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Parents face a significant financial hit with nursery fees set to soar by 10 per cent in the wake of Rachel Reeves’s controversial tax hikes on employers, a major new survey has found.
They could also find themselves struggling to find a place for their child, with one in seven nursery businesses – and the government’s flagship expansion of free childcare places – now at risk, the National Day Nurseries Association (NDNA) warned.
Purnima Tanuku, the organisation’s chief executive, said the results of the survey of more than 700 nurseries were “alarming”.
Providers were being put in an “awful situation where they are forced to either significantly increase their fees to parents or face an uncertain future”, she said.
In response to the new data, critics called on the chancellor to exempt nurseries and childcare providers from a tax hike “set to cripple them”.
Nearly all of those surveyed, 96 per cent, said they would increase fees to parents, by an average of 10 per cent.
Nurseries are being hit by the rise in employers’ national insurance announced by the chancellor in the Budget.
Because so much of their spending goes on staff, the survey also found that average staffing costs would increase by 15 per cent from April, when the changes come in.
As a result, 39 per cent also said that they planned to offer fewer childcare places.
Nearly one in five, 17 per cent, said they would make a loss, while 14 per cent said their business was at risk.
The NDNA said that while the government has announced that the rates it pays providers for childcare places will increase, they will not account for the national insurance rise.
The organisation warned that parents would be left to “pick up the shortfall”.
Ms Tanuku said: “The alarming results of this survey come just months before the biggest phase of the government’s funded childcare expansion, putting this policy at risk.
“Nurseries do not want to be in this awful situation where they are forced to either significantly increase their fees to parents or face an uncertain future, with 14 per cent of nurseries saying their business is at risk.”
She added: “High quality comes at a cost and unfortunately the government appears to be unwilling to pay that price. Instead, we are left with a situation where they are increasing statutory employment costs, which impact hugely on nurseries because staffing makes up 75 per cent of their expenditure – but not taking these increases into consideration when paying for childcare places.
“From September, the government will be paying for 80 per cent of childcare places in England. Simply put, if the sector’s most significant customer is not paying their fair share, nurseries have to find this money from somewhere else or close their doors.”
From September, eligible working parents will be able to access up to 30 hours of free childcare a week for children aged nine months and older.
She called on the chancellor to exempt nurseries from paying business rates and reimburse them for the increased national insurance costs.
Mandy Blazey, 34, who has one child, Reuben, at nursery four days a week and another child on the way, said she was already paying £1,218 a month. “We’ve been paying more for childcare than we have for our mortgage. It’s the most expensive outgoing that we have,” she said, adding: “We have had to change nursery settings for our second because the cost of where we are, it’s an incredible setting and they run an incredible facility for learning and development, but that comes at a price.”
The rise in costs will come on top of nursery fees which have already soared in recent years.
Suzanna Chaplin, 36, a mum with two kids in nursery, told The Independent: When we first started Otto in nursery, the costs were £89 a day. We’ve now seen consistent pay increases basically every three to six months, and to the latest one, which was last week, which brought it up to £103 per day per child.”
Shadow education secretary Laura Trott said: “Nursery providers are being pushed to the brink. With Labour offering no further support to protect the sector from their jobs tax, it will mean more closures or massive fee hikes for parents.”
Munira Wilson, the Liberal Democrat’s education spokesperson, said: “This deeply concerning report proves the nightmare that parents and providers alike are facing thanks to the chancellor’s tax hike.
“After a decade of Conservative underfunding, now this government is turning a blind eye to the damage that their [national insurance] policy will wreak on early years provision. Access to good quality childcare is crucial not just to children’s development, but to opening up options for parents and families.
“A true solution to the crisis in early years provision must begin by exempting nurseries and childcare providers from the tax hike set to cripple them.”
Green Party MP for North Herefordshire Ellie Chowns said: “Good quality early years education is vital to tackling deprivation, poverty and inequality but it is clear that the tax and spend policies Labour have opted for are going to make accessing such education harder, especially for the poorest families.
“There is a raft of fairer, greener taxes that can be used – including a wealth tax on billionaires and multimillionaires – to ensure those with the broadest shoulders carry the greatest load when it comes to taxation and paying for the vital services like early years education which benefit all of society.”
A Department for Education spokesperson said: “Giving every child the best start in life is central to our mission to break the unfair link between background and success, and our plan for change commits to getting thousands more children school-ready by aged 5.
“That’s why despite having to take tough decisions to fix the foundations of the economy, we are raising early years funding by over £2bn next year, including a targeted £75m grant to support the increase to 30 government-funded hours from September.
“We will continue to work closely with the sector to make sure the funded childcare hours remain fair and accessible to all parents.”
