CEY0885

Written evidence submitted by The Day Nursery Peterborough Ltd

l am an owner of a Children’s Day Nursery in Peterborough; we are a triple-rated Ofsted outstanding nursery. I am a member of the NDNA and Early Years Alliance. I have had my business for 18 years and have seen first-hand the changes to the sector. I am a very passionate nursery owner who is desperate to help save the early years sector

The Government recently announced another 10 million for maintained nurseries, the national funding formula was brought in (April 2017) so that all childcare providers received the same money for providing the same service, and yet maintained nurseries have constantly been paid additional money every year. There are 24,000 private nurseries compared to 2,400 maintained nurseries, so the majority of children attend private nurseries.

The 24,000 private nursery settings need protection as much as the 2,400 maintained nurseries, if the continued rate of closure continues in private nurseries, even more, childcare places will be lost. As a result of mass early years settings closing, parents will find it even more difficult to secure a childcare place for their children, so parents will be unable to work, which will increase Government out-of-work benefit payments and also increase the number of economically inactive workers in UK, which is already at record levels. This, in turn, is bad for the country’s economy, at a time when the country needs to increase productivity and growth in order to reduce our current high levels of inflation.

There are endless reports showing the real benefit to children by attending early year provision and how this affects their future: -

“90% of a brain develops by the age of 5
Early Years Education has proved to have a positive impact on children’s long-term future and their outcomes in adulthood

The new government proposed changes are:

giving more money for maintained nurseries
allowing childminders to have more children by increasing their ratios
Childminders reducing their need to be using the early year curriculum
Changing ratios in line with Scotland - age 3-4 children 1:10 (currently 1:8) but this change would only be for settings where the children are in for less than 4 hours per day, this will not help private nurseries at all.

All of which are not needed by the sector. However, there are changes that could be made literally overnight which will retain our wonderful Early Years sector and provide education and care for the future generation.

Terms of Reference – Early Years Provision

The current government proposal to relax ratios for two-year-olds in nursery and preschool settings

Quite simply, changing the staff ratios will not make any difference to settings, as most settings will ignore them and continue with the current ratios, therefore implementing this ratio change will make absolutely no cost savings for parents. This idea should be scrapped, as there are much better things that could be implemented instead, which will actually make a difference to the Early Years Sector.

The Early Year’s sector and parents are also both concerned in regards to the proposed ratio changes and the safety implications this will have on children and the additional pressures on staff, as highlighted in the Westminster Hall debate e-petition 615623 – relating to staff-child ratios in early years childcare on 14/11/22.

Terms of Reference – Childcare Entitlements

How affordable and easy to understand is the current provision of childcare in England and what steps, if any, could be taken to improve it, especially in relation to families living within the most deprived areas in England?
Are the current entitlements providing parents/carers with sufficient childcare, and to what extent are childcare costs affecting parents/carers from returning to work full-time?
Whether the current Tax-Free Childcare scheme and support for childcare from the benefits and tax credit system, is working effectively or whether these subsidies could be better used within other childcare subsidies.

The whole funding system needs a complete overhaul. At present 3/4-year-old funding is paid for 15 or 30 hours per week for 38 weeks – this does not really help working parents who need childcare throughout the whole year. All year-round early-year settings spread the funding equally throughout the year so they can get 11 hours (15 hours funded) or 22 hours (30 hours funded) per week funding every week. I like the tax-free childcare system, and my staff always encourage people to use it, however, this system is still underused, and could be utilised so much better and also provide the Government with a massive amount of cost savings every year.

Suggestions –

Allow all year-round working parents the option of getting 15/30 hours funding for 51 or 52 weeks a year, this will help working families’ monthly childcare fees
Pay the funding amount directly into the parent’s Government gateway account, which can only be used to pay for childcare instead of paying it to the local authority
Stop the local authority’s involvement in processing the funding payments, there is no need for this, this overcomplicates it and it is an expensive way of administering it. At present all local authorities’ top slice 5% off all the total Government funding issued to every council for the 2/3- & 4-year-old funding to provide the admin processing the funding payments.

If this was paid directly to the parents, all of the money could be paid directly to the settings via a tax-free childcare account, therefore increasing the hourly funding rate, making settings that offer funded hours, more financially viable.

The Tax-free childcare system already uses the Government gateway account, so it already knows if parents are working and their salaries due to the HMRC real-time reporting requirements for companies.
If the money is paid via a tax-free childcare system, this will reduce fraudulent claims by parents to different councils and different settings as they will only be paid once per child.
Allow all settings to charge/set their own prices for all funded places, which will cover their costs in actually providing the service, so they do not continue to make a loss for every hour of childcare that they actually provide - which is the case at present. The parents pay settings via their tax-free childcare account. This way the parents can choose where to “spend” their tax-free childcare funding and the setting can charge a price at which it can remain sustainable and viable (like the old childcare voucher system)
Tax-free childcare payments can be transferred to the childcare setting by the parents and used in any way which suits parents, i.e.,

more can be paid to settings by the parents when the child first starts nursery to help with any deposits
to help parents when they start work as they have to wait until the end of the month to be paid
they can also budget for their family, so if they know they have large bills coming up like car service/tax, etc, and things like Christmas, they can use more of the tax-free childcare money during these times to help them manage financially during the month, flexibility for parents is very important

Terms of Reference – Early Years Provision

What challenges do early years providers face in terms of workforce, including recruiting and retaining qualified staff, and the barriers faced by individuals joining the profession? To what extent has the Covid-19 pandemic exacerbated workforce challenges?

There are changes that can be made to help the sector literally overnight without it costing any money at all to the Government. There is a national shortage of early years qualified staff, which is having a massive effect on early years settings, unfortunately, settings have been forced to limit the number of places and/or even permanently close due to the lack of qualified staff. New Ofsted sector statistics show that 5,400 early years providers have closed since last year.

On a daily basis settings are now closing and the recent announcement of an increase in the minimum wage in April 2023 to £10.40, will mean employers have to pay an increase of £1,913.60 per year (on top of the increase to national insurance and pension employer contribution increase payments) for a full-time member of staff. Therefore, the funding hourly rate paid to settings needs to reflect the increase that settings will be forced to pay, otherwise, it will become financially unviable, for them to be able to offer the funding hours, and even more, settings will close.

At present is it difficult in many areas of the country for parents to find early years provision and this will get worse with the number of settings closings. The economy needs early years provision in order for parents to work and it is very important that young children receive early years provision

The Government could make three changes at ZERO cost to the Government, which will massively support the viability of the early year’s sector

Please drop the maths and English GCSE/Functional skills requirement immediately – there are thousands of people out there who have passed the level 3 course, but due to them not having the Maths and English requirement, their qualifications are virtually useless, as these people are classed as unqualified by Ofsted/DFE. These people are wanting to work within the sector and the sector is literally crying out for qualified staff. In my 18 years, I have never seen a recruitment crisis this bad. I read on one nursery forum that one national training provider alone, has 500 people who are now Level 3 qualified in childcare and ready to enter the early years sector, but as they do not hold the required maths and English qualifications, they are not classed as “qualified” to work in the early year’s sector. This will be the same case throughout the country for different training providers, this is why they need to drop the Maths and English requirement urgently. I cannot stress enough how much, by just doing this one thing would massively help the recruitment for early years sector.

Most secondary schools only do the health and social care course and tell students that by doing this course they can go into care or early years; this is untrue as the health and social care course is not classed as full and relevant by Ofsted/DFE and therefore classed as unqualified in early years. As part of the health and social care courses they have to go on placements in early years settings, so why is this qualification not full and relevant for early years? There are literally thousands of people who hold Health and social care qualifications desperate to work within the early years but the Ofsted/DFE rules don’t recognise their qualifications in the early years. We all desperately need to recruit. Please allow health and social care qualifications to be recognised by Ofsted/DFE as full and relevant within early years and equivalent to the Level 2 childcare qualification.

The set space requirements per child could be changed sensibly and safely to allow settings to take in more children within the current same staff/child ratio

Terms of Reference – Early Years Provision

The affordability of early years provision and the reasons behind rising costs

The reasons for the increase in childcare costs are simply down to the costs to the business to actually provide the service, we are in a cost-of-living crisis when everything is more expensive, gas and electricity have gone up 300%, minimum wage is increasing again, which in turn increases employer PAYE, national insurance contributions, and pensions. Consumables have increased and food has massively increased. Over 70% of all nursery expenses alone are for staff costs, so any increase in minimum wage affects the whole staff pay structure and childcare fees have to be increased to offset the increase in the additional staff costs. The funding hourly rate paid to settings does not cover the actual costs to the settings for it to actually provide the funding hours, so every setting is losing money for every hour of funding that they offer.

The Government is also wasting millions of pounds by implementing “the expert and mentoring program” the majority of settings don’t need this “service” and any settings that would actually use this service would already be receiving local authority early years support, so it’s just duplicating the same service to a small majority of settings at a massive amount of money. This money would be better off used to increase the hourly funding rate for all settings, after all, there is no point in this program if there are no settings open to offer the early years provision to children.

Vat – it is unfair that private nurseries are unable to claim back vat payments that have been paid for resources and other items. Maintained nurseries & private schools are able to claim vat back. This money that we have to pay for our resources etc could be reinvested in the business which will help with company cashflow and the sustainability of the companies/sector
Corporation Tax – again not paid by maintained nurseries or private schools, this money could be reinvested in the company to help with sustainability and help cashflow
Business rates – Wales and Scotland nurseries don’t pay business rates, so how is it fair that English nurseries have to pay it? Mine for example is £17,000 per year, money which could be invested in the business and or enable me to take on another member of staff. Maintained nursery settings don’t pay business rates. Nursery setting’s business rates are high due to the set space requirements by Ofsted/DFE per child according to their age, which means settings have to have larger premises = large business rates
Please stop paying the Maintained nurseries additional payments – Maintained nursery supplement – we have one maintained nursery in Peterborough that got an extra £224,406 this year alone on top of the funding rate that all settings received per child. If this additional money was split between all of the settings it would help with all the setting’s sustainability. They already don’t pay vat, business rates, or council tax and also get charity money, none of which is available for private nursery settings. We all do exactly the same job and should be paid fairly, by receiving the same money for doing the same job, which is the reason the funding formula was brought in in April 2017.

Summary

Urgent changes need to be brought in to save the early years sector.

It is unfair for the Government to continue to insist that settings offer “free places” when settings make a loss doing this. No other sectors are forced by Government to provide a service at a loss-making price

If the Government insists on keeping funded hours “free” for parents, then the funding hourly rate paid to settings needs to increase in line with inflation every year,

If the funding hourly rate cannot be increased significantly, then allow settings to charge what it costs to actually provide the service and allow parents to use “their funding in the form of a voucher” towards the cost and parents pay any difference, so the settings remain financially viable, sustainable and OPEN.

By dropping the maths and English requirements will allow tens of thousands of staff back into the Early Years sector

Please listen to the sector suggestions, we know the problems first hand and know what changes need to be made to protect the sector. There is no point in expensive Government reviews undertaken by people who do not work in the sector and who do not understand and appreciate the ongoing issues within the sector.

The early year’s sector really is at a crisis point, 5400 settings have closed within the last year alone, this can not continue, changes have to be made urgently.

January 2023