provider costs vary substantially between age groups – primarily because of statutory ratios. Providers generally adopt a more-or-less flat pricing structure across the age phases. Currently this is possible because the free entitlement is only 15 hours. When Gvt purchases the majority of ‘cheaper’ three- and four-year-old places, it will become harder for providers to price in this way. Providers may, therefore, increase prices for younger children – potentially by as much as 30%. This could stop parents returning to work while their children are younger.”

This acceptance of inevitable price increases comes despite the fact that the document goes on to state that:

“a 10% reduction in the cost of childcare might lead to a 1.4% increase in the employment rate for married mothers with pre-school age children.”

A separate briefing note to then-early years minister Sam Gyimah, obtained as part of the FOI request and marked as ‘RE: Early Years Funding Rate Negotiations”, which has been heavily redacted, states that the total annual cost for increasing early years funding rates could be:

“… reduced to c. £500m if Ministers are content that we do not fund providers to cross-subside the privately-paid rate for children younger than 3, and instead accept that prices will rise for these children”.

Following the 2015 Spending Review, government ultimately implemented an annual increase in funding of just £300m per year which came into effect in 2017.

The Early Years Spending Review Scenarios document also exposes a deliberate strategy of passing costs on to parents, stating:

“We will strip out funding for consumables (food, nappies) – and set an expectation that providers charge parents for these."

It also states that the government expected “providers to move, over time, to full use of statutory staff ratios”, despite lower child-adult ratios being associated with higher quality early years provision.

BACKGROUND TO THE FOI REQUEST

The Alliance originally submitted its FOI request – which asked for proof that the early years funding rates announced in 2015 and implemented in 2017 had been calculated to be enough to cover the rising cost of delivering places over subsequent years – in December 2018. The Department for Education rejected this request, even after a ruling by the Information Commissioner’s Office (ICO) that the information should be released, instead appealing to the First Tier Tribunal against the ICO’s decision.

While awaiting a Tribunal hearing date, the Department claimed that it would be publishing the requested information as part of wider government transparency documents, before eventually withdrawing its appeal and providing the documents to the Alliance.

SECOND FOI REQUEST

The Alliance additionally filed a second FOI request in April 2021 asking for the calculations behind repeated government claims that the 1.2% increase in funding for the early years which came into effect in April would cover this year’s uplift in the national minimum and living wages, as well as the extension of the latter to 23- and 24-year-olds.

However, the Department has rejected this request, stating that it is already planning to release this information itself and that it is in the public interest to wait for it to do so. This is despite children and family minister Vicky Ford stating during a January 2021 meeting of the APPG for Early Education and Childcare that the government would be releasing this information to the sector.

Further information about the Alliance’s investigations into early years sector underfunding are set to be shared during the charity’s Annual Conference, taking place online on the evening of Tuesday 15 June.

During his keynote speech, chief executive Neil Leitch will say:

“What these documents confirm is that this government, for all its rhetoric about levelling up, improving life chances and giving all children the best possible start in life, has been shamelessly, knowingly underfunding our sector for years.

“They knew that the level of funding they gave to us would impact on quality. They knew it would put prices up for parents. And they did it anyway”.

The conference, entitled We are Educators: Putting early years at the heart of education policy, is taking place online from 6pm tonight (Tuesday 15 June). The keynote line-up also includes Nobel prize-winning economist, James Heckman, creator of famous Heckman Curve demonstrates that the highest rate of economic returns comes from the earliest investments in children, reducing the need for social spending at a later date.

Commenting, Early Years Alliance chief executive, Neil Leitch, said:

“For years, the early years sector has warned that the so-called ‘free entitlement’ offer is anything but free, in the face of repeated government claims that the policy is adequately funded. These documents, which they spent more than two years trying to hide, prove otherwise.

“The early years of a child’s life are critical to their long-term learning and development – and yet ministers have been all too happy to force providers to work to maximum ratios, inevitably reducing quality, in order to save the Treasury some money.

“For so long, the government has tried to deflect the blame for rising childcare costs. But these documents prove, in black and white, that it knew that the introduction of the 30-hours policy, along with an insufficient level of investment, would result in higher costs for parents of younger children.

“Early years providers and parents have had enough of being forced to pay the price for this underfunded policy year after year. There is still time for the government to do the right thing, but at this point, the only way for it to maintain any credibility with parents and early educators is by agreeing to a full review of early years policy in this country. That means delivering the substantial investment the sector needs in the upcoming Spending Review.  

“Only with fair and adequate funding will we ensure nurseries, pre-schools and childminders can continue delivering the quality, affordable care and education that children and families both need and deserve.”

The full conference line up is available here: Alliance Annual Conference 2021

 

NOTES TO EDITORS

  • Download the documents released in response to the December 2018 FOI here: https://www.dropbox.com/sh/jahv701milmpf2e/AAA_Phys_CmdCLtid91TwUzZa?dl=0
  • A headshot of Neil Leitch and additional data on early years setting closures and the text of Neil Leitch’s conference speech will be available to download here: https://www.dropbox.com/sh/78lt8rz62tcuery/AABBy5fW5iKx2wLryk1JtxFka?dl=0
  • The national estimate of average hourly rates for 2020-21 for three- and four-year-olds, as calculated by independent education researchers Ceeda (www.ceeda.co.uk), is based on total part-time equivalent (PTE) numbers and funding allocations contained within in the 2020-2021 Dedicated Schools Grant Guidance, published by the Education and Skills Funding Agency, and inclusive of local authority administrative spend.

    The estimates include DAF (Disability Access Fund) Early Years Pupil Premium (EYPP) for disadvantaged children but are exclusive of the MNS (Maintained Nursery Schools) funding, not relevant to the private, voluntary and independent (PVI) childcare sector which accounts for a majority of providers in England.

    Local authorities are required to plan to “pass-through” a minimum of 95% of Dedicated Schools Grant Funding for early years entitlements to providers so they can deliver these places. However, they may apply for a ‘disapplication’ of this guidance allowing them to pass on a smaller amount.

    Ceeda estimates that the average amount passed on to providers during 2020-21 was £4.76 per hour. However, exact per pupil figures vary widely based on location, and proportion of pupils in receipt of DAF or EYPP at the setting.

  • An estimate of the annual cost of a single 30-hrs place to the provider was reached by multiplying the gap between actual funding levels in 2020-21 and the DfE’s estimated cost of provision (£7.49 - £4.89 = £2.60), multiplied by 30 hours over 38-weeks (1,140 hours) - the number of hours available to a child with 30-hour funding over the course of a year.
  • The ICO’s decision notice on the Alliance’s 2018 FOI request is available here: https://ico.org.uk/media/action-weve-taken/decision-notices/2019/2615997/fs50831496.pdf
  • A recording of children and families minister Vicky Ford’s statement to the APPG for Childcare and Early Education is available on YouTube here (25:30 onwards). She states: “In terms of funding, the work that we did with Treasury when we agreed that £44m for 6p for three- and four-year-olds, the 8p for two-year-olds, we are going to share maths underpinning that. We’ve agreed to do that with the sector to show how that should more than cover the uplift in the minimum wage when that comes in in April.”