MPs spoke out about the impact of National Insurance rises on nurseries this week as Parliament voted against amendments which would exempt childcare providers from the change.

After the third reading of the National Insurance Contributions (Secondary Class 1 Contributions) Bill MPs voted against the exemption of childcare provision from rises to employer contributions, and against a review of the impact on childcare provision six months after the Act is passed.

However, during the debate a number of MPs highlighted the impact the changes would make on nurseries in their constituencies.

Gareth Davies, MP for Grantham and Bourne, said  the Bill would contribute an average of £47,000 in additional costs per nursery next year, quoting figures from National Day Nurseries Association (NDNA) analysis.

Stella Creasey, MP for Walthamstow, said the childcare sector would be particularly impacted because “staffing costs make up 75% of a nursery’s running costs, compared with 30% for the average restaurant.”

James Murray, Exchequer Secretary to the Treasury, said “many nurseries” would be able to access the employment allowance, which will allow eligible employers to reduce the amount they pay in NI contributions by up to £10,500. However businesses receiving more than half of their income from public funding are not eligible for the allowance, and Creasey said this ruled out most nurseries, which gain the majority of their income from funded places.

“There is perhaps an unintended irony in all that… which is that investing in more childcare, as we are doing, means that many of those small businesses will not be eligible for the employment allowance,” she said. “As it is about companies that receive less than 50% of their income from public funding, while many childcare providers were originally in that position before money started going into them, the irony is that many fewer will be in that position in the coming years as a result, meaning that they will be denied the opportunity.”

James MacLeary, MP for Lewes and chair of the All-Party Parliamentary Group for childcare and early education, said the rises would lead to higher fees for parents.  “The National Insurance changes could lead to recruitment freezes, reduced staff training and even nursery closures,” he said.

Purnima Tanuku, chief executive of NDNA, said the organisation had briefed many MPs ahead of the debate. She said: “Exchequer Secretary James Murray responded by saying that it’s ‘likely that childcare providers will be able to benefit from the employment allowance’. However, current rules mean that as the government-funded hours are increasing, they won’t be eligible for this allowance. Analysis by the Institute for Fiscal Studies suggests this is already the case and nurseries are heading towards 80% of their places being publicly-funded. We urgently need the Government to review their rules and reimburse private and voluntary early education settings in the same way that they will do for schools and school-based nursery provision.”

She added: “While it’s good that MPs understand the situation and are making these crucial arguments for nurseries, the Government must change the rules to enable nurseries to  be sustainable. If this is not addressed urgently, parents will be left footing the bill or risk a further reduction in places and more closures.”