I was recently invited onto the Sky News Politics Hub programme for an interview with Sophy Ridge, and I’m not sure I allowed her to get a word in edgeways, as I found myself letting off steam about the recent budget and the impact on early years providers. I didn’t say everything I wanted to, either, so I thought I’d better offload my reflections into a blog.

Our financial year at Acorn is the calendar year, so we traditionally sign off our budget in November for the following year. This year we knew that a government budget would be set out on 30th October, so my Head of Finance, Emily, and myself prepared a budget with different scenarios. We’d already had to make some adjustments for the impact of the rise in the National Living Wage – which was higher than we anticipated at 6.7%, particularly in the case of younger employees (16.3% and 18%). I don’t disagree with the need to increase the minimum wage, and recognise the importance of maintaining a differential between the minimum wage and our qualified early years professionals, but we also know that fee rises compromise our affordability so we are left wondering how to accommodate these increases and reluctantly worked out that an average fee increase of 7% will be needed when these come into effect in April next year.

We had also heard the pre-budget rumours about the National Insurance Contributions (NICs) being increased by one or two per cent so I’d asked Emily to do a scenario for each of those, though hoping it would be the former, as a 2% increase would cost us £90,000. On the day of the budget I was listening avidly to the Chancellor’s speech but it was also a training day for some of our nurseries, and I was on my way to Emberton to deliver a session on our outdoor ethos. As I arrived, I heard Rachel Reeves’ announcement that NICs would increase by 1.2% so I sent a gleeful email to Emily – we’re OK, it’s less than we feared. As soon as my training session was finished I turned my phone back on, and found a text message from the chair of our trustee finance committee, asking for a phone call to discuss whether we’d still be able to present our budget the following week to the rest of the board, given the impact of the budget. No problem, I breezily replied, it’s not as bad as we’d anticipated! 

It's laughable now to reflect on my concern about the possibility of a 2% increase. My finance chair calmly pointed out that by his calculations, the drop in the threshold would cost us £276,000. I called Emily and she broke the news to me about the bit of the budget that I hadn’t yet heard, and that seemingly no-one had anticipated. Dropping the threshold at which employer NICs become payable would cost us an additional £615 per employee per year! Much as I recognise the need to fund the NHS and I honestly don’t have a problem with paying taxes, this move affects the early years sector (and social care) disproportionately – around 75% of our overheads are salaries, and with around 460 employees, the calculation of an additional £276,000 per year was correct. In total our employment costs will rise by nearly 10% in April.

As a not-for-profit charitable social enterprise, we are very fortunate not to have any shareholders expecting dividends, but we work on very low margins, aiming only for a break-even at our nurseries in low-income areas. There is no ‘wiggle room’ that can patch this enormous hole in our budget. As I pointed out on the Sky News programme, this endangers those nurseries that the Labour government should be the keenest to support, those situated in areas of deprivation, and heavily dependent on the funded hours, which for the three- and four-year-olds are still funded at below the cost of delivery. So far there is no indication that the government care about this unforeseen consequence.

I’d already felt let down and disappointed by the new government’s focus on breakfast clubs and putting nurseries in empty classrooms (a ludicrous idea for so many reasons) and now it seems as if they really don’t care if high quality early years provision is limited to those families who can afford high fees. The admirable (and brilliantly named) Pregnant Then Screwed have surveyed families who have confirmed what those of us working in the sector already know – if nursery fees become unaffordable, working parents (particularly mothers) reduce their working hours or leave the workforce altogether. How is that going to help your ambitious growth plans Rachel?

 

 Zoe Raven