It is a pleasure to serve under your chairmanship, Mr Gapes. I congratulate my hon. Friend the Member for Bolton West (Chris Green) on introducing this morning’s important debate.
My interest in the sector arose as a consequence of an invitation to visit Pathfinders Day Nursery in my constituency, which is based at Crescent School in Rugby, to discuss the challenges faced by the sector with Alison Dyke, the owner of the nursery and the Warwickshire chair of the National Day Nurseries Association. My interest was aroused partly because I know about the importance of providing 30 hours of quality childcare and nursery education to our youngsters to give them a great start in life and to parents, particularly because it enables those parents who want to get back into the workforce to do so.
My interest was also aroused as a businessman. I was a businessman for 25 years, and some of the issues that were drawn to my attention related to the sustainability and viability of a fast-growing small business sector. I wanted to understand the business implications. A great deal of what I learned at my meeting related to funding, which earlier speakers mentioned.
As a fellow Warwickshire MP, the Minister will be aware that there is variation in the amount of funding that different authorities receive. The national headline funding rate is £4.94 per hour, but as the county authority, Warwickshire receives £4.30 an hour. I had assumed
that that meant £4.30 an hour paid to the childcare provider. That, of course, is not the case, because local authorities are entitled to take a deduction. In Warwickshire, that deduction amounts to 5%, which is used by the local authority to fund the early years special educational needs team, to provide some business support and to contribute to the early years provider. That results in a rate of £3.96 being paid to childcare providers in Warwickshire, which Alison tells me is really not enough to provide high-quality childcare or anything more than a bare bones service.
As the Minister will be aware, there is research to support that contention: Ceeda has found that the hourly cost to a provider of each place for a three or four-year-old is £5.08, whereas the average Government funding is £4.34 an hour and Warwickshire pays its providers £3.96 per hour. Ceeda calculates that that shortfall of about £1 an hour adds up to an annual funding shortfall of £63 million for the 30 hours offer for three and four-year-olds nationwide.
The National Day Nurseries Association has found that since 2017, when the 30 hours policy was introduced, closures have increased by 47%, largely as a consequence of financial pressures. It has also found that 19% of nurseries expect to make a loss, while only 43% anticipate a profit or surplus. I have already mentioned the difference between the costs of delivering the service and of funding it. Survey respondents highlighted administration challenges in the sector: 85% said that there is now additional administration to do, while 58% said that managing the complexity of the system is among the challenges they face.
Mrs Dyke is delighted that some parents are now able to access funding and provide a nursery education for their children in a way that they could not before. She and Pathfinders are very proud of the high-quality environment that they offer to children between the ages of six months and five years. They allocate 28 places for three and four-year-olds who receive the extended 30 hours’ funding. Her assessment is that children who attend nursery make extremely good progress in their development and gain an enormous advantage, but she is concerned about how to fund it—I understand that the rate has now been frozen until 2020, despite the increasing costs of labour, staff training and service provision. She is also concerned that for children on the 30-hour funded places, providers are being required to provide a no-frills service, which does not equate to quality childcare.
My hon. Friend the Member for Bolton West referred to the fact that many providers are asking parents to pay for additional services; Mrs Dyke highlights snacks and other food, as well as other consumables and specialist sessions.