New WBG analysis finds £5bn a year funding gap in Government’s childcare policy

• Based on revised funding rates released by the Department for Education, the Women’s Budget Group calculated the gap between the £4.2bn a year allocated to the Government’s expanded childcare offer once fully rolled out in 2025/26 and the estimated cost of delivering the hours for providers.
• This is based on forecast costs for 2020/21 published by the Department for Education (DfE) in 2015, uprated by inflation and wage costs and using DfE forecast take up rates. We estimate the funding gap to be £5bn a year from 2025/26.

Ignacia Pinto, Senior Research and Policy Officer at the Women’s Budget Group said,

“When the Chancellor announced the expansion of publicly funded early education and childcare last year, we welcomed his recognition of the importance childcare and its links to a well-functioning economy.

“We warned however that failing to fund the expansion properly would put pressure on the sector and exacerbate staff shortages. Our work with the Early Education and Childcare Coalition and Leeds University has since evidenced the need for up to 50,000 additional early years professionals this year and again in 2025 to maintain existing provision and meet the demand created by the expanded entitlement.

“In two weeks’ time, the Chancellor has the opportunity to make good on promises made to parents a year ago and meet the additional £5bn a year cost of delivering hours desperately needed by parents up and down the country.

“Otherwise, come April with the roll out of 30 hours a week to three and four-year-olds, there will be yet more stories of workers leaving the sector, parents unable to secure a place, and nurseries shutting their doors because they can’t make the maths work.”

Sarah Ronan, Director of the Early Education and Childcare Coalition said,

“Chronic underfunding of early education and childcare has placed the sector in a vulnerable position with high fees and provider closures now a hallmark of the English system. It is incredulous, and indeed dangerous, for the Government to underfund the sector to the tune of £5bn when history tells us that this is likely to shrink provision rather than grow it at a time of unprecedented demand.

“The Government must use the upcoming Spring Budget to stabilise the sector with funding levels that match the true cost of delivery. In particular, the rate for three- and four-year-olds is critically low. Research out today from coalition member Early Years Alliance found that 76% of providers are receiving a rate that is less than the cost of delivering these new hours, with a quarter of providers saying its likely they’ll close in the next 12 months due to financial pressures.

“Continuing to knowingly underfund these entitlements is a political choice to abandon the sector. It will be struggling families who pay the price for this, with parents pushed out of work or into debt while children miss out on vital early education because there are no places available in their area. The Government still has time to salvage its flagship policy, and keep its promise to parents, but it won’t happen until they get real about the cost of delivering these entitlements.”

Notes to Editors

• Breakdown of calculation: https://wbg.org.uk/analysis/updated-analysis-early-education-and-childcare/
• WBG response to childcare expansion in the Spring Budget 2023: https://wbg.org.uk/media/press-releases/wbg-finds-government-funding-for-early-education-and-childcare-falls-short-by-5-2bn/
• Research with Early Education and Childcare Coalition and Leeds University: https://www.earlyeducationchildcare.org/early-years-workforce-report

About the Women’s Budget Group

The UK Women’s Budget Group (WBG) is the UK’s leading feminist economics think tank, providing evidence and analysis on women’s economic position and proposing policy alternatives for a gender-equal economy. We act as a link between academia, the women’s voluntary sector and progressive economic think tanks.

About the Early Education and Childcare Coalition

The Early Education and Childcare Coalition is an independent group that unites the voices of parents, children, providers, those working in the sector and the wider business community. Our vision is of an early education and childcare sector that provides high-quality, affordable provision for all families in all communities, and with it, good pay, conditions, and funding for those providing that education and care. We use our collective voice and research to build public and political support for early education and childcare.