YMCA is calling on the Department for Education to reconsider the Early Years National Funding Formula (EYNFF) allocations for 2023/24, which fall well below that of inflation and the National Living Wage.
The charity said that providers are having to make ‘difficult decisions’ about their early years settings amid rising costs and underfunding.
Eight in ten YMCA childcare settings said they were unable to deliver childcare at the funding rate provided by their local authority, prior to the publication of the 2023/24 funding rates.
YMCA is one of the largest nursery groups in the UK and runs childcare provision through a federation of local YMCAs.
It operates more than 80 early years settings across England, providing more than 4,500 childcare places, with many settings based in deprived areas.
YMCA Fairthorne in Hampshire is reportedly closing four settings in Southampton at the end of February because 'they are no longer viable', leaving 145 children without childcare.
The YMCA report released today (Thursday) reveals that the EYNFF for 2023/24 falls far short of the support needed for providers to deliver the Government’s early years entitlement places, as inflation and National Living Wage effectively outstrip any increase across England.
It said that the EYNFF does not take into account the rising inflation rate and there is now a 7 per cent shortfall between the increase in the rate paid for three- and four-year-olds and the increase in inflation during the same time period. For the two-year-old rate the shortfall is 6 per cent.
YMCA’s research found that funding rates for three- and four-year-old places have risen by an average of 3.2 per cent, and 4.4 per cent for two-year-olds in 2023/24.
However, one third (34 per cent) of local authorities received a funding increase of just 2 per cent or less for three- and four-year-olds, and nearly half (48 per cent) received a rise of 2 per cent or less for two-year-olds.
Denise Hatton, chief executive of YMCA England and Wales, said, ‘Looking at the current picture of funding for early years settings against a backdrop of colossal inflation rates, ongoing cost of living and a full-blown recruitment crisis, it is little wonder that providers are buckling under the strain.’
Deprived areas
YMCA also said that Government policy penalises settings in the most deprived areas. Many YMCAs work in the most disadvantaged communities, with families unable to afford extra non-government funded hours, which in more affluent areas is often used to offset low funding rates.
The report said some YMCAs are having to change their business models or review their operations in the most deprived areas.
It said a particular focus on financial support is also needed for those settings operating in the most deprived areas of the country, with providers also citing poverty among nursery staff.
The charity’s research also shows that deprived settings often experience a higher level of additional need, with more children with special educational needs and disabilities, as well as children with protection plans, putting a further strain on resources.
One local YMCA provider said, ‘As a result of the woefully low funding settlement, we will be closing three of our nurseries in the next month. Regrettably, these are in the most deprived areas of our patch, where families need the support most, however having heavily subsidised these nurseries for a few years to hundreds of thousands of pounds, it is clear there is simply no sustainable business model when relying on government funding...even when this is the very people the government should be trying to level up.’
Recruitment crisis
Local YMCAs are finding it increasingly hard to find qualified staff to work in early years. Many of them said that the salaries they offer in their setting, as dictated by the funding rate, are not high enough to attract talent or retain them in the organisation. YMCA said it had reports of nursery workers often leaving for jobs in supermarkets because pay was higher.
For staff members who continue to work in early years, many are struggling with the impact of the cost-of-living crisis.
YMCA heard reports of staff members being unable to afford to buy the correct uniform, pay for lunches, or afford the petrol in their car to drive to work. Some YMCAs have adapated by offering staff members free meals with the children they work with, washing their uniforms, and offering advanced wage payments.
One YMCA provider said, ‘We are seeing in work poverty arising with staff and I'm not sure our parents can sustain an extra cost burden. The thing that amazed us is the government is intent on encouraging people and particularly parents back into the work place - this isn't going to happen whilst early years is the orphan of the funding regime - parents won't be able to afford any extra costs and settings can't take on any more costs without forced closures becoming common place.’
Hatton added, ‘We know that offering the right early years support gives children the greatest chance of reaching their potential than at any other stage of their life, and yet settings are essentially being forced into extinction due to drastic underfunding. The current model simply does not work. Government must invest in early years provision, before it is too late.’
The National Day Nurseries Association – whose members include some of the YMCA nurseries – said Government underfunding of early years places was 'at the heart of the recruitment crisis providers face' and was leading to closures like these being reported by YMCA.
Chief executive Purnima Tanuku said, 'This will only get worse as below inflation funding increases make the gap between costs and hourly rates even larger. Without urgent action in the spring budget, we risk seeing even more settings close and it will be parents and children who pay the price for the Government’s failure to invest in these crucial first five years.'
A Department for Education spokesperson said, 'We recognise that families and early years providers across the country are facing financial pressures. That’s why we have spent more than £20 billion over the past five years to support families with the cost of childcare.'
The DfE said it was investing an extra £20m into the early years entitlements for 2023-24, in response to national living wage increases, and that from 1 April 2023 until 31 March 2024, education settings, including early years settings, would also benefit from the Energy Bills Discount Scheme.
It said this meant that local authorities are set to receive average funding increases of 3.4 per cent for the three- and four-year-old free childcare entitlements and 4 per cent for the two-year-old entitlement, compared to their 2022-23 rates.
