Unfunded Minimum and Living Wage increases threaten nurseries 

The Government has accepted the Low Pay Commission’s recommendation to increase the Minimum and Living Wage levels at a rate well above inflation.

At the same time, nurseries in England will receive an increase of less than 2% to their funding rates for 2020/21.

The National Living Wage (NLW), paid to anyone aged 25 and over, will increase by 6.2% to £8.72 from April 2020, while the National Minimum Wage (NMW) for 21-24 year olds and apprentices will rise by 6.4%. 

In September the Chancellor announced an additional £66 million for the funded hours for three and four year olds in 2020/21. This amounts to less than 2% of current expenditure on the scheme and any increases are dependent on decisions made at local authority level.

Purnima Tanuku OBEPurnima Tanuku OBE, Chief Executive of NDNA said: “While today’s announcement is good news for low paid workers it will do nothing to address the workforce crisis in early years. Without tackling the chronic underfunding of early years, this increase will threaten more childcare providers with closure.

 “While the pay rates increase at all ages by at least 4.5%, and more than 6% for those over 21, the funding for childcare places has failed to keep pace. The Department for Education has promised an extra £66 million for next year but that doesn’t even cover one third of these increases. 

 “The Low Pay Commission’s report recognises that the childcare sector is ‘price-taking’, meaning it is reliant on Government funding rates and can’t adjust prices in the same way other businesses can.

“Our workforce survey showed a sector in crisis and without the proper investment in early years, today’s announcement risks making that situation worse. Many skilled workers are leaving early years for well paid jobs in retail which carry less responsibility. Without better funding, providers will struggle to be able to reward qualified and experienced staff and so risk losing them.

“Governments in England, Scotland and Wales will need to review the impact of today’s announcement on the real costs of delivering the funded childcare promises they have made to parents, and ensure providers have the resources they need to deliver high quality early education and care for our children.”

The Low Pay Commission’s Report recognises that businesses pass on the increased salary costs to consumers through rising prices but identified childcare and early years as one sector that could not easily do this, stating: “businesses in other sectors remain ‘pricetakers’ who do not have this option, whether because of market structures or reliance on government funding. Adult social care and childcare are in this group, with stakeholders telling us the sectors’ funding crises had not improved.”

Download Low Pay Commission report