Providers across the country will struggle to meet increased demand for funded early years places under the upcoming entitlement expansion as a result of staffing and space shortages, a new survey by leading membership organisation the Early Years Alliance has found.  

In the March 2023 Budget, the government announced plans to expand the funded entitlement Offer to children from eligible working families aged two-year-olds from April 2024 and to eligible children aged nine months onwards from September 2024. 

However, with under six weeks until the first phase of the rollout, an Alliance survey of 1,196 early years providers shows that unaddressed capacity and funding challenges mean than most nurseries, pre-schools and childminders Planning to offer the expansion will be unable to increase places to meet demand, with a notable proportion considering opting out of offering the extended funded hours completely. 

CAPACITY CHALLENGES 

More than half (55%) of all survey respondents are already full with a waiting list, while a further 13% are full with no waiting list. Just 3% of respondents said they had a large number of spaces available. 

New two-year-old offer 

Overall, of the 95% of nurseries, pre-schools and childminders currently offering early years places to non-funded two-year-olds, just over two-thirds (69%) are planning to offer these places via the government’s early entitlement offer when the scheme is introduced, with nearly a third either remaining undecided (15%), planning to offer a limited number of funded places and charge privately for the rest (13%), or opt out of the funded offer completely (3%). 

Of those providers planning to offer all or some places for two-year-olds under the government scheme, 86% said they are expecting it to lead to an increase in demand – however, of these, seven in 10 (71%) aren’t planning to increase places. Just over one in 10 (11%) are planning to delay the rollout of funded two-year-old places to a later date, with the majority of those (63%) opting for September 2024. 

Funding rate confirmation: Providers also highlighted that delays in receiving confirmation of their funding rates for April have made it increasingly difficult for them to prepare for the rollout of the new two-year-old offer.  

Earlier this month, the government announced plans to introduce new regulations which would require local authorities to confirm funding rates to frontline providers eight weeks after local authority rates have been confirmed. However, at the time of the survey, just over two in five (41%) settings currently offering places to two-year-olds and planning to continue to do so under the government scheme had received confirmation of what their funding rate will be. 

Nine-month-old offer 

Of those providers (59% of all respondents) currently offering places to under-twos, two-thirds (67%) are planning to offer these places via the government’s early entitlement offer when the scheme is introduced, with 4% planning to charge for places privately, 12% set to offer a limited number of funded places and charge privately for the rest, and 17% undecided. 

Of those planning to offer places for under-twos when the scheme expands from September 2024, 84% are expecting an increase in demand, with around half (53%) expecting a significant increase. However, of these, three-quarters (76%) are not planning to increase places. 

Of the remaining providers (41% of all respondents) who do not currently offer places to under-twos, 93% are planning to opt out of delivering the entitlement scheme when the offer is extended to this age group, with a further 4% still unsure. 

FINANCIAL PRESSURES 

The survey painted a stark picture of the financial pressure on early years providers. Of the 41% of respondents who had received confirmation of their two-year-old funding rate at the time of the survey, over a third (35%) said that their new rate would still be less than the cost of delivery places, rising to 60% for nurseries and pre-schools. 

Of the 46% of nurseries, pre-schools and childminders who had received confirmation of their three- and four-year-old rate at the time of the survey, 76% said it would be less than the cost of delivery, with more than a third (38%) expecting it to be ‘significantly less’. 

In addition, 86% of nurseries and pre-schools warned that the upcoming increase in the national living wage would have a ‘somewhat negative’ (28%) or ‘very negative’ (58%) impact on their setting finances. Of those, eight in 10 (81%) plan to increase fees to mitigate this, while 52% intend to introduce or increase optional charges (for example: for trips, meals and snacks). 

As a result of these sustained pressures, a quarter (25%) of all respondents said that it was likely or very likely that they will start limiting the number of early entitlement places they offer by September 2025, while around a fifth (19%) said it is likely or very likely that their setting would have opted out of at least some of early entitlement offers entirely by this date. 

Around a quarter (24%) of respondents said that it is likely or very likely that their setting will close over the next 12 months. 

RECOMMENDATIONS 

Ahead of next month’s Budget, the Alliance is calling on the government to commit to: 

• commit to a further increase in early years investment to ensure that providers are able to meet rising cost pressures while keeping parent fees as low as possible 
• establish a mechanism to ensure that funding rates continue to increase in line with provider costs going forward 
• develop a clear workforce retention strategy to stem the flow of existing early educators out of the sector  

Commenting Neil Leitch, CEO of the Early Years Alliance, said: 

“These survey findings should send alarm bells ringing throughout government. With just weeks to go until the rollout of the extended offer, it is clear that despite the government’s continued promises, not all eligible families will be able to access the early years places they need.  

“Years of sustained underfunding combined with a worsening staffing crisis and limitations on space means that many providers simply won’t be able to increase places to meet the surge in demand for the new offers, while others will have no choice but to limit the number of places they deliver under the expansion or opt out of the entitlements completely.  

“And of course, with so many settings still struggling with the impact of inadequate funding rates in the face of sharp cost rises, even those parents who are able to secure a funded space are still likely to face sharp increases in fees and charges for anything outside of their entitlement hours.  

“We have long warned that no expansion of the early entitlement offers would be workable in practice unless pre-existing challenges were properly addressed. And while we recognise that ministers have taken some steps to try and address the sector’s concerns – including the recent recruitment campaign – there is still so much more to do to address the wider systemic issues with the current system. 

“If the extended entitlement policy is going to have any chance of success, the government needs to urgently address the financial and capacity challenges facing providers. This means increased investment and the development of a clear strategy for supporting not just recruitment, but also the retention of the existing early years workforce. Simply put, this is the only way to ensure that providers will be in a position to deliver the affordable, accessible, sustainable quality early education places that families need.” 

“So as we approach the 2024 Budget, it is absolutely vital that the government acknowledges and recognises the scale of the crisis we are in and takes definitive action to turn things around. Continuing to deny there is a problem is simply not an option.”