Childcare expansion could leave parents paying more, study finds

The expansion of free childcare across England could leave some parents paying more for their nursery fees, a study has found.

From 1 September, working parents of children aged between nine months and four years old will have access to 30 hours a week of childcare during term time, paid for by the government.

Education Secretary Bridget Phillipson said the move would save eligible families an average of £7,500 per year.

However, research by the University of Bradford and University of Bath found the government funding was not keeping pace with rising nursery prices and suggested the policy could “backfire”.

Kerry Papps, professor of economics at the University of Bradford, said areas where there was increased competition for nursery places were particularly at risk.

He said the demand could “push up prices for unfunded hours, wiping out savings for families who need them most”.

The study found that over the past 18 months, nursery fees had risen fastest in areas with the lowest government funding.

It found in most of England, funding for three and four-year-olds was lower than the average hourly fee, forcing nurseries to plug the gap by charging more.

Neil Leitch, chief executive of the Early Years Alliance, which represents 14,000 nurseries and childminders across the country, said increased fees were due to “gross underfunding”.

“Here we have the biggest initiative ever launched in terms of early years care and we have a recruitment and retention crisis,” he said.

“Even the previous government had to accept they were underfunding by around 30%.

“To make things worse, the additional cost in terms of National Insurance increases and we are prohibited from passing on those costs, despite the fact they have not factored that amount into the new rates.”

Mr Leitch added: “Providers will do their absolute utmost to facilitate the needs of parents, but if we are talking medium and long-term sustainability, I’m afraid there is nothing to tell me a plan exists that would change that unless we get adequacy of funding.”

Sarah Ronan, director of campaign group the Early Education and Childcare Coalition, said: “It would be unwise to think that this is the end of the road.

“The sector is operating in really difficult financial circumstances at the moment, [with] rising employment costs, rising operating costs and funding not keeping pace with that.”

Karen Simpkin runs the Sunflower Children’s Centre in Sheffield and said the stresses on finances came from the upkeep of buildings as well as other costs such as business rates.

She said: “You have to read up about what the government are going to pay you, how they are going to support you.

“With business rates, I pay £15,000 a year – some nurseries in different areas pay a lot more – but where does that money come from?”

The Department for Education previously said the government was increasing investment in early years to more than £8bn next year.

It said that included a dedicated £75m expansion grant, which would “be targeted to providers supporting delivery of the expanded 30 hours of government-funded childcare in September”.