The research on spending on the early years and childcare reveals there will be a ‘significant drop’ in the number of disadvantaged two-year-olds that will be eligible for the funded entitlement which is being expanded from April to two-year-olds and to all children from the age of nine months by the end of 2025.
According to the analysis, the poorest third of families will see almost no direct benefit from the new entitlement.
The Early Years Alliance questioned why it is seen as acceptable in the early years that ‘children’s fundamental access to education is determined by their parents’ earnings’
The research also highlights the importance of getting the funding rates right, revealing:
- Two-year-old funding has risen the most, increasing by a third, from an average of £6 an hour to £7.95. Even after providers’ rising costs are taken into account, it means providers are around £1 an hour better off in real terms than in the previous funding peak- and ‘well above’ current market prices for childcare.
- Funding for three and four-year-olds has risen, but not by the same amount as two-year-old funding. It states the 6 per cent rise comes on the back of a 17 per cent fall in core funding in the decade up to 2022-23. This represents a shortfall of 11 per cent in funding for 2024-25 when compared to the rate in 2012-13.
‘Early years spending update: Budget reforms and beyond’ also highlights how the share of disadvantaged two-year-olds eligible for a funded childcare place has fallen from nearly 40 per cent in 2015 to just over a quarter in 2022-23.
It was carried out by the IFS and funded by the Nuffield Foundation.
Elaine Drayton, IFS research economist and an author of the report, said, ‘Childcare providers have seen significant increases in their costs over the last decade, but funding rates have failed to keep pace. Core hourly funding for three- and four-year-olds fell by 17 per cent in the decade leading up to 2022–23, once rising costs of provision are taken into account.
‘As the free entitlement expands, the Government will be setting the price for more and more of formal pre-school childcare hours – and the risks to getting the funding rates wrong will get bigger and bigger.’
The National Day Nurseries Association said the report backs up what they have been saying for years – that funding rates are not anywhere near enough for childcare providers to deliver high-quality places.’