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The annual autumn statement saw the Chancellor promising a hike in staff wages and a drop in national insurance contributions. Whilst it got a large hooray from many, it has left the early years sector to deal with growing expenses without tax relief or help to make things more affordable.
Here’s my take on it all…
The government’s promised increase of wages by almost 10% might seem like a win for most, but the worry for many childcare providers, like you and I, is how to deliver the promised benefits whilst dealing with rapidly rising operational costs.
For someone working 40 hours a week, considering the employer’s national insurance and workplace pension contributions, it’s approximately an extra £2500 in wages per year. For the average nursery with 20 staff members, that’s an extra £4000 a month or a staggering £50,000 a year in costs. In fact, the wage hike since 2017 has been a whopping 60% increase in the national minimum wage, seriously tightening the financial purse strings of childcare providers.
Another win for working families was the budget’s plan to offer 15 ‘free’ childcare hours per week to over 2’s from April and 9-month-olds from September 2024. But, as you already know, it’s not free, and it’s not 15 hours either (it’s something like 11.18 hours). And with employment rates soaring, the ‘better funding rate’ will soon melt away unless early years settings introduce substantial year-on-year increases to their hourly rates.
Whilst the government’s intention to make childcare more affordable for families and get people back to work is admirable, the required increase in childcare rates to cover a higher-than-inflation minimum wage surely contradicts the intended affordability of childcare services.
If you’re one of the many early years business owners who are hesitant to hike up fees, you’re not alone. It’s a common fear that ‘parents simply won’t pay more’, which leaves many nurseries using rates set way too low to cover costs, let alone make a profit. Unfortunately, it’s this mindset that has seen many settings closing their doors or running on thin air.
Childcare providers are leaving the sector in larger numbers each year, and in the most recent report from Ofsted, the figures speak for themselves. With 210 fewer providers on non-domestic premises and over 3000 fewer childminders and home child carers, the number of places available to children is also decreasing.
What’s the solution?
In my mind, as a sector, we need to develop our businesses to have more of a corporate mindset. I realise for lots of you reading this, that will go against the grain, but business is business. The promises made by the Chancellor have pushed us into a corner where adopting more of a business mindset might be the only way to survive.
Although most government policies aim high, they often ignore what a sector really needs. They set unrealistic standards and make unattainable promises without thinking about whether it’s doable or sustainable for those who have to implement the changes. AKA you and I.
That’s what’s happened here. And it was the same with the original 30-hour initiative that left us all scrambling to make ends meet.
Just one example of the gap between policy and reality is the government’s plans to change staff-to-child ratios from 1:4 to 1:5 for 2-year-olds in childcare. Where’s the extra space, facilities and equipment to accommodate more children coming from?
I’m all for fair wages and helping parents get back to work – if it’s implemented correctly with consideration for the bigger picture. If it’s handled correctly without messing up the business model, the new funding initiatives could be a game-changer for some childcare setups. As parents tap into the support available, some opportunities it could create include the…
Long story short, the early years sector is facing some tough times with rising costs and proposed policies that miss the mark. But my overall feeling is that if we, as providers, start thinking and acting more like corporate businesses and make the most of what’s available, there is a way we can make things work to thrive and survive.
Need a hand with any early years sector funding issues? Email us at [email protected] or check out our funding support page for some expert advice and guidance.
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