legal ease

15th January 2016 at 00:00
Totting up nursery costs

One of the Conservative Party’s election pledges was to extend the free early education entitlement for 3- and 4-year-olds from 15 to 30 hours per week for working parents. In the recent Autumn Statement, George Osborne reiterated his commitment to this, although he did announce a couple of limitations. The free entitlement will be available for those who earn up to a maximum of £100,000 a year and who work at least 16 hours a week (if the parents are a couple, then both must work at least 16 hours a week).

The Childcare Bill 2015 has not yet received royal assent, but it is anticipated that this increase will be rolled out from September 2016 and be fully implemented by September 2017. If your school offers early years provision through a nursery or pre-school, then there is much to consider about the changes.

At first blush, this may seem like a positive opportunity for schools. But with the potential increase in demand for places, it is likely that these proposals will represent a real challenge to a financially sustainable operation. The government has stated that it is committed to increasing the average childcare funding rate paid to providers, but, to date, no figures have been published.

Many early years providers find that the government’s funding rate often does not meet the running costs.

This challenge is likely to increase with the introduction of the National Living Wage and increased pension costs. The extension in the free early education entitlement in 2016-17 is likely to further compound this issue unless there is also a significant increase in the funding rate. And there are limits to providers’ abilities to supplement their fees. The Department for Education’s statutory guidance on early education and childcare precludes providers from setting restrictions on parents to guarantee a minimum number of hours, charging top-up fees or charging for certain extras.

As a result, a significant number of nurseries and pre-preps are taking time to consider the advantages and disadvantages of continuing to participate in the scheme.

Many schools consider a nursery offering to be a “loss leader” to raise the school’s profile in the local community, to widen the potential net of families, and to encourage parents to choose the school for later years’ education. Schools should assess retention rates, and whether nursery provision is achieving this aim.

We would encourage all schools to review staff costs and budget for the early years provision and undertake financial modelling to assess the likely impact of the extension to the free early education scheme.

An increasing number of schools and nurseries have taken the decision to stop participating in the scheme. If this is a likely outcome, then it is essential that necessary notice is given and that the communication strategy is managed effectively to minimise the impact on children, parents and staff.

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