Wake Up, Rethink the Funding

August 23rd 2022

Last week I was contacted by national radio and TV to do an interview about the impact of the cost-of-living crisis and how this will affect both parents and staff.

This is part of the wider media voice, shouting loudly to the Government to stop dodging the issue behind the leadership wall because once they are in, or should I say, once Liz Truss is installed in Downing St. rethinking Boris’ wallpaper choice, there will be no avoiding the issue. Support packages have been ruled out and the issue of the 25% windfall tax on energy companies is very quiet. That’s despite the widespread anger about unprecedented profits of the Energy Companies and everyone is telling Liz that tax breaks won’t solve the crisis because the problem is too big for just one solution.

Last week the energy market experts, Cornwall Insight upgraded their forecasts for average annual energy bills – predicting that they could now rise to more than £3,500 in October and over £4,200 and January. Inflation is currently at 9.4% and expected to hit a whopping 13% in quarter four of 2022 and we face the prospect of recession. The Institute for Fiscal Studies said that the poorest 10% of households face effective inflation of 18% as inflation is not the same for everyone. Disposable income after essential costs fell by £70 a month and lower income households are particularly vulnerable because they spend a bigger share of income on gas, electricity and food. The most affected are families with young children, the vulnerable, the elderly and families living with disability.

This is compounding the deeper issues of poverty faced by many families. For example, before the pandemic, 4.3 million children were living in poverty in the UK. In 2020/21, this fell to 3.9 million (or 27% of children) – largely thanks to the temporary £20 a week increase to Universal Credit. But that was reversed at the end October 2021 and with the rising cost of living throughout 2022, this has likely pushed this progress firmly into reverse.

While there is a media  focus on families on benefit, we must not forget the JAM families (who are Just About Managing and not entitled to any support).  They are sending their children to nurseries so that they can work but sadly are joining the many millions who are the working poor. Ironically, many of these families include the Early Years staff who are providing the service. In 2019, a report by the Education Policy Institute found that Early Years staff are in a position of high financial insecurity and hardship with more than 44% claiming benefits and tax credits, according to a report.

What can we do? The normal way to increase income is to increase fees and then redistribute the additional money into staff salaries and cost management. Easier said than done when we are running underfunded services. Research from the National Day Nurseries Association has shown that over the last five years, the hourly rates that the Government pays to local authorities for funded childcare places grew by only 3.3%. This year, that gap will continue to widen.  How can we reinvest in staff and support them during these difficult times?

If we increase fees too much, we exclude many families from accessing affordable high-quality education and care and ultimately children lose out.  Many settings are on their knees since the pandemic with numerous closures, especially in poor neighbourhoods.

Therefore, as providers, we must think about what we can do to support staff and parents. Obviously, we must review salaries and consider financial support such as a cost-of-living bonus. We also need to consider some basic stuff like offering staff lunch, putting a range of feminine hygiene products in the bathrooms and providing Employee Assistance services with Debt Advice.  These are issues that are emerging among different aged people, for example young people are really short on hygiene products.  No surprise then to see debt increasing. Here is a quick summary:


Mobile phone debt                 300%

Tax and NI arrears                   500%

Rent and Council Tax              100%

Catalogue                                  400%

Personal Loan                           100%

Fuel Debt                                   113%


But these are just window dressing. In order to help parents and staff, the sector needs proper funding to ensure it survives the financial crisis. The response so far has been the call to increase the child to staff ratios, more likely now with Liz Truss in charge.

A spurious report recently produced by Policy Exchange called Better Childcare argues that an extra child will mean a £40 reduction on parent’s fees.  Much of the report is about deregulation and nothing in it gives comfort.  There are no other solutions forthcoming to improve the services to parents to enable them to work and try and keep their heads above water. The notion that childcare is part of the national infrastructure is still misunderstood.  It is a simple enough message; fund the childcare sector to provide high quality services to children so parents can work and children, all children, can benefit for the education and care they deserve which will build their confidence and capabilities for the future.  Win, win surely?


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