Nurseries risk closure over stealth cuts to their funding

HUNDREDS of nurseries are at risk of closing as stealth cuts to their funding mean they will be unable to meet requirements for free childcare, the Institute for Fiscal Studies (IFS) has suggested.

Taxpayer funding for the early years industry will be 8pc smaller in real terms by 2024-25, the IFS said, with the Jeremy Hunt, the Chancellor, not expected to pledge any extra help in next week’s Autumn Statement.

Liz Bayram, chief executive of the Professional Association for Childcare and Early Years, said the stealth reductions would add “more pressure on already very underfunded services”.

She said: “It’s difficult to say what each provider may react to. But the common themes we hear are, ‘We’ll just keep the costs down ourselves as best we can’; ‘We’re going to have to shut’.”

The budget cuts – driven by rises in support failing to keep pace with a surge in inflation – come on top of an already difficult period for childcare.

The total number of nurseries fell by 4,000 in the year to April, the largest drop in six years, and is down by 22pc since 2015. There is no cap on how much providers can charge parents, with weekly rates as high as £180 for 25 hours in London. However, state funds pay for 15 hours of early education and childcare for all three and four-yearolds and some two-year-olds, and 30 hours for three and four-year-old children of working parents.

If the funds available for this do not go up, it means the money on offer does not cover nurseries’ rising costs.

The research, from the IFS, shows that while childcarers were already facing costs outpacing inflation, they will see even faster increases in coming years. Many employees in the sector are on, or near, minimum wage, meaning rises in the National Living Wage have added to higher expenses.

“When this budget was set in 2021, the Government had a pretty strong case to say that it was more or less doing enough to keep things on an even keel in the sector. Inflation has turned out so much higher that it now looks dramatically different,” Christine Farquharson, from the IFS, said.

Last year’s Spending Review provided an uplift to the free entitlement budget worth £500m over three years. Based on inflation forecasts at the time, this would mean funding would be 2pc lower by 2024-2025, according to the research. Spiralling inflation now means this figure is vastly understated.

Childcare costs have become an increasingly political topic, with 12,000 parents marching in protest in October.