Parents in Lancashire saw a drop in the average cost of childcare last year despite a backdrop of rising figures across England.
But the Professional Association for Childcare and Early Years warns providers across the country are struggling to stay afloat, thanks to rising costs and insufficient funding for the Government’s 30 hours’ free childcare scheme.
The average hourly fee charged by childcare providers for three and four-year-olds in Lancashire was £4.50 in 2019, according to a survey carried out by the Department for Education.
That was a decrease compared to the previous year, when it was £4.75.
Localised figures are rounded to the nearest 25p, meaning the true change could be as low as 1p or as high as 39p per hour.
Across England, however, parents saw an average hike of 2.4 per cent, rising to £5.04 per hour.
Families with both parents in work – or just one in single-parent households – who earn at least 16 hours minimum wage per week but less than £100,000 a year are entitled to 30 hours’ free childcare weekly during term time.
But industry experts argue funding for the scheme does not cover provider’s costs, pushing up the cost of childcare outside the funded hours.
PACEY says some smaller providers are being forced to shut up shop or join larger chains, leading to what it described as the “Tesco-isation” of childcare, and less choice for parents.
In Lancashire, the number of Early Years childcare providers – those who care for children from birth up until five – registered with Ofsted fell from 1,501 in 2015 to 1,280 last year, a decrease of 15 per cent.
Over the same period, the number of providers nationally dropped from 73,500 to 61,700, a 16 per cent decline.
Liz Bayram, chief executive of PACEY, said the current system was “untenable”, and called for the Government to readdress its funding formula.
“The situation has been in this mess for far too long and this government needs to take action now,” she said.
“We believe all of [the challenges] can be resolved if this government revisits its funding formula for early education entitlements so that it covers the current cost of delivering a place, and in future is linked to inflation.”
A Freedom of Information request by the National Day Nurseries Association found that three-quarters of councils underspent on early years education in 2018-19, with £63.5 million earmarked for pre-schoolers either lying unused, or channeled away to other areas of education.
Lancashire County Council reported a £921,648 underspend during that time.
The council currently receives £4.30 in government funding per hour per child, according to NDNA.
Of this, £4.13 (96 per cent) goes to providers as a base rate to fund the provision of free places.
Additional hourly supplements provided by the council based on levels of deprivation or special educational needs have not been factored in.
Local authorities are required to pass on at least 95 per cent of early years funding to providers, with a maximum five per cent permitted to be kept back for administration costs, and to meet other local needs for pre-schoolers.
A Department for Education spokeswoman said the Government had recently announced an increase to hourly funding rates for councils in 2020-21, and it would continue to monitor the childcare market closely.
She added: “The setting of local provider funding rates is a decision for local authorities in consultation with their Schools Forum.”