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Nurseries warn of rising fees ahead of childcare expansion

Getty Images A woman reads a book to four young children in a nursery room. She is sat cross-legged on the floor with a blue book open to the two girls and two boys, who are smiling.Getty Images
Early years experts say the government's uplift will not cover wage and National Insurance increases

Nurseries say parents could face higher fees and even nursery closures due to insufficient funding ahead of an expansion in the provision of free childcare.

On Tuesday, the government announced that early years funding would increase by £2bn next year in England, to support the planned rollout of 30 hours per week of government-funded childcare for all eligible under-fives from September.

That includes a 45% uplift in the Early Years Pupil Premium funding for the most disadvantaged children, to up to £570 per year.

But nursery leaders warn the increases will not be enough to cover rising National Insurance contributions and minimum wage staffing costs.

Included in the £2bn uplift is a £75m expansion grant, which the government says will support nurseries, childminders and other providers to deliver the 70,000 additional spaces needed from September.

But the National Day Nurseries Association (NDNA) says additional costs from increased minimum wages and National Insurance contributions next year could add £2,600 per employee in average nursery outgoings, which will "cripple providers".

The NDNA is warning that some nurseries will have to pass on these rising costs to parents in the form of higher fees.

And while it welcomes the increase in Early Years Pupil Premium, the NDNA says £570 is still only a fraction of the £1,455 pupil premium paid to primary schools.

Nicola Fleury, owner of Kidzrus, which has five settings in Salford, says that since the childcare changes began they have seen a "huge increase in demand" for places.

Vanessa Clarke / BBC Nicola Fleury is smiling at the camera wearing a red blazer and a neck scarf. She has blonde hair.Vanessa Clarke / BBC
Nursery boss Nicola Fleury says it's only fair that staff salaries are improved

"Our concerns are making sure that our staff have a fair wage. The increase in the national minimum wage is absolutely right," she says.

"They work so hard and are under so much pressure."

But she says employers' National Insurance contributions are taking "quite a hike", and so nurseries "have to get the funds from somewhere".

She wants to see exemptions for England's nurseries from business rates, in line with Wales and Scotland's devolved policies.

Mrs Fleury says her staffing costs will increase by between £8,000 and £10,000 per month from April.

The recruitment and retention crisis is also still a major issue for the sector, which does not have enough staff to meet demand.

"Foundation years are the most important years of a child's life," Mrs Fleury says.

"We're making so many differences, not just to children, but to families as well. And it's really important that we as a profession are recognised within the education system."

Vanessa Clarke / BBC An early years staff member reads to a child inside a nursery classroomVanessa Clarke / BBC
A recruitment and retention crisis is a concern for the sector, as childcare entitlements for families increase

An additional 35,000 staff and 70,000 places will be required to meet demand next September, according to the Department for Education.

Education Secretary Bridget Phillipson says early years "has been my priority from day one".

"By giving more children the chance to start school ready to go, we transform their life chances, and the life chances of every child in their classroom," she says.

But the regulator Ofsted has also raised concerns that many families struggle to access high-quality early childcare.

And the decreasing availability of places has not been evenly spread across the country, with the North East, the East Midlands, and Yorkshire and The Humber worst affected.

Ofsted says these "childcare deserts" are more likely to be in areas with lower incomes and higher child poverty.

The Department for Education says the 45% uplift to Early Years Pupil Premium will provide more support for those families most likely to live in childcare deserts.

Nick Harrison, chief executive of the Sutton Trust, called it a "welcome first step" but said that "much more is needed to level the playing field".

Vanessa Clarke / BBC A child smiles at the camera as he holds up a craft he has madeVanessa Clarke / BBC
The government says 70,000 more childcare places are needed by September 2025

Government-funded hourly rates for early years providers vary between local authorities.

On average, government funding rates will rise by 38p to £11.54 for under-2s, by 28p to £8.53 for two-year-olds, and by 24p to £6.12 for three- and four-year olds.

Early Years Alliance chief executive Neil Leitch says the new funding rates will "fail to even come close" to covering costs.

"Countless nurseries, pre-schools and childminders will be left with no option but to raise costs, reduce places or simply close their doors completely," he said.

NDNA chief executive Purnima Tanuku says a shortfall in funds could result in higher nursery fees, as well as fewer available places during the government's rollout of more funded childcare.

"All children deserve the best start in life and these rates don't reflect that high quality care and education," she said.

"The combination of all these factors will be the last straw for some nurseries, which will result in more settings closing rather than expanding to meet expected demand."

The NDNA says it has seen a 50% increase in closures over the last year, particularly in deprived areas.