Sustainability of the nursery sector

The House of Commons Library has published a briefing paper on the level of funding for free childcare provision for 3 and 4-year-olds (CBP-8052), which is available to view here.

Business rate relief for childcare providers

Some Members have suggested that the Government might provide relief from business rates for childcare providers, and a petition to Parliament calling for such relief recently closed (6 October 2018) having attracted 10,915 signatures. The Government is due to respond to this in due course. Currently, there is no relief scheme specifically directed at nurseries in England. It is possible, however, that they would be able to claim other forms of relief:

• Charitable relief: where a property is occupied by a charity and wholly or mainly used for charitable purposes, it is entitled to 80% mandatory relief;
• Small business rate relief: properties with a rateable value of £12,000 or under receive 100% rate relief, whilst those with a rateable value between £12,000 and £15,000 receive tapered relief. Occupiers can only claim small business rate relief in respect of one property, and cannot claim if the total rateable value of their properties is £20,000 or more;

Two additional temporary sources of relief were introduced in the March 2017 Budget:

• A new £300 million fund has been made available to local authorities to enable them to apply discretionary relief to ‘hard cases’. This comprises £180 million in 2017-18, followed by £85 million, £35 million and £5 million in the ensuing years, as announced in the 2017 Budget. It is for billing authorities (district and unitary councils) to decide how to allocate discretionary relief under this scheme. Each billing authority is allocated a maximum sum that can be reimbursed by the Government.
• Businesses that no longer receive small business rate relief or rural rate relief after the revaluation, but which did receive either relief before, will be subject to an additional limit on the amount by which their rate bills can rise. This is known as the ‘Supporting Small Businesses scheme’. Eligible businesses will see their business rates bills rise by a minimum of £50 per month, or 5% in 2017-18, whichever is the greater, until they reach their full liability. The minimum percentage will become 7.5% in 2018-19, 10% in 2019-20, and 15% in 2020-21 and 2021-22.

The Government’s most recent response to questions about the impact of business rates on childcare providers is that it has “commissioned new research to understand provider’s current costs.”

On 13 September 2017, Derek Mackay, the Scottish Finance Secretary, announced that day nurseries in Scotland would be exempt from paying business rates from April 2018. This followed a report into non-domestic business rates by the Barclay review groups, published in August 2017, which recommended 100 per cent business rate relief which, it estimated, would save the childcare sector in Scotland approximately £8 million annually.

On 27 September 2018, the Welsh Finance Secretary, Mark Drakeford announced that business rates will be scrapped for day nurseries in Wales. This followed calls from campaigners, including the NDNA (National Day Nurseries Association) Cymru, who claimed that it would aid the private sector to support the Welsh Government’s delivery of 30 hours funded childcare to working parents of three and four-year-olds. This will come into force from April 2019 and will be fully available across Wales by 2020, with a review of the policy scheduled in 2022.

Members may find the following further reading material to be of use when preparing for this debate.

Press material:

Scrap business rates to help struggling nurseries, government urged

Children & Young People Now, 8 October 2018

Childcare access falls in disadvantaged areas, new report reveals

Nursery World, 1 October 2018

CEEDA DATA: 2017/18 annual report - Pressure and pride

Nursery World, 30 September 2018

Business rates scrapped for children's day nurseries in Wales

BBC News, 27 September 2018

English nurseries want business rates scrapped after Wales becomes exempt

Daynurseries.co.uk, 27 September 2018

Nursery closures rise 66 per cent since 30 hours began

Nursery World, 16 September 2018

Government urged to find funding solution to save nursery schools

Nursery World, 12 September 2018

Free childcare scheme 'closing' nurseries, education charity says

BBC News, 4 September 2018

[Details of this survey carried out by the Pre-School Learning Alliance are available here]

30 hours: nearly one year on, government must wake up to warning signs

National Day Nurseries Association, 20 June 2018

Small childcare providers struggle to make ends meet

Federation of Small Businesses, 20 June 2018

Funding gap leaves nurseries struggling to pay minimum wage

Financial Times, 20 June 2018 [available to view via Parliamentary accounts]

Closures rise, as nurseries struggle with funding and admin

Nursery World, 19 June 2018

Business of childcare will fail so long as toddlers are the cash-cows

The Conversation, 30 May 2018

Scottish spending watchdog concerned about nursery funding

BBC News, 15 February 2018

Ceeda Data: About Early Years 2 - No such thing as free?

Nursery World, 5 February 2018

A thousand nurseries close as free childcare scheme falters

The Observer, 18 November 2017

Sector reports:

Federation of Small Businesses report, Handle with Care: Challenges facing small childcare providers, 19 April 2018

National Day Nurseries Association, Nursery Survey England, June 2018

National Day Nurseries Association, Annual Nurseries Survey 2018, 20 June 2018