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Leaders at Kent County Council (KCC) have written to the government calling for an urgent review of funding guidance for Early Years settings during lockdown.
It comes as nurseries are due to hold their annual headcount which determines how much funding they will receive the following year based on the number of children in their care.
David Whitehead, from Potential in Everyone Academy Trust speaks on the issue
It is set to happen on January 18, but with so many children isolating or learning from home, there are fears establishments will be penalised for having lower numbers which could force them into closure.
KCC leader Roger Gough, and cabinet member for education and skills, Richard Long, have written a letter to Parliamentary Under-Secretary of State for Children and Families, Minister Vicky Ford asking the government to urgently take action and issue clearer guidance.
Speaking today, Mr Long said: "During the first lockdown, government guidance stipulated local authorities could continue to pay Early Years providers for free entitlements for two, three and four year-olds, based on the number of eligible children that were registered rather than those who were attending.
"A similar arrangement remained for the Autumn term and this proved vital for the survival of many nurseries, pre-schools and childminders during an extremely tough time.
“However, from January 1, the guidance states the funding arrangements would return to how they were before the pandemic, where local authorities would only pay providers for children who attend settings.
"Despite the government asking Early Years to stay open to all children, most settings have less than 50% of their normal levels of attendance meaning their funding has, in some cases, halved.
"More measures are needed now to ensure this vital element of the education sector is able to continue looking after Kent’s children."
The call for action is being backed by David Whitehead, the chief executive of the Potential in Everyone Academy Trust based in Sittingbourne.
He said: "If parents are making key decisions not to send their children in based on health and safety, then the setting shouldn't be punished in the form of funding for the following year.
"Overall nurseries have been really overlooked. The rhetoric is that they are safe and that is based on the fact children are not as affected by the virus, but it always seems to overlook the adults that are working in the provision."
The news of KCC's letter was welcomed by mother-of-two Nikki Dempster from Ashford who described the current situation as 'madness'.
The 31-year-old is currently a stay-at-home mum who is happy to keep her children Maisie, five, and Luna, three, home through lockdown.
But if she continues to keep Luna out of nursery, she may lose her space when it is eventually safe to return.
Mrs Dempster said: "It's good they are taking action but they are also late in the game and it's frustrating it has got to this point.
"I'm just hopeful the government is actually going to listen and make the right decision because at the moment it goes against everything we have been advised to do.
"There are a lot of mums like me who are happy to have their children at home while they need to, but if we continue to do that our children will miss out because of it.
"If we send Luna in for the headcount and then take her straight back out again, it could cause problems for the pre-school which is the last thing we want. There has got to be a way round it."
Mr Long and Mr Gough also used the letter to reinforce their call to the government for all school, early years and childcare staff to be given priority access to the Covid-19 vaccination.
To read the letter in full, click here.