For nursery operators that have entered into funding contracts with local authorities to deliver 30 hours childcare as of September 2017, funding rates as agreed have been fixed for 3 years. If there are no further increases in living wage rates - although some are expected going forward - towards the end of the current 30 hours funding contracts, nursery owners solely delivering 30 hours funded childcare will potentially have seen their salary costs increase by a minimum of 13.2%. Allowing for differentials, this increase is likely to be closer to 15% or more by 2020.
The cost of childcare and the implications of high staffing margins associated to delivering high quality childcare are set to come under further scrutiny during 2018/19. Providers catering to 'private pay' parents are in a position of greater strength, compared to those solely offering subsidised childcare places, and therefore, sustainability prospects are enhanced by comparison.
Yesterday’s announcement will add further fuel to the childcare ratios debate.