Simon Laube, ECC CEO, says Government funding for the sector has not been keeping up with inflation. Since 2019, this has equated to a drop in funding by more than 11 percent in real terms. Growing centre budget shortfalls are putting the futures of our youngest tamariki severely at risk.
“Quality early childhood education is one of the best things we can give our young people. It sets them up for success – not just as they embark on their education journeys, but for the rest of their lives,” says Laube.
“Early childhood centres play an even greater role for children from families who struggle financially – those least able to afford increases in fees.
“But centres have reached crisis point. Most providers rely heavily on Government funding, but the gap in costs and what the Government is providing only continues to grow.
“Every month, more centres around the country are closing. Our analysis shows that closures went from four per month in 2022 to 20 per month in 2023. The centre closures are stacking up, with a total of 443 closed between March 2022 and July 2025.
“Centres that are barely able to keep the lights on have been forced to cut even more costs and shift more of the burden onto parents. According to the Ministry of Education, 20 Hours ECE funding has not kept pace with rising costs, including inflation.
“Kiwi families are already struggling with the cost of living. We want to show future families that it is affordable to have a family and get quality education for their preschool-aged children.
“As part of the ECC’s ‘5 Percent for Under 5s’ campaign, we’re making a simple ask of the Government: increase funding for early childhood education by 5 percent in this year’s Budget, with the increase applied from 1 July 2026, so government funding can start to catch up.
“This cost adjustment would help avoid an effective funding cut to providers while costs are increasing, driven largely by teacher salary costs – which have increased by over 20 percent in some cases.
“We’re working with early childhood centres, parents, and communities to make our voice heard to politicians.
“This commitment by the Government will help ensure early learning services can keep delivering safe, reliable care and strong learning outcomes for nearly 200,000 young Kiwis.
“We’re calling on the Government to be brave this election year and start closing the gap.”
Notes
More information about the 5 Percent for Under 5s campaign can be found at: https://www.ecc.org.nz/5-percent-for-under-5s/
The following reports further illustrate the impacts of the funding cuts for ECE:
Pay Parity Closures Report: ECC analysis shows that 443 early childhood services closed between March 2022 and July 2025. The Pay Parity scheme, combined with ongoing COVID impacts and sustained underfunding from the Government, is severely damaging the sector. This rise in closures puts the future of accessible, high-quality early childhood education and care at serious risk.
ECE Debt Report: ECC analysis, based on Official Information Act requests to the IRD, shows the total amount of ECE debt to IRD (mainly GST and PAYE) has risen from $7 million (2014/15) to $27 million (2024/25), nearly 300 percent. Non-payment of PAYE is a worrying financial sign for ECE entities. Failure to deduct PAYE is recoverable by the Crown, as employers (and PAYE intermediaries) are deemed to hold the tax in trust to the Crown.
Benefits of 20 Hours Free ECE: A recent Ministry of Education report, proactively released, shows that the Government’s main ECE funding policy has not kept up with rising costs and inflation. Yet for services that claim this funding, they are expected not to charge fees for 20 hours.
