National Audit Office finds roll-out of funded early education & childcare will be “challenging”

A report published by the National Audit Office (NAO) today finds that the timetable for the roll-out of the new funded early education and childcare entitlements in England is “ambitious” and that “challenges and uncertainties remain around sector sustainability and staffing”. Although the initial stage of the roll-out in April 2024 appears to be on track, later phases are more uncertain and expected to be more challenging. The NAO raises concerns about the potential impact of rapid growth of the sector on quality and about the availability of places for vulnerable children.

The report notes that the Department for Education (DfE) currently “assesses the likelihood of delivering the places required in September 2024 and 2025 as amber/red “problematic” given the increase”. It also flags that a survey of local authorities by DfE found that their confidence in having sufficient places to meet demand drops from 82% for April 2024s to “34% for September 2024, with 47% neither confident or unconfident, and 9% for September 2025 given the uncertainties and scale of the increase”. The report gives DfE estimates that providers must create 85,000 new places by September 2025, with 19% more places for children under 2. Staffing would need to increase by 40,000 or 12% in just over two years, which it suggests is unlikely given that between 2018 and 2023, staffing increased by only 5%. It is unclear whether DfE’s attempts to boost recruitment will have an impact.

On funding, the report makes clear that DfE were aware that the funding rates for 3- and 4-year-olds were below the real cost of a place:

“DfE’s analysis, prepared in advance of the Spring Budget 2023, showed that between 2019-20 and 2021-22 funding rates had been set below providers’ estimated delivery costs. Inflationary pressures (including higher energy, food and wage costs) also led to an estimated funding gap of £230 million in 2023-24 and £315 million in 2024-25.”

Given the difference between annual rates of increase and rates of inflation, this does not seem consistent with the subsequent statement that “For 2024-25, HMT has approved rates for 3- and 4–year-olds that aim to restore a small level of estimated profits.”

The report also asks questions about the likelihood of government objectives being met in relation to parental employment, acknowledging that in many cases the funding will go to parents who were previously paying for childcare. It also flags the methodological issues with proving whether employment rates have changed as a result of the policy.

On the impact of the policy on the most disadvantaged children, the report notes:

“DfE recognised the extension could widen the attainment gap and considered extending entitlements to younger disadvantaged children. However, government opted not to progress this, given affordability concerns. The Institute for Fiscal Studies reported that higher‑income families will benefit more, with the lowest 30% of the income distribution seeing almost no direct benefit. DfE has not yet confirmed how it will monitor the ongoing impact on attainment but has committed to consider this in its evaluation.”

It also flags the potential negative impact on quality of an “influx of more inexperienced staff and providers, alongside DfE changing staff:child supervision ratios for 2-year-olds and practitioner qualifications”, and the risk of displacing more vulnerable children who may be “more challenging or costly to support”. It has no performance indicators around quality or the impact on disadvantaged children.

Early Education’s Chief Executive, Beatrice Merrick, said:

“This report raises a number of questions about the risks inherent in the roll-out of the new entitlements, from whether government can achieve its targets, to whether it is even possible to evaluate its impact. Most worryingly, it questions whether government has given sufficient thought to policy’s impact on the quality of early childhood education children will receive – especially those from disadvantaged backgrounds for whom it can be most transformational. The report also recognises the long-term issue of deliberate under-funding of the 3- and 4-year-old entitlement, which has been so detrimental to the stability of the sector and is still unresolved. The government’s significant additional investment in the sector will not pay off unless these issues are urgently addressed.”

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