The letter says, ‘Business rates were an important issue raised to us by early years settings and practitioners [during the Committee’s inquiry].
‘Many childcare businesses pointed out that the size of their premises was not of choice but of meeting regulatory standards required by Government and Ofsted guidelines. They therefore had to pay more in business rates not as a result of a commercial decision to expand but as a result of meeting the space standards set by public bodies.
‘We were also informed of the effect of VAT on PVI settings, with many expressing how VAT charges drive up costs, and called for reform. Worcestershire Independent Providers told us that VAT charges had prevented them from moving ahead with a planned property extension. Little Faces Childcare argued that full relief from VAT would allow providers to pass on savings to parents.
The letter follows a response from the Department for Education (DfE) to the Committee’s report which stated that the ‘Government currently has no plans to make changes to the business rates support provided to early years businesses or the VAT exemption which nurseries currently enjoy.’
Education Committee chair Robin Walker MP commented, ‘With less than a month to go before the Autumn Statement, we hope the Chancellor will continue the work he started in his Spring Budget towards reviving and expanding the country’s struggling childcare sector.
‘Recognising childcare settings as the vital infrastructure that they are, my Committee believes providers should be spared the burden of having their wafer thin margins sent to the Chancellor through business rates and VAT on their purchases.
‘It feels unjust that childcare businesses might cross thresholds to pay higher rates of tax purely in order to meet the demand that Government is creating.
‘These sums would be small beer to the Treasury but a gamechanger for the sector, which has the power to support great numbers of talented parents back into the workforce and be an asset to the wider economy, as well promoting early development and identifying cases of special educational needs.’
Jonathan Broadbery, director of policy and communications at the National Day Nurseries Association (NDNA), said, ‘At a time when the early years sector should be expanding to help deliver the funded childcare places the Government is promising, business rates and VAT are piling on additional costs and holding providers back. Changes to the valuation policies for nurseries is actually sending business rates bills skyrocketing which the Government is refusing to recognise.
‘This expansion of funded places will mean every room in nurseries will be delivering funded places. We need to remove this tax on the space that nurseries give children to learn, grow and develop. We will be sending our own evidence to the Chancellor to ask him to give this matter serious consideration under the circumstances.’
