The coalition's cuts to early years education are storing up problems for the future

By neglecting the early years we risk having to spend more playing catch-up later on.

If the Spending Round was supposed to protect education, the Chancellor’s calculations didn’t add up. By ignoring early years, what sounds like good news for schools could end up being bad news for education outcomes.

The schools budget is one of the few that has been protected from cuts – not just in cash terms, but in real terms. But by ring-fencing schools funding, other areas of education will take a much deeper hit. Rather than an across the board cut of 1 per cent, this will be concentrated in early years, early intervention projects and further education colleges, who now face more than a 4 per cent cut in their budgets.

In the pre-spending review negotiations, Nick Clegg fought to maintain the government’s commitment to rolling out childcare to 2-year-olds in low-income families. So it could have been worse. Small mercy. From an educational development perspective, it makes better sense to prioritise funding in the early years than to spend more on playing catch-up later on. The first years of a child’s life are a crucial period of rapid development. We know high quality childcare has the potential to boost children’s development (both cognitive and social), and, most importantly, we know high quality early years has the greatest positive impact on those children from households with lower levels of income and education.

And disadvantage starts young. At 18 months, children of parents with lower income and lower levels of formal education are already scoring substantially lower in development tests than their colleagues, and these gaps typically widen. Our early years sector has been instrumental in helping narrow this gap, less than half of children from a Free School Meal background are deemed to have a "good level of development" at five. This either means less privileged children are getting left behind when they start compulsory education or schools have to invest far more money tackling the gap later on.

The early years sector is struggling and further cuts will only exacerbate the problem. Many providers are already unable to cover costs of delivering the free entitlement – and this has been worsening in recent months. Four out of ten nurseries that offer free places for two-year-olds do not receive enough funding to cover their costs. The average shortfall (£1.19 per hour) works out as a loss of £678 per year, per child. In the south of England it’s even worse, at £1,208. For the three and four-year-old places, 8 out of 10 nurseries in England are unable to cover their costs, losing £700 per year per child.

So the further cuts to local authorities and early years are going to cause serious problems. The costs can’t be absorbed by providers – a quarter of providers made a financial loss in the previous year, and salaries are already extremely low, with the average full time childminder earning just £11,400 a year.

If the costs can’t be covered by the sector, providers will either face closure or will need to push the prices up. But parents already pay comparatively high prices for childcare, and family incomes are already being squeezed by the fact the costs of living rising quicker than pay.

By neglecting the early years we risk having to spend more playing catch-up later on. The Spending Round verdict? Great for schools, but tough on toddlers.

David Cameron is pictured during a visit to a London Early Years Foundation nursery in London. Photograph: Getty Images.
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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.