‘This will be the end of nurseries’: preschools in England warn of closures amid free childcare expansion plan

A key plan to expand free childcare will “absolutely guarantee” the closure of more nurseries, the departure of staff and a fall in places if there is not a substantial increase in the funding behind it, Jeremy Hunt has been warned.

An eye-catching pledge for a huge expansion of free childcare provision was a main giveaway in the chancellor’s budget last week. However, while childcare providers have welcomed extra help for parents, nurseries across England, speaking to the Observer, said that the plan risked having a “catastrophic” impact on the sector without an overhauling of central funding.

“This will be the end of nurseries,” said Mel Hart, owner of Albion House nursery and the Old School nursery in Grantham, Lincolnshire. “We are already underfunded by approximately £2.50 per hour, per child for the three and four-year-olds. Over 5,000 nurseries are said to have closed in the last year. If more are struggling financially, more will also close. Then there will be nowhere for children to go so that parents can go to work.”

The budget plan will see 30 hours a week of free childcare given to all children aged from nine months to four years, though its introduction will be staggered. At present, parents of three and four-year-olds can claim 15 or 30 hours of free childcare, depending on their circumstances.

Hunt promised an increase of free hours funding of £204m from this September, eventually rising to £288m next year. However, it is well below independent estimates of the costs nurseries face and full funding details have not been revealed.

The system now effectively relies on the fees paid by the parents of younger children offsetting the underfunding of “free” hours handed to older ones. But under Hunt’s plan, the expansion of free hours would prevent that happening.

Purnima Tanuku, chief executive of National Day Nurseries Association, said: “The more funded children that [nurseries] are taking, the more losses they’re making. On average, providers lose £2.20-2.30 per child, per hour. That’s the gap at the moment. Unless proper funding follows, all we’re doing is exacerbating the problem.”

Jo Morris of Playsteps nursery in Swindon, Wiltshire, said that under the funding levels now, there was a gap of £87,700 a year between the costs of caring for the 57 children on free hours and the state funding provided. “We’ve had to cross-subsidise from the parents who do pay,” she said. “When access to free hours is expanded, you can imagine that the losses for us and other nurseries and childminders could be catastrophic.”

Olivia Foley of the Hungry Caterpillar nurseries, most of which are in London, said it was already difficult to fill vacancies, as the work was hard and wages already higher elsewhere – even before any further spending squeeze.

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“We have got so many vacancies; we’ve got nurseries where we’re holding registration down to around 60% because we just can’t get the staff,” she said. “The idea that we’re going to be able to provide all these additional places – unless there’s a workforce development plan, there just won’t be the staff to deliver it.”

Caroline Nutting of the Little Acorns preschool in Leigh-on-Sea, Essex, said: “We would have to make redundancies, have less staff and the care and high standard provision would end up being affected.”

Sarah Jacomb, owner of the Toybox day nursery in East Grinstead, West Sussex, said the idea of free hours was “simply not true and very misleading”. She backed helping parents, but added: “Parents are now expecting free childcare and are oblivious to the fact that nurseries will have to somehow bridge the gap between what the government will pay them and what it actually costs them.”

Insiders are now demanding meetings with the chancellor and the education secretary, Gillian Keegan, to seek reassurances that there would be a big increase in funding for free childcare hours. The change means the state is now effectively overseeing the financial viability of vast swathes of the sector.

Neil Leitch, head of education charity the Early Years Alliance, said: “The levels of funding and the 30-hour expansion plans announced in the budget show the government has underestimated just how serious the issues facing the early years sector are. We urge the Treasury to engage in discussions with us so, together, we can work out how these plans will work in practice.”

Department sources said the childcare offer was the single biggest investment in England ever and that, by 2027-28, it would be spending more than £8bn every year on free hours and early education.

Keegan said in Grazia last week: “We’re paying more to the providers so, logically, because they were asking for that, they could pay people. We think that they will make sure it’s attractive.”