Private Government documents show ministers were told that flagship childcare plans would push up costs for parents.
The dossier, obtained by the Early Years Alliance after a two-and-a-half-year freedom of information battle, reveals that officials sounded the alarm in 2015 over plans to offer 30 hours of free childcare for 3 and 4-year-olds.
Working parents can claim the weekly childcare if they earn more than the national living wage for 16 hours per week – around £1,813 – but less than £100,000 a year.
But early years leaders have long warned that the scheme is underfunded.
Documents show civil servants estimated the cost of providing a government-funded early years place would reach £7.49 per child per hour by 2020-21.
But independent analysts Ceeda said the average early years funding rate given to local authorities in 2020-21 was just £4.89 – a shortfall of £2.60 per child per hour, or £2,964 per child over a year.
Officials also said the scheme could drive up costs for parents and force providers to have bigger groups of children.
A briefing document on the plans said providers “may increase prices for younger children – potentially by as much as 30%. This could stop parents returning to work while their children are younger.”
Ministers were also advised to deliberately pass on costs to parents by charging them for things like food and nappies.
Early Years Alliance Chief Executive Neil Leitch said: “For years, the early years sector has warned that the so-called ‘free entitlement’ offer is anything but free, in the face of repeated government claims that the policy is adequately funded.
“These documents, which they spent more than two years trying to hide, prove otherwise.”
It comes after more than 100,000 people signed a petition demanding an independent review into childcare funding and affordability.
Shadow Early Years Minister Tulip Siddiq said: “These shocking findings confirm the Conservatives’ disregard for early years education and the childcare needs of working families.
“Conservative Ministers knew that they were dramatically underfunding early years, and that this would drive up the cost of childcare whilst driving down quality. Yet they pushed ahead regardless.
“The Government owes parents an apology for this reckless underfunding of early years and for covering it up.”
She demanded urgent action to prevent closures of early years providers, which have been hit hard by the pandemic.
Cllr Anntoinette Bramble, Chair of the LGA’s Children and Young People Board, said: “Early years is an essential element of levelling up. To help the national recovery, it is vital that all parents have access to the good quality childcare they need to enable them to return to work, while ensuring that children have the support they need to develop school readiness.
“We have long highlighted that the early entitlements are underfunded. This underfunding, alongside a fall in income from parents during lockdowns, was a key factor in the challenges face by early years providers throughout the pandemic as they worked hard to support children and families.”
A Department for Education 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.
“Through our early years funding formula, which we introduced after consultation with the sector, councils must pass on the vast majority of the funding they receive for the three and four-year-old entitlements.
“The number of childcare places available for parents in England has remained broadly stable since 2015, and we are not aware of any significant issues for parents in accessing free places – we work closely with councils to ensure this remains the case.”
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