23 Dec 2010

More cash needed for free nursery places scheme to succeed

A key government pledge to provide 15 hours of free nursery care for the most disadvantaged two-year-olds needs extra funding to succeed, a Channel 4 News investigation can reveal.

A nursery age child eating a doughnut. (Reuters)

Nursery and childcare experts familiar with the scheme have told Channel 4 News that the Government’s promise to provide 15 hours of free nursery care for all of the most disadvantaged two-year-olds by 2013 may not be achievable unless more money is pumped into the programme.

The investigation found there are concerns that because the sector is already losing money by providing free places to three and four-year-olds the extra strain of the new pledge could see nurseries withdraw from the scheme or risk going out of business.


The government has rejected the concerns as “speculation”. A Department for Education spokesman told Channel 4 News: “It’s wrong to say that there isn’t sufficient funding for the commitment as funding hasn’t been announced yet.

“This is pure speculation. We are absolutely committed to ensuring that the free entitlement for childcare to deprived two-year-olds is a success.

The government is somewhat playing on the goodwill of providers. June O’Sullivan

“For the pilot we fund local authorities to allow them to pass on £4.85 per hour (and £6 per hour in London) to providers. This compares to an average cost of childcare in England of £3.52 per hour according to research by the Daycare Trust.

“We have provided £64m in 2011-12 and £223m in 2012-13 to allow an increase in the number of places delivered in advance of the entitlement.”

Nurseries losing money

But nurseries say their fears are based on what has happened within the existing scheme which offers universal free places to three and four year olds.

Nurseries who offer the free places for three and four-year-olds are paid an hourly rate per child from money given by central government to local authorities. Nursery costs vary between regions and a 2010 national report found care costs currently average £3.54 per hour per child.

But research by the representative body for the day nurseries sector, the National Day Nurseries Association (NDNA) found that 81 per cent of nurseries were not having their costs covered by this money, which the organisation says has implications for them to invest in important areas such as staff qualifications and resources.

Industry insiders also argue that calculating the average costs of nursery care from relatively crude data to set the level of payments means the true costs to providers of offering free places are not reflected.

Top-up fees

In addition, the money is distributed locally, coming from the ring-fenced Direct Schools Grant. However there is no protection within that money for the funding of free nursery places.

There are fears that when the pilot programme is rolled out, the amount currently given to councils to fund the scheme (which in London is £6 per child per hour) may not be given to nurseries in its entirety as councils try to make their cash go further.

Nurseries are prevented from levying “top-up fees” to supplement the money they get for the free places scheme. But these rules can be interpreted locally, raising more problems.

We have had difficulty finding childcare provision of the appropriate quality to meet the demand. Brent Council

Early years and childcare expert Denise Burke who has worked extensively with local councils points out: “Some providers are already setting conditions so that parents who take on the “free” provision must also take on more hours as part of the deal for which they are then charged more than the normal hourly rate so that the nursery can make up some of the loss on the free hours.”

There is a code of practice that all providers who deliver the early years grant must adhere to but it is interpreted locally. Denise believes that if the rules on this were tightened up, it could see some providers forced to pull out of the free places scheme.

Urgent funding issues

Purnima Tanuku, Chief Executive of NDNA has called for the Government to take their concerns seriously: “NDNA and nurseries value the benefits of free nursery education for children but it is important to recognise the serious under-funding issues a significant number of nurseries face when providing places for three and four-year-olds.

“Free nursery education for disadvantaged two-year-olds is of course welcome news for families and will offer these children fantastic benefits. However, nurseries will need these places to be adequately funded otherwise they could be a serious threat to the nurseries’ long-term viability.

“NDNA believes issues with funding for three and four year olds need to be urgently addressed before asking nurseries to provide sessions for younger children, to ensure that nurseries can support families during difficult economic times by providing high-quality childcare.”

The organisation wants more guidance on how the scheme will be funded and how the money will reach nurseries.

Denise Burke went even further. She told Channel 4 News: “The money has got to go up. You can’t provide quality without high quality staff – which are expensive. Local authorities are not in a position to subsidise the places as their budgets are being cut.”

Children's minister Sarah Teather. (Getty)

Places shortfall

One authority which has been taking part in what is called a pathfinder (pilot) scheme for the Government is Brent Council which has provided just over 220 places for the most deprived two-year-olds in the borough, amounting to around 25 per cent of its disadvantaged youngsters. It is also looking to save £90m from its budget over the next four years.

It raised another issue with the scheme regarding capacity in the system for the extra places. A spokesman told Channel 4 News: “Brent Council was one of the first to deliver the pilot and it has helped our disadvantaged families enormously, however we have had difficulty finding childcare provision of the appropriate quality to meet the demand.”

And these concerns are well-founded. The government stipulates that the nursery places for two-year-olds should be of a “high quality” however an Ofsted report into quality childcare provision has found that there is an increasing gap in the standard of childcare between deprived and affluent areas.

Further, as local authorities gather data to find out whether there are currently sufficient places to meet demand, an analysis in the sector magazine Nursery World suggested authorities could find there are not enough suitable places to meet current needs.

‘Big Society’ concerns

The voluntary sector also has concerns about funding of the scheme. One organisation which has taken part in the pilot is the London Early Years Foundation, a social enterprise and charity which operates nurseries in central London.

An example of the government’s “Big Society” principle, its chief executive June O’Sullivan says although she strongly supports what the Government is trying to do, she has already voiced her concerns to the education minister Sarah Teather on the issue of adequate funding: “I have written to the minister about the pilot and told her the government should keep the scheme but fund it properly and collect relevant data as it’s important for taxpayers to see what the impact is of these schemes in terms of developmental outcomes for the children.”

She feels that the government is taking advantage of providers: “We would be prepared to continue running the scheme but it’s outrageous that the “free” nursery places are having to be subsidised by nurseries.

“We always find a way to carry on but the government is somewhat playing on the goodwill of providers and the fact that the majority of people aren’t running nurseries for profit but because they want to help children.”