Introduction

Impact of coronavirus outbreak on early years settings

The coronavirus outbreak has impacted financially on early years settings, including because of enforced closures during the first national lockdown and lower levels of attendance since settings have re-opened to all children.

The Institute for Fiscal Studies (IFS) has estimated, for example, that “a quarter of private nurseries might have been operating at a significant deficit” during the national lockdown, compared to 11% before the pandemic. With regards to the impact of lower attendance, the IFS has estimated that “for every 5 percentage point drop in fee income between 5% and 25% compared with pre-crisis levels, an additional 3–4 percentage points of providers are likely to face a significant deficit.”

Government support

The Government has announced a range of measures aimed at supporting the early years sector financially during the pandemic. This includes, but is not limited to:

  • continuing to fund local authorities for the early education entitlements during any periods when providers are forced to close; and
  • basing early years funding for local authorities for autumn term 2020 on pre-coronavirus levels of attendance.

A range of measures aimed at supporting businesses generally have also been announced, which childcare providers may be able to access depending on their circumstances. This has included, for example, the Coronavirus Job Retention Scheme.

Concerns about financial sustainability

Representatives of early years providers were contending prior to the pandemic that Government funding was not sufficient to cover the increasing costs of provision, including, for example, increases in the National Living Wage. They have raised concerns that the extra financial pressure caused by the pandemic could force some providers to close.

At the end of October 2020, for example, the Early Years Alliance stated that in a survey of early years providers, one in six thought they could close by Christmas without additional funding. In a November 2020 briefing on the early years sector, Ofsted said that, of 208 providers surveyed, around 65 per cent were “not worried” that their business would have to close.

Government position

In response to a parliamentary question on 20 November 2020, the Minister, Vicky Ford, outlined the support provided to the early years sector during the pandemic and stated that the Government continued “to work closely with both local authorities and the early years sector organisations to monitor the impact of the COVID-19 outbreak on the sector.” She added that the Government also continued to “look at the costs associated with the outbreak and to secure the best and most appropriate support for the sector.”

Spending Review 2020

At the 2020 Spending Review, the Government announced that it would provide “£44 million for early years education in 2021-22 to increase the hourly rate paid to childcare providers for the government’s free hours offer.”

The Government has also stated that the Spending Review provides “a continuation of around £60 million of supplementary funding for maintained nursery schools in the 2021-22 financial year”. (This funding has been provided to Maintained Nursery Schools since 2017-18 in recognition of the extra costs they face which are not accounted for in the early years funding formula).

Further information: relevant Library briefings

Further information is provided in Library Briefing 8052, Early years funding (England), last updated 27 November 2020. The briefing provides information on:

  • How the Government funds early years provision in England, including the operation of the early years national funding formula.
  • How early years funding rates have changed since 2017
  • The position of maintained nursery schools, including the provision of supplementary funding since 2017.
  • The impact of the coronavirus outbreak on the early years sector, and Government support for the sector during the pandemic.

A separate Library Briefing, Coronavirus: Childcare FAQs (last updated 10 November 2020) provides more detailed information concerning the impact of the coronavirus outbreak on early years providers, including their financial sustainability.

Parliamentary Material

Parliamentary Questions

Nurseries: Finance

26 Nov 2020 | 119183

Asked by: Theresa Villiers

To ask the Secretary of State for Education, what plans he has to extend supplementary funding for maintained nursery schools to cover the 2021-22 financial year.

Answering Member: Vicky Ford | Department: Department for Education (DfE)

Maintained nursery schools (MNS) are an important part of the early years sector and provide valuable services, especially in disadvantaged areas. The government announced on 24 August that up to £23 million of supplementary funding will be provided to local authorities, to enable them to continue protecting the funding of MNS during the summer term in 2021.

This government remains committed to the long-term funding of MNS, and any reform to the way they are funded will be accompanied by appropriate funding protections.

The department has secured a continuation of around £60 million of supplementary funding for MNS in the 2021-22 financial year, as part of this Spending Review. The department continues to consider what is required to ensure a clear, long-term picture of funding for all MNS, including those in Barnet. We will say more about this soon.

Pre-school Education: Coronavirus

20 Nov 2020 | 114782

Asked by: Sir David Evennett

To ask the Secretary of State for Education, what assessment his Department has made of the effectiveness of the level of financial support provided to the early years sector during the covid-19 outbreak.

Answering Member: Vicky Ford | Department: DfE

We are continuing to fund childcare at the same level as before the COVID-19 outbreak, until the end of the calendar year, giving nurseries and childminders another term of secure income, regardless of how many children are attending. Early years settings will continue to benefit from a planned £3.6 billion funding in the 2020-21 financial year to deliver free early education and childcare places.

In addition to this, the government has provided a package of support for individuals and businesses which are directly benefitting providers of childcare. This includes business rates relief and grants, the extended Self-Employment Income Support Scheme (SEISS) and the extended Coronavirus Job Retention Scheme (CJRS), which will remain open until March 2021, with employees receiving 80% of their current salary for hours not worked, up to a maximum of £2,500 per month.

Our survey of childcare and early years providers and COVID-19, published on 26 October, contains information on early years providers’ use of the CJRS and how many childminders applied for and received government support:

  • At the time of the survey (July 2020), 76% per cent of open group-based providers and 14% of open school-based providers responding reported having made use of the CJRS at any point.
  • At the time of the survey, all childminders were asked whether they had applied for any financial support from the government due to loss of income, for example via the SEISS or the Small Business Grant Scheme. The majority of all childminders (86%) reported having applied for financial support from the government. Of these, 80% have received support and 6% had applied for but not (yet) received support.

Further information on the survey is available here: https://www.gov.uk/government/publications/survey-of-childcare-and-early-years-providers-and-covid-19-coronavirus.

We continue to work closely with both local authorities and the early years sector organisations to monitor the impact of the COVID-19 outbreak on the sector. We continue to look at the costs associated with the outbreak and to secure the best and most appropriate support for the sector.

Pre-school Education: Coronavirus

17 Nov 2020 | HL9959

Asked by: Lord Taylor of Warwick

To ask Her Majesty’s Government what assessment they have made of the survey by the Early Years Alliance, published on 30 October, finding that one in six early years providers could close by Christmas 2020 without additional funding; and what steps they are taking to provide additional income to nurseries and childminders.

Answering Member: Baroness Berridge | Department: DfE

The government recognises the importance of supporting the early years sector financially during the COVID-19 outbreak.

We note the information provided by the Early Years Alliance and have used it in recent discussions with HM Treasury.

Data published on 26 October, in the latest parent survey by Ipsos MORI, shows that in September 94% of parents whose child received formal childcare, before the COVID-19 outbreak, were either using formal childcare now, or were intending to return their child to formal childcare, if they could, by January 2021.

Attendance data on early years shows that children’s attendance at the majority of nurseries, preschools and childminders is starting to climb back to pre-COVID-19 levels (an estimated 770,000 children attended early years settings on 22 October, compared with 417,000 at the end of the summer term).

Nurseries, preschools and childminders have received significant financial support over the past months and will benefit from a planned £3.6 billion funding package in financial year 2020-21 for free early education and childcare places.

We are providing extra stability and reassurance to settings that are open by ‘block-buying’ childcare places for the rest of this year at the level we would have funded before the COVID-19 outbreak, regardless of how many children are attending. This will give nurseries and childminders another term of secure income.

In addition to this, the government has provided a package of support for individuals and businesses which are directly benefitting providers of childcare. This includes business rates relief and grants, the extended Self-Employment Income Support Scheme, the Business Interruption Loan Scheme, the Job Retention Bonus and the extended Coronavirus Job Retention Scheme, which will remain open until December, with employees receiving 80% of their current salary for hours not worked, up to a maximum of £2,500.

Further, business premises forced to close in England are to receive grants worth up to £3,000 per month under the Local Restrictions Support Grant. Also, £1.1 billion is being given to local authorities, distributed on the basis of £20 per head, for one-off payments to enable them to support businesses more broadly.

We continue to work closely with both local authorities and the early years sector organisations to monitor the impact of the COVID-19 outbreak on the sector.

Childminding: Coronavirus

04 Nov 2020 | 109207

Asked by: Andrew Gwynne

To ask the Chancellor of the Exchequer, what support his Department will provide for childminders who did not qualify for the Self-Employment Income Support Scheme.

Answering Member: Jesse Norman | Department: Treasury

The Government is providing extra security to nurseries and childminders that are open by ‘block-buying’ childcare places for the rest of 2020 at the level the Government would have funded before coronavirus, regardless of how many children are attending.

This means that even if providers are open but caring for fewer children, as a result of low demand from parents or due to public health reasons, they can continue to be funded for the autumn term at broadly the levels they would have expected to see in the 2020 autumn term had there been no coronavirus outbreak. This gives another term of secure income to nurseries and childminders that are open for children who need them.

Early years settings will continue to benefit from £3.6 billion of planned funding in 2020-21 to create free early education and childcare places for children.

The SEISS is one element of a comprehensive package of support for individuals and businesses. This package includes Bounce Back loans, tax deferrals, rental support, mortgage holidays, and other business support grants. More information about the full range of business support measures is available at www.gov.uk/government/collections/financial-support-for-businesses-during-coronavirus-covid-19.

Children: Day Care

05 Oct 2020 | 97657

Asked by: Tulip Siddiq

To ask the Secretary of State for Education, whether he plans to continue funding early entitlements for free childcare at the rate of occupancy before the covid-19 outbreak after January 2021.

Answering Member: Vicky Ford | Department: DfE

On 20 July, we announced we will continue paying local authorities for the childcare places they usually fund for the autumn term. This will give nurseries and childminders another term of secure income, regardless of whether fewer children are attending.

At the same time, we set out our intention to return to the normal early years funding process from the start of 2021. This would mean using the January 2021 census to drive funding allocations for local authorities for the 2021 spring term, and that local authorities’ funding to childcare providers would return to ‘funding following the child’ from 1 January 2021.

We also made clear in that announcement that we would review the funding approach for the spring term given the uncertain times ahead with the COVID-19 outbreak. We are doing so and will announce our approach in due course.

Pre-school Education: Finance

03 Apr 2020 | 30811

Asked by: Tulip Siddiq

To ask the Secretary of State for Education, what the 2020-2021 budget headings are for the £66m increase in early years funding announced at the Spending Round 2019.

Answering Member: Vicky Ford | Department: DfE

The additional £66 million to support early education entitlements in 2020-21 which was announced by my right hon. Friend, the Chancellor of the Exchequer in August 2019, provided an 8 pence an hour increase in rates for the 2-year-old entitlement and also for the vast majority of areas for 3- and 4-year-old entitlement for 2020-21 – which we subsequently announced in October 2019. It has also maintained funding rates for 2020-21 for the small number of authorities which have been protected from large drops to their funding as a result of the “loss cap”.

Details of this increased funding, broken down by individual funding stream and across local authorities, was published in December 2019 and can be found at the link below:

https://skillsfunding.service.gov.uk/single-funding-statement/latest/dedicated-schools-grant/download-funding/2020-to-2021.

This publication does not have ‘budget headings’ other than columns naming the entitlements by age group, along with columns for the Disability Access Fund (DAF) and the Early Years Pupil Premium (EYPP).

The funding allocations for local authorities are based on actual take up of the entitlement hours. Therefore, allocations for 2020-21 will be updated, first in summer 2020 using updated data from the January 2020 schools and early years censuses, and then in summer 2021 using January 2021 census data for the final allocation.

In total, the government plans to spend more than £3.6 billion to support early education entitlements in 2020-21.

News and reports

News articles

Treasury announces £44 million additional early years funding

Early Years Alliance

25 November 2020

Spending Review: Early years sector to receive a rise of £44m in 2021-22

Nursery World

25 November 2020

Government Plans To Cut Funding To Childcare Sector On Brink Of Its Collapse

Labour Newsroom

25 November 2020

Alliance calls for £240m early years funding in Spending Review

Early Years Alliance

20 October 2020

Maintained nurseries face ‘perfect storm’ due to Covid

Times Education Supplement

9 October 2020

Nurseries in need of coronavirus care

The Times

20 September 2020

‘Parents are terrified’: England’s nurseries hit hard by lockdown

The Guardian

24 July 2020

Nurseries warn of ‘mass closures’ as lockdown lifts

BBC

24 June 2020

Nursery crisis looms as one in six childcare providers say they will permanently close after lockdown

The Telegraph

30 April 2020

UK childcare industry ‘crushed’ by coronavirus crisis

The Guardian

24 April 2020

Coronavirus: ‘The future of our nursery is pretty bleak’

BBC

21 March 2020

Coronavirus: ‘I was asked for £430 a month for my shut nursery’

BBC

7 April 2020

Government reveals local authority funding rates for 2020/21

Early Years Alliance

31 October 2019

Reports

Ofsted, COVID-19 series: briefing on early years, October 2020, 10 November 2020

Department for Education, Providers’ finances: Evidence from the Survey of Childcare and Early Years Providers 2019, 26 October 2020

Early Education, NAHT, NEU and UNISON, Maintained nursery schools and COVID-19: vital community services on a cliff-edge, October 2020

Institute for Fiscal Studies, Challenges for the childcare market: the implications of COVID-19 for childcare providers in England, 4 September 2020 


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