Speaking at the National Day Nurseries Association's annual conference in Coventry today, children’s minister Claire Coutinho told delegates that 'top slicing' was a ‘real concern’ among the sector and that the Department for Education is ‘looking at the situation closely’ to ensure the ‘balance is right’ in terms of how the money flows to providers.
The minister was giving the keynote speech at NDNA’s 2023 conference Shaping the future of childcare: making the first five years count at Coventry Building Society Arena.
Karen Richards, of Wolds Childcare in Nottinghamshire, asked the minister for an ‘open dialogue’ around ‘opting out of the system’, similar to the ‘academisation system in schools’, which get their funding from central government.
She told delegates, ‘If I’m purchasing my own in-house SEND and speech and language therapists, I should be able to have the 3.7 percent the local authority retains for that purpose.’
Coutinho said that the average amount of funding that is passed on from local authorities to providers is 97 per cent.
She added, ‘As we're putting a huge amount more investment into the sector, the amount they [providers] will have will be more, in terms of percentage. So I like to look at that in terms of what they can take out for the system. I looked at whether it could be taken out completely but in terms of administration of payments, for example, they do need people to be able to do that.’
In the Spring Budget, the Chancellor pledged to double the spending on childcare by 2028, aiming to spend ‘more than £8 billion each year on the early years’, Coutinho said. This will eventually fund 30 hours of childcare per week for eligible working parents of children from nine months old to when they start Primary school.
From September, there will be £204 million worth of extra funding for local authorities to increase the hourly rates that providers are paid. The average hourly rate for two-year-olds will go up from £6 per hour to around £8 per hour, and the average rate for three- and four-year-olds will be over £5.50 per hour. From 2024 to 2025 the average rate for under-twos will increase to £11 per hour.
Philip Siddell, owner of Humpty Dumpty nurseries in the West Midlands, told delegates that the proposed funding rates for September come ‘nowhere near’ the rates needed.
‘When we talk about the rates that actually come down to nurseries, even when the local authorities take less than 5 per cent, those rates are currently working out at £4.52 [per child] an hour. If you're going to increase that by 7 per cent, that's only going to put it up to £4.83. Typical prices in the West Midlands are around £65 to £72 pounds a day at £6.50 to £7.20 an hour.’
He added, ‘There is a huge discrepancy and some of us have difficulty understanding how you’re proposing such a low rate for three- and four-year-olds and an enormous rate for under two year-olds at £11 an hour. What you're proposing seems to totally turn the pricing structure upside down.’
But Coutinho said she ‘stands by’ the funding structure. ‘What we are doing in terms of the amount of funding that we're putting into the sector, means that we're going to be a much larger buyer of childcare than we used to be. And it's really important to make sure that we're not distorting the market. As 75 per cent of your costs are staff, when you have to have three children per staff, obviously that's a huge amount more costs versus when you have eight children per staff for three- to four-year-olds. Therefore, it is really important that we try to reflect costs for those rates, which is why we do careful work to gather the evidence of what your costs are.’
Coutinho said that September rates for each local authority will be confirmed ‘before the Summer break’ and that the DfE will be asking the sector for views on how to distribute the funding for the new entitlements from April 2024, including ‘rules that local authorities will have to follow when distributing the funding to providers’.
She also announced that a new recruitment campaign would be launched next year to deal with the issues around workforce challenges.
Reflecting on the event, where delegates raised questions and the minister stayed behind at the end of the session to answer individual concerns, chief executive, Purnima Tanuka, said, ‘Providers feel that the minister has listened to them today, in terms of the challenges they are facing. But the most important thing is what happens next.’
NDNA is hosting an online members session with the DfE on the EYFS consultation on 20 June, where providers can discuss their concerns around Ofsted regulations, three- and four-year funding and the workforce crisis.
