The Government knew nursery fees could rise as a result of their flagship free childcare policy, official documents reveal.
Documents obtained under Freedom of Information laws from the Department for Education (DfE) state that officials recognised that introducing the 30-hours free childcare for three and four-year-olds in England was likely to result in price increases for parents.
The documents, released by the Early Years Alliance (EYA) after the Government was forced to publish them by the Information Commissioner, suggest that early years funding rates for 2020/21 were less than two-thirds of what DfE estimated to be the true cost of "fully funding" the sector.
Neil Leitch, chief executive of the EYA, will accuse the Government of "shamelessly, knowingly underfunding" the sector during his keynote speech at the EYA’s annual conference on Thursday.
The EYA originally submitted its FOI request – which asked for proof that the early years funding rates announced in 2015 and implemented in 2017 had been calculated to be enough to cover the rising cost of delivering places over subsequent years – in December 2018.
A briefing document to the ministers, entitled Early Years Spending Review Scenarios and dated October 27, 2015, said: "Provider costs vary substantially between age groups – primarily because of statutory ratios. Providers generally adopt a more-or-less flat pricing structure across the age phases.
The Early Years Alliance says parents have had enough of paying for poor policy
"Currently this is possible because the free entitlement is only 15 hours. When Gvt [Government] purchases the majority of ‘cheaper’ three- and four-year-old places, it will become harder for providers to price in this way.
"Providers may, therefore, increase prices for younger children – potentially by as much as 30 percent. This could stop parents returning to work while their children are younger.
"There is some evidence that a 10 percent reduction in the cost of childcare might lead to a 1.4 percent increase in the employment rate for married mothers with pre-school age children."
The same document marked as "official sensitive", adds: "There are a number of factors that could risk the sustainability of the [three- and four-year-old] entitlement – from NLW (National Living Wage) pressures to supporting children with Send.
"Fully funding them all is not affordable – by 2020-21 it would be a 3-4yo rate of £7.49, and potentially cost for the uplift alone of over £2bn.
"We will make reforms and expect providers to become more efficient in order to reduce this cost."
Mr Leitch said: "For so long, the Government has tried to deflect the blame for rising childcare costs.
"But these documents prove, in black and white, that it knew that the introduction of the 30-hours policy, along with an insufficient level of investment, would result in higher costs for parents of younger children.
"Early-years providers and parents have had enough of being forced to pay the price for this underfunded policy year after year."
A DfE spokesperson said: “We’ve made an unprecedented investment in childcare over the past decade, spending more than £3.5 billion in each of the past three years on our free childcare offers and increasing the hourly rate paid to councils above inflation for the past two years."