Free childcare scheme faces funding 'crisis', charity claims
The government's free childcare scheme is facing "chronic underfunding", according to a report commissioned by the Pre-school Learning Alliance.
Local authorities currently receive money from the government to pay for up to 15 hours of free childcare a week.
But the report suggests this funding is only enough to cover four out of every five children taking up the offer.
The government says it is doing more than its predecessors to tackle the cost of childcare.
Researchers found that the average hourly cost of providing a childcare place for a three- or four-year-old is £4.53, but nurseries and pre-school centres receive £3.88 per hour per child on average.
That represents a shortfall of 18%.
For two-year-olds, the average hourly cost of a childcare place is £5.97, but centres caring for this age group receive an average of £5.19 - a shortfall of 15%.
Neil Leitch, chief executive of the alliance, which represents over 14,000 providers of childcare, warned that the situation was "clearly not sustainable".
He accused the government of being "unwilling to give the support that providers need" and added that "chronic underfunding has left us with a free entitlement scheme in crisis".
Business leaders called on the government to take action to make childcare more affordable at the CBI conference on Monday.
A spokesperson for the Department for Education said it was doing more than any other government to tackle the cost of childcare.
The spokesperson said the report had been "totally overblown. It is nonsense to suggest that childcare has been underfunded. The cost of childcare is falling in real terms and we have increased annual funding for early education by over £1bn since 2010.
"As a result of our plan for education more families than ever before are now eligible for free childcare."
Childcare Minister Sam Gyimah said: "We have a thriving nursery sector with more nurseries opening than ever before offering more nursery places than ever before.
"We've published a tool that allows us to to track the money that goes from central government to local authorities who then provide the funding to nurseries, to see whether we're having the same impact in every local authority as far as funding is concerned.
"That tool will enable us to make a proper assessment of the billion pounds that is going into this sector and how much of it is reaching the front line," he added.
The average couple with two children saw their income fall by £2,132 a year in real terms between 2009-10 and 2012-13, the CBI says.
Figures obtained under a Freedom of Information request by the alliance show that out of 126 authorities, 29% have made no changes to the base rates of funding they give to nurseries and other providers for the free entitlement offer.
The government extended its free childcare scheme last year to include two-year-olds from families in receipt of certain benefits.
Three and four-year-olds are also entitled to 15 hours per week of "early education" for 38 weeks a year.
The places can be in nursery schools, children's centres, day care nurseries, playgroups, pre-schools and with accredited child minders.