Written evidence submitted by the Early Years Alliance (GRC0009)

Information on the impact of coronavirus on the childcare sector


Do you have a sense of whether a large number of childcare providers might struggle to reopen due to financial pressures as a result of coronavirus?


It’s important to note that the early years sector in England was facing significant financial challenges long before the outbreak of COVID-19.


Independent research from sector analysts Ceeda estimated that the total annual sector-wide shortfall for private and voluntary childcare providers at £824 million in 2020/21 (not taking into account the impact of the 2020 national living and minimum wage increases).


Statistics from Ofsted, released in response to a Parliamentary Question last year, also revealed that figures from Ofsted revealed that between April 2018 and March 2019, an average of more than 500 nurseries, pre-schools and childminders closed every month in England.




The outbreak of COVID-19, and subsequent order from the government for all childcare settings in England to close to all but critical worker families and vulnerable children has had a significant negative financial impact on early years providers, many of whom have seen their income fall substantially, while many costs – such as mortgages and rents and insurance – remain.


The support schemes offered by the government, while welcome, do not provide adequate support to ensure that the early years sector is able to remain sustainable through this crisis and beyond.


A survey of more than 3,000 pre-schools, nurseries and childminders carried out by the Alliance in April found that:





The main concerns for the early years sector are outlined below:


Early entitlement funding and the Job Retention Scheme

Early years guidance published by the DfE on 24 March stated:


"The Coronavirus Job Retention Scheme means that for employees who are not working but kept on payroll, the government will contribute 80% of each worker’s wages of up to £2,500, backdated to 1 March 2020. Settings can access this scheme while continuing to be paid the early entitlements funding via local authorities." 


This assurance was reiterated by children and families minister Vicky Ford in a letter to the early years sector published on the same day, which included the same statement, which added: “For many pre-schools and nurseries we know that staffing is their largest expense, so this will make a significant contribution to help manage their outgoings.”


In the weeks following, providers repeatedly sought confirmation that this guidance was accurate, and that the sector could benefit from both schemes, and the DfE repeatedly directed them back to the above guidance.


However, on 17 April, the Department for Education published new guidance (Coronavirus (COVID-19): financial support for education, early years and children’s social care) which stated that providers who receive ‘free entitlement’ funding would be limited as to the level of support they can receive via the Job Retention Scheme. Specifically it said:


“If it is difficult to distinguish whether staff are funded through free entitlement or private income for the purposes of meeting the first 3 conditions as listed above, then an early years provider can access the CJRS to cover up to the proportion of its paybill which could be considered to have been paid for from that provider’s private income.”


While the principle of this guidance – that providers should not be ‘double-funded’ for staff costs – Is completely reasonable, the government had four weeks to warn providers that it planned to place conditions on their access to these two schemes, and failed to do so – and yet, has seen fit to apply this guidance retrospectively.


The children and families minister claimed in an Education Select Committee meeting on 22 April that the guidance on this issue had been clear. However, the original DfE guidance has now been amended to read:


“The Coronavirus Job Retention Scheme means that for employees who are not working but kept on payroll, the government will contribute 80% of each worker’s wages of up to £2,500, backdated to 1 March 2020. Further guidance provides details on how early years providers with a mixture of public and private funding should access the scheme.”


75% of respondents to the Alliance’s survey stated that they had been under the understanding that they would be able to access full support from both schemes, and 71% had already furloughed staff.


As a result of this last-minute ‘clarification’, 47% say they may have to make staff redundant.





Early entitlement funding continuing as ‘normal’

On 17 March, the Department for Education announced that all providers receiving ‘free entitlement’ funding could continue to receive this funding for children no longer attend the setting.


Education secretary Gavin Williamson said at the time: “We will continue to pay for all free early years entitlements places, even in the event that settings are closed on the advice of Public Health England, or children are not able to attend due to coronavirus, and we will not be asking for funding back from local authorities.”


In addition, the Department said that it was its ‘expectation’ that “local authorities should follow its position and continue to pass on the government funding it receives for these entitlements to providers”.


However, on 22 April, the Department for Education updated early years guidance to state that it will be setting out “how local authorities can use their free entitlement funding differently, redistributing it – in exceptional cases and in a clearly focussed and targeted way – in order to secure childcare for the children of critical workers and for vulnerable children, where their usual arrangements are no longer possible.”


The revised DfE guidance goes on to state that:


“Any setting which sees their early entitlement funding reduced in order to fund childcare places elsewhere will be able to increase the proportion of their salary bill eligible for the Coronavirus Job Retention Scheme in line with the Department’s guidance on access to the scheme.”


It is our concern that this will lead numerous repeats of the situation currently taking place in Wiltshire, whereby the local authority is funding an ‘incentive scheme’ to encourage providers to stay open by reducing ‘free entitlement’ funding payments to providers who have close to 40% in June.


It is important to note that most providers who have closed have done so not because of a disregard for the needs of local key worker families and vulnerable children, but due to a lack of demand for places.


77% of those who responded to our survey who have temporarily closed said that this was because there was not enough demand for places for critical worker / vulnerable children.


In addition, while the government has stated that settings who have seen their funding reduced can get increased support via the Job Retention Scheme, this scheme is of course restricted to settings’ wage bills and capped at 80%, so this settings in this position will still find themselves losing out financially.


Business support grants

The Small Business Grant, which offers funding of £10,000 to businesses including childcare settings in receipt of relevant rate relief, is welcome support for those able to access it. However, because eligibility for this grant is based on receiving business rate relief, providers who by any other definition would be considered ‘small businesses’, but who aren’t registered for rate relief (because, for example, they are based in premises that have no rateable value, or because they rent their premises) are excluded.


In addition, while eligible businesses in the retail, hospitality and leisure sectors with a rateable value of between £15,000 and £51,000 are able to receive a £25,000 grant from government, such support does not extend to the childcare sector.


Childminder support

While the Self-employed Income Support Scheme offers some welcome support to self-employed childminders during this time, the decision to calculate this support based on profits rather than income means that for childminders, many of whom have made little profit over recent years, the financial support offered by the scheme will be minimal. Newly-employed childminders, who fall outside of the eligibility criteria, will receive no support at all from the Self- employed Income Support Scheme.



In addition, on average, funded children only account for a small of childminder places (for example, in 2019, only 2% of three-year-olds took up their funded entitlement with a childminder). This means that the government commitment to continue providing early entitlement funding to local authorities during the coronavirus outbreak offers very little financial support to many childminders across the country.



Do you think prices might be driven upwards if, for example, capacity is reduced in light of social distancing or closures for economic reasons?


The steps that childcare providers are required to take over the next few months in order to remain sustainable will be largely dependent on the level of government support made available to the sector.


As it stands, the government has yet to provide any clarification on what financial support will be available for providers during this transitional period, during which the take-up of places is expected to be much lower than normal, due to providers restricting places to ensure they are able to operate as safely as possible and/or due to a lack of demand from parents who may be reluctant to send their children back to their childcare provision.


The Alliance has repeatedly called on the government to commit to making transitional funding available to the early years sector during this period – this is likely to be critical to ensuring that providers are able to remain viable.


If such support isn’t made available, however, then it may well be the case that early years providers who have waived or substantially reduced parent fees may have to review their decision to do so. Additional, in the longer term, providers may have to explore options with regard to increasing fees and charges more generally.


How important is it for new parents to have the time to visit nurseries and for their children to take part in “settling in” days?


The key person relationship is more important than ever as the early years sector returns to ‘normal’ and settling-in (alongside resettling) is a key part of this.


The importance of settling-in cannot be underestimated. Young children form strong attachments with their main carers at home (normally, their parents). The parent is the child’s secure base from which the child develops confidence to begin to explore the world around them, i.e. meeting new people.  This confidence only grows and develops because the child knows that their secure base is not far away.


Over time as the child gets older and develops socially and emotionally, their confidence develops further, because their secure base is either within the proximity, or the child learns that they will return. When a baby or young child is cared for by somebody else, the proximity of the parent is removed, this can be extremely distressing for a child in any circumstance. 


This is what is referred to as separation anxiety and it is a perfectly normal and healthy reaction. However, prolonged separation from a child’s main carer can cause them a good deal of stress that is not at all good for their development. It also places stress on the attachment relationship with their main carer. This stress does not always show itself as the child crying when they are separated from their parent but can manifest in other behaviour issues that are not always immediately apparent.  


This is why the key person approach during settling-in is paramount. The child has time to form an attachment with another carer (the key person). The key person then becomes their secure base when they are at the setting, but this does not in any way compromise the bond with their main carer as children can form multiple attachments. 


For some children who have an insecure attachment with their main carer, the settling-in process is even more important – without it the child can become extremely distressed, withdrawn and display challenging behaviour. Vulnerable children and children with SEND must have their right to a fair and comprehensive settling in process protected at all costs. 


It is for these reasons that the settling-in process cannot be rushed, must not be dismissed and must be carefully planned, reviewed and agreed with parents/carers. 


Given current social distancing rules, settling-in will be a challenge – however, this does not mean it should be dismissed all together. Adapted approaches could include initially using virtual home visits and having regular contact between a child’s designated key person and the parents. 


In the longer term, it may be better for some children to have their start date deferred so that they can be settled properly. For the rest, settings should consider staggering their start dates and settling-in visits so that the key person can give them their full attention, and also adhere to the setting’s own safety guidelines during this period.



What do you think about the government’s guidance for the reopening of nurseries?

It is positive that the current guidance gives providers the opportunity to use their professional judgement and does not dictate a specific or attempt to enforce a single fixed approach to operating safely during the coronavirus outbreak.


That said, many providers are likely to rely heavily on guidance produced by the government for support and so it is important that the information produced covers all the necessary issues. As it stands (as of Monday 18 May), there are a number of key issues that have yet to be address by government – these include, but are not limited to: guidance on children attending more than one settings and if this should still continue post 1 June; similarly, staff working at more than one setting; the ability of providers (largely childminders and before- and after-school clubs) to pick up and drop off children from other settings; and how to keep children in consistent groups or ‘bubbles’ when different children attend on different days.


In addition, as it stands, the guidance is more applicable for larger group settings, and is not necessarily reflective of smaller settings (e.g. settings who operate in a single-room rented space) or childminders (for example, the guidance suggests that providers should remove “soft furnishings” which isn’t likely to be possible for providers operating from their own home).


The guidance also doesn’t differentiate between the different ages of children attending early years settings or acknowledge that some adult-to-adult contact is going to be unavoidable (for example, the handing over of young children who cannot walk).


There is also a lack of detail around the science underpinning the guidance. While the scientific evidence (as outlined in the Department for Education document Overview of scientific advice and information on coronavirus (COVID-19)) suggests that children are less likely to be susceptible to coronavirus, and that those who do contract the virus are less likely to be severely ill than adults, the guidance states that “There is no evidence to suggest that children transmit the virus any more than adults. Some studies suggest younger children may transmit less, but this evidence is mixed and provides a low degree of confidence at best.”


As a result, some providers remain concerned that opening up their provision could result in an increase of the transmission of the virus to adults, via children. It would be useful, therefore, if government could explicitly explain in its guidance why it is not concerned that this will be the case.


May 2020