More than a quarter of childcare providers say they will not survive the year due to funding rates failing to keep up with costs, a committee warned.

Jenny Rathbone, who chairs the Senedd’s equality committee, highlighted an Early Years Wales survey which raised the sector’s concerns about financial sustainability.

The Cardiff Central MS said while 72 per cent of providers were confident they would survive for one year, that means 28 per cent feared for their immediate future under the current model.

Ms Rathbone warned of a “falling-off-a-cliff” scenario with 80 per cent of providers saying they did not think they would survive two years and only 9 per cent confident of surviving the next five.

Calling for a rapid review, Ms Rathbone warned: “Any increase in funding would only come in the next financial year. So, where does that leave these people?”

Buffy Williams, a fellow Labour backbencher, said almost all providers want the hourly rate of childcare offer funding to be reviewed annually or linked to inflation.

She raised evidence to the committee that the current £5 rate – which was initially set in April 2022 – is unsustainable and risks the viability of a large number of childcare providers.

Jayne Bryant, who is new in post as early years minister, said a three-year cycle aligns with the budget-setting process but she would be open to reviewing the vital rate more regularly.

Acknowledging the fragility of the childcare sector, she said: “I do recognise that for some providers this really does mean that they're operating very close to the financial wire.”

Ms Bryant confirmed any rate change would not come into effect until April 2025, stressing that budgets are tight and decisions must be based on robust evidence.

Clare Severn, the Welsh Government’s head of childcare and policy, warned that childcare settings in Wales face “really, really tough times”.

She said: “The national minimum wage has really impacted on childcare settings.

“The increase in the actual wage as well as the change to the age at which people are entitled to the national minimum wage has really fallen hard on the childcare sector.”

Jane Dodds, the Lib Dems’ leader in Wales, who was a social worker for 27 years, raised concerns about inadequate provision across Wales for disabled children.

Sharing her concerns, Ms Bryant pointed to the additional support grant, which aims to ensure that all children have equal access to the Welsh Government’s childcare offer.

Pressed for a timeline on proposals for professional registration of the workforce, Ms Severn stressed the need to tread carefully, suggesting the reforms are at least two to three years off.

Plaid Cymru’s Sioned Williams highlighted evidence from the Bevan Foundation and Oxfam Cymru that most parents believe childcare is completely unaffordable.

Ms Bryant told the committee a universal childcare system remains the ambition, with a wider vision for a fully integrated early childhood play, learning and care system.

Quizzed about the expansion of the childcare element of the Flying Start programme, the witnesses said five councils are lagging due to recruitment and retention challenges.

Responding to the Bevan Foundation’s calls for a more cohesive childcare offer, Ms Bryant agreed it is important to make it as easy as possible for parents to understand entitlements.

Carolyn Thomas, who represents North Wales, echoed the Wales TUC’s calls for a childcare forum to tackle low pay and the undervaluing of a predominantly female workforce.

The Labour MS highlighted suggestions that standards and benchmarks relating to the workforce could be used as a condition of funding in future.

Ms Bryant suggested Wales could follow Scotland in attaching requirements in relation to pay and staff development, particularly a commitment to the real living wage.