The Chancellor’s commitment to increase the National Living Wage to more than £11 an hour will be “the final nail in the coffin for settings” unless funding rises in line with salaries, the early years sector has warned.

Speaking at the Conservative Party conference in Manchester, Chancellor Jeremy Hunt committed to accept recommendations from the Low Pay Commission, which will be announced in November. Based on the latest forecasts, this would see the National Living Wage increase to more than £11 an hour from April 2024. The National Living Wage is the minimum wage for people aged 23 and above.

Neil Leitch, chief executive of the Early Years Alliance, said: “While we absolutely support the principle of all staff receiving a fair and reasonable wage, the fact is that without adequate government funding, this increase in the national living wage is likely to spell disaster for the early years.”

He added: “There is no question that those working in the early years are educational professionals who absolutely deserve a wage that reflects the value of the work that they do – but unless the government ensures that funding for the sector rises in line with wage increases, what should be a positive development for the sector could end up marking the final nail in the coffin for settings across the country.”

Purnima Tanuku, chief executive of National Day Nurseries Association (NDNA), said: “Since it was first brought in almost eight years ago, the National Living Wage will have gone up by 53% and yet the hourly funding rate that the government pays to providers has only risen by 23% in the same period.”

She added: “While providers value what their amazing staff do and want to be able to reward them better to recognise the difference they make to children’s lives, they are undermined by years of chronic underfunding. If the Government plans to increase the National Living Wage to £11 and beyond, they need to have a plan of how childcare funding will keep up, given historically low funding rates.”