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New research on the cost and funding of early education

The Department for Education (DfE) has published new independent research on the cost and funding of early education in England. The work forms part of the Study of Early Education and Development (SEED), a major eight-year study commissioned by DfE to explore the impact of government-funded childcare and early education.

The new report, authored by Frontier Economics, looks at a number of issues concerning cost and funding of early education including how costs vary between different types of providers and in different parts of the country, as well as the additional costs associated with provision for children with special educational needs and disability (SEND).

Key findings include:

  • Childminders have the lowest average total weekly cost due to their small scale. The average total weekly cost for a setting is £4,747, but for childminders it is £797. Maintained nursery schools and LA / children’s centres have higher average total weekly costs (£11,144 and £9,178 respectively) than private, voluntary or nursery class settings (£6,307, £4,116 and £3,243 respectively).
  • The mean hourly delivery cost per child is £4.58 for children under the age of 2; £4.30 for 2- year-olds; £3.72 for 3- and 4-year-olds; and £3.91 for school children (when cared for in settings with preschool children).
  • The mean hourly costs for 3- and 4-year-olds are higher for childminders, maintained nursery schools and LA/children’s centres than for nursery classes, private and voluntary settings. These differences are statistically significant and are not explained by related differences in region, quality or age profile across provider types. The hourly cost is also statistically significantly higher for nursery classes over private settings. There is a similar pattern in hourly cost across provider types for 2-year-olds.
  • The mean hourly cost for 3- and 4-year-olds is substantially higher in London (£4.86) and somewhat higher in the Midlands (£3.98), South West (£3.79) and East of England (£3.65) than the other five regions (which range from £3.06 to £3.49). A similar pattern exists for the costs for 2-year-old children. These regional differences are statistically significant and not explained by related variations in provider types or quality levels, but appear to reflect differences in the cost of resources across the country.
  • Mean hourly costs are also slightly higher in urban than in rural areas and in more deprived areas over less deprived ones. However, the differences are not statistically significant once allowance is made for other related factors.
  • The study did not find a strong correlation between quality and cost, and there was little difference in cost between graduate-led settings and non-graduate-led settings.
  • Additional funding for children with SEND either in mainstream settings or in specialist SEND settings tends to be insufficient to cover these additional costs of delivery.

The report’s main conclusions include:

  • Designing efficient levels of early years entitlement funding (EYE) which are financially sustainable for settings is challenging for several reasons. First, there is substantial variation in the hourly cost of delivery. Second, settings tend to operate under complex financial models involving cross-subsidisation between different ages of children and across different time periods. Third, there is a need to better understand the drivers of the surpluses in revenue over costs.
  • There is some limited evidence that the current system does not adequately deliver the child-specific financial support required for children with SEND. Further, more robust, research is required on this issue.
  • Exploring the reasons why delivery costs vary across provider types might offer new insights on how early education and childcare could be delivered more efficiently at lower cost.
  •  The evidence indicates that higher quality does not involve substantially higher cost. Moreover, higher funding or subsidy levels provide the opportunity for providers to deliver or parents to choose higher quality, but do not guarantee that they will do so. It suggests an effective financial incentive would require higher funding or subsidy levels to be attached to higher quality provision or use.
  • The variation in the cost of different options for the delivery of early education suggests that some may offer better value for money than others. However, these costs need to be balanced against evidence on the financial value of the impacts to draw final conclusions on value for money.