Half a billion pound Budget bombshell for nurseries 

The Chancellor’s Budget will short-change the average private nursery by about £42,000 and cost the sector £437 million, National Day Nurseries Association (NDNA) is set to tell MPs.
APPG for Childcare and Education logo

With no move on business rates relief for nurseries, a lack of adequate funding for ‘free’ childcare places and inflation-busting increases in National Living and Minimum Wages, the Budget spelled a triple whammy for private, voluntary and independent (PVI) nurseries in England.

PVI nurseries deliver the vast majority of childcare and early education places across the country and yet are persistently ignored by Government.

While staffing costs continue to soar, Government funding for ‘free’ places stagnates, translating to a cut in real terms. 

NDNA will reveal these new figures at the All Party Parliamentary Group for Early Education and Childcare inquiry today (Wednesday 14 November) which also includes testimony from nurseries including one in the process of closing down.

Purnima Tanuku OBE, Chief Executive of NDNA said: “This Budget announcement was disappointing on all fronts and is set to cost the sector almost half a billion pounds next year alone. Ministers must allow for this in the upcoming funding settlement or this becomes a massive funding cut.  

“Despite the momentum of our campaign for the Government to follow the examples of the Welsh and Scottish Governments who have given 100% business rates relief to nurseries, the Chancellor gave no concessions at all to the nursery sector on this unfair tax. 

“The Department for Education cannot rely on costings data from 2012/13 to inform their funding rates, when the legal minimum wage was more than £2 lower than it will be from April.

“Ministers must factor the cost implications of their decisions into the childcare settlement for 2019/20. Failure to recognise these impacts will result in more nurseries having to make the heart-breaking decision to close their doors. 

“They must stop pretending that this policy is working. We speak with members every week who find themselves in desperate situations solely because of this underfunded childcare policy. They must act now to give meaningful hourly rates to providers for the coming year.

“Despite providing plenty of evidence, the Minister is unwilling to acknowledge this as a serious issue. It’s good to see MPs through the APPG taking a keen interest in the sector and the Minister will have to pay attention to the inquiry findings.”

Nicole Politis will be speaking at the APPG inquiry today. Based in the North West, she is one of the Directors of Portico Day Nurseries Ltd and Chair of NDNA’s St Helen’s network.

Nicole said: “Nursery businesses have been suffering for years now trying to do their best for children and families on pitiful hourly funding rates which don’t even cover our delivery costs. 

“Children need high quality early years education so they can achieve their full potential and develop a lifelong love of learning. The funding in its current format is unsustainable. If the grant was delivered directly to parents through the existing Tax-Free Childcare system, it would relieve the administrative burden on Local Authorities and providers, and improve parental choice.”

Tulip Siddiq MP, Chair of the APPG for Childcare and Early Education, said: “From looking at this year’s Budget, one would assume that this Government is content to allow the funding crisis in the early years sector to continue.

"With over 250,000 childcare places lost, this budget was an opportunity to provide relief, but the costs for childcare settings are only growing. The APPG’s inquiry arrives at a vital time, and we will be looking at exactly what the government needs to do to change this concerning outlook."

NDNA’s calculations:

  • The cost of not granting business rates relief to PVI nurseries is estimated nationally at £155 million. Members reported average costs of £10,778 per nursery in 2017
  • The cost of increasing the National Living Wage to full-time staff is £44,286,485.This is based on 70% of the workforce receiving full-time National Living Wage. The Low Pay Commission’s estimate that 22% of the workforce is covered by Living Wage now and 36.6% will be covered when it increases in April. NDNA has not accounted for part-time staff or those under 25 who will also have higher wages when the National Minimum Wage also rises
  • The impact of continued underfunding of the 30 hours policy is £237,957,626.40 for the sector. This is based on NDNA’s latest annual nursery survey shortfall figure of £1.90 per hour per child or £2,166 per year. This only includes children on the 30 hours policy and not the universal 15 hours. It also doesn’t look at the impact of underfunding of two-year-old places for nurseries

For the average nursery – with 45 children, 11 staff members and 13 funded three and four-year-old places – the total shortfall is £42,033.83:

  • NLW for full time staff = £2,550.91
  • Business rates = £10,778
  • Underfunding 30 hours policy = £28,704.92