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With a Commons majority of 78 and one seat left to declare, the Conservative party swept to power this morning. What will it mean for the early years sector?

The key message is more of the same. There will be no expansion of ‘free-entitlement’ places under a new Conservative administration and the funding freeze will continue.

In the 2020/21 financial year, independent analysis by Ceeda indicates the sector will face a funding deficit of £824 million, allowing for pay inflation of 3.6%, CPI inflation of 1.5% and the impact of fee cross-subsidy across age groups.

Funding rates are forecast to fall short of 2020/21 costs by 39% for 2-year-old places and 21% for 3 to 4-year-olds. Government plans for a National Living Wage of £10.50 per hour from 21 years of age will widen these gaps still further in future years unless significant changes are made to investment levels.

Given this funding environment, the cost-cutting measures and fee inflation seen in recent years will inevitably continue, and supply in deprived areas will be put at increased risk. How can this tide be turned?

Dr Jo Verrill, managing director at Ceeda says:

“Childcare providers will find some relief in the fact that the funding freeze will not be accompanied by further expansion of free-entitlement places. There is no doubt, however, that many in the sector, and the communities they serve face a very challenging future. We are likely to see an increasing divergence between communities, in the quality and availability of early education and childcare, as providers struggle to bridge the gap between funding rates and rising costs.”

The Big EY Debate

We invite you to join us on 23 January for #TheBigEYdebate, as the sector comes together to share views on policy direction and how to tackle the funding crisis. Find out more HERE.