According to a report by the Institute for Fiscal Studies, the rapid pace of inflation will erode funding for early years care in nurseries and childcare providers over the next three years.
The IFS said funding for childcare places in England will actually fall by 8% by 2024-25 as a result of inflation, as providers face 16% higher costs over that period, mainly due to higher wage bills.
Elaine Drayton, one of the authors of the IFS report, said governments have prioritized spending on early years provision over the past decade, with new childcare benefits for disadvantaged two-year-olds and three- and four-year-olds in working families. and expanding its provision at a time when other public services were cut off.
But service providers in the early years face rapidly rising costs that erode the value of their budgets. Childcare provider costs have already been rising faster than economy-wide inflation over the past few years, but they face an even steeper rise in the coming years,” Drayton said.
“This will leave government funding for the free childcare program much lower than it was planned when the budget was last set in 2021.”
The result is that a significant increase in the spending review in 2021 – up to £3.75 billion a year until 2024-25, which covers the general 15-hour week childcare entitlement, which rises to 30 hours for many working parents – will wind up at a higher rate. Expected inflation.
Neil Leach, CEO of the Early Years Alliance, said: “We know early years providers are deeply committed to providing high-quality education to our young children, as well as the childcare that many parents depend on – but that alone is not enough to pay the bills and keep doors open. .
“The reality is that the first-year financing system in this country is broken, and the way the government looks and treats our vital sector needs an urgent rethink before it collapses completely.”
Kevin Courtney, the joint secretary general of the National Education Union, said its members had warned that nursery closures were inevitable “unless the government intervened” and announced more financial support for the sector in next week’s budget.
Bridget Phillipson, the shadow education minister, said the IFC’s analysis highlighted the need to build “a new, modern childcare system”.
“The lower value of childcare subsidies means parents will face higher bills or more nursery closures, all because governors are ruining the economy,” Phillipson said.