Funded Childcare Hours in England: What It Means For Providers
In this article, we explore how the increased entitlement of childcare hours and funding for this from the March 2023 Conservative budget will impact childcare providers into 2024 and 2025.
Increase in Funded Hours
Previously, most working parents were entitled to 30 free hours for children 3 to 4 years old across the 38 weeks of the school year.¹ This scheme was expanded in the March 2023 Budget so working parents of all children under 4 years and over 9 months would be entitled to 30 hours of government-funded childcare.² Due to the scale of the new scheme, new government-funded hours will be rolled out throughout 2024 and 2025:
From April 2024: 15 hours of free childcare per week for 2-year-olds.
From September 2024: 15 hours of free childcare per week for children between 9 months and 3 years old.
From September 2025: 30 hours per week of free childcare for children between 9 months and 3 years old.³
How do funded hour increases impact childcare providers?
While the 2023 budget announcement was good news for parents, many also recognised the massive impact it will have on the childcare sector. The government was careful to call out how it aimed to support nurseries, childminders, and other childcare providers by increasing the hourly rate paid. Funding increased to £204 million in September 2023 and should increase to £288 million in 2024/2025. This means, on average, the rate paid to local authorities for 2-year-olds would increase from £6 to £8 per hour and from £5.29 to £5.50 for 3 to 4-year-olds.⁴
But does this do enough to help deliver these 30-hour entitlements that many parents will take up? For many childcare providers, staffing remains the core issue. While increased funding aims to incentivise people to enter the childcare industry, demand still far outpaces the available staff and care.
At the start of April, the Department of Education estimated that a further 15,000 childcare places will be needed by September 2024, and another 70,000 places will be required to meet demands for the final roll-out in September 2025.⁵
While childcare demands following April 2024’s expansion have been mostly met, according to the Department of Education and the National Audit Office, meeting the 2024 and 2025 milestones will be “problematic” given capacity and staffing issues.⁶ Childcare staffing was shown to have grown in 2023 according to the Department of Education,¹ but Ofsted data from August 2022 shows 8% fewer registered childcare providers than the previous year, with the number of childcare places down 2%.⁷ A continuous shortage of childminders, caused by many leaving the profession, is one of the reasons UK demand still outpaces childcare places
As summarised by the House of Lords, childcare providers have been stretched thin by funding being pushed to cover “more hours, more weeks and more children” as free entitlement for parents has grown over time. Given that nearly all parents in England take up their existing universal entitlement for 3—to 4-year-olds, any population growth immediately impacts available childcare spaces.³
Increased funding is sorely needed for the childcare industry, with 96% of providers surveyed in 2019 finding that government 30-hour funding then did not cover their costs and 92% finding it caused them financial challenges.⁸ It’s this under-funding that means many are leaving the profession, either as the 31-40% of employees in the UK who leave within the first two years due to low wages and lack of training,⁹ or managers having to close centres that cannot run at a cost.
While increased funding is needed, many say the 2023 budget did not go far enough: CBI estimated that the real costs of the government's plans would be around £8.9 billion, not £4 billion. Many parents and industry experts understand it’s still on the government to fix this discrepancy, as Jodi Brearley, Found of Pregnant Then Screwed, commented: “the fault does not lie with the childcare providers themselves but at the door of number 10. Nurseries cannot magic up money to plug financial gaps left by years of chronic underfunding”.¹⁰
In any case, the 2023 budget announcement will likely create more demand, putting more strain on childcare providers in 2024 and 2025. Funding increases are positive but overdue and may do little to help with the recruitment and training of staff that many providers really need.
Does the new government change funded hour increases?
It’s hard to predict exactly what the future holds for the childcare sector, but we shouldn’t expect increases in funded hours to change.
While the Labour party did raise concerns about the feasibility of the budget announcement, even commissioning a review into the scheme,¹¹ they eventually pledged to deliver the hours promised for parents as part of the Labour manifesto.¹² They even went further than the former government, aiming to open over 3,000 nurseries in spaces available from shrinking primary schools to meet growing demand, funded by a controversial VAT levy for private schools.
Experts have weighed in both for and against this policy, but again, there is a debate over how to facilitate the necessary recruitment and staffing, as opposed to the investment itself. The Early Education and Childcare Coalition stated that “underpinning its plan for reform must be a new workforce strategy that will attract more people into the sector and see early years professionals receive the pay, conditions and respect they deserve”, with Pregnant then Screwed highlighting the “long waiting lists, and childcare deserts across England” that still need be tackled by any reforms.¹³
There are glimmers of hope that the new government will tackle recruitment and staffing at some point, but they are keen to conclude the review previously commissioned with Sir David Bell before setting out clear plans.¹⁴ This does mean that for the near present, childcare providers will still have to work out how to meet the increased demand rising to meet them in September 2024.
Managing Increased Demand in Childcare
Even with the industry and parents acknowledging that underfunding, staffing, and demand issues should lie with the government, you need to keep your business going. While it shouldn’t fall to childcare providers, until these issues are tackled at scale, businesses will need to find a way to do even more with their existing workforce.
Doing more with less is difficult for any business, but organised, flexible staff scheduling will ensure you know your staff’s true capacity. You need to know who is where and when in order to keep meeting parents' demand for hours, funded or unfunded.
With PARiM you can easily create, manage, and communicate childcare schedules, ensuring that your team is in sync and your clients receive the best care. Your employees can automatically track their time and geolocation on the go with our mobile app. Our intuitive scheduling tools gives you full oversight of who is where, while GPS time clock ensures all the right qualified staff are in the right places. You can then understand how your operations are running with the ability to export data for seamless payroll processing.
“PARiM has helped us save time equal to one full-time position. But what I love even more is how it eliminates human errors. Our invoices used to take three days. With PARiM, we have them done in three minutes.”
Megan Metzger, Founder & President of Preferred Childcare
PARiM can also enable client access, depending on your business needs. This means any clients can be added to the system to let them see their requested shifts, contact information and hourly rates. You can, for example, put parents' minds at ease and save time answering their queries by enabling them to see their nanny’s contact information and hourly rates, but also let clients themselves approve timesheets in their mobile app.
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