Steve Alexander, chief executive of the Pre-school Learning Alliance, which has 30 neighbourhood nurseries - 26 of which are now designated children's centres - said that the ending of the three-year subsidy in April 2007 presents 'significant challenges'.
He said, 'The Government's commitment to reaching disadvantaged children and families is without question. However, three years ago the occupancy targets we were given were wholly unrealistic and some settings were located without a full needs assessment. As a consequence we have struggled - along with the rest of the sector - to break even. We've increased attendance rates but we are delivering at a deficit and when the subsidy is withdrawn we stand to lose more than 1.5m.'
He confirmed the Alliance's commitment to maintaining services in the most disadvantaged communities and said that 'many lessons had been learned by all involved' since the introduction of the NNI. But he added, 'We would continue to struggle without the subsidy being provided.'
At a recent meeting with the DfES, the Alliance highlighted the challenges to be addressed to ensure the long-term viability of neighbourhood nurseries and said that it was 'confident a resolution could be reached'.
'We've presented strong evidence to the Government detailing the usage of nurseries, deployment of staffing, occupancy levels and insights into how long it takes to make a nursery viable.
'The DfES has not yet agreed to more central funding, despite the Government-funded PricewaterhouseCoopers report in September highlighting the need for ongoing central funding for some services for the foreseeable future. But they have listened to concerns and want to help.'
Other providers facing similar problems include nursery group Wind in the Willows, which recently sold two of its 17 neighbourhood nurseries and has two more on the market. Director Tom Hobbs said this is because 'Government policy is killing neighbourhood nurseries'.
'The strategy was originally a good one. But in all fairness to local authorities, who are they going to protect? Their own schools and children's centres; not neighbourhood nurseries or private sector nurseries. The funding is orientated in a way that they have no choice. You can't blame local authorities for following direction from Whitehall.'
Earlier this year, Buffer Bear, which operates 39 nurseries, closed six neighbourhood nurseries when low occupancy levels and the threat from children's centres meant the group could no longer afford to keep them open (News, 11 May). It retains 20 neighbourhood nurseries.
Children's charity 4Children has launched a new sustainability support programme for childcare providers and local authorities (see 'In brief', page 8) to cope with the issues.
Chief executive Anne Longfield said, 'We're confident children's centres can be sustainable. But we acknowledge that there's a mismatch in timing because children's centres need support now and some local authorities don't have the strategic leadership in place to be able to sufficiently support them.'
Purnima Tanuku, chief executive of NDNA, said local authorities need to 'effectively engage with existing provision.'
Liz Railton, programme director for the Together for Children programme (see below), said, 'We'll be looking at where we can improve sustainability and giving advice to the Government.'