Recommendation 8

The Government will soon be funding up to 80% of all childcare places in England, up from 50% before the Spring Budget. In recognition of this, and the public benefit that the whole early years sector is providing, the HM Treasury should grant all early years providers an exemption from business rates. Private, Voluntary and Independent (PVI) settings should also be zero-rated for VAT. We heard that VAT costs and business rates facing ECEC settings are taken into account in the DfE’s process of setting funding rates. Following these proposed changes, DfE should not account for any cost savings gained from VAT and business rate exemptions in their calculation of the funding allocations for local authorities. This would allow savings to be channelled back into the settings in recognition for the need for a more qualified (and therefore expensive) workforce. The benefits to retention and development of staff, affordability for parents and expansion of places for children will substantially outweigh the costs of these changes.