A £204m fund described by the government as the biggest investment in childcare ever “grossly underestimates” what early-years providers need to keep their doors open, representatives of the sector have said. The increase, announced in March’s budget, comes as the government also announced plans for a “wraparound” childcare plan for England. Sixteen councils have been selected to develop the plans for parents of primary school-age children in England in the Department for Education’s “largest ever” investment in childcare. The introduction of the scheme, which will provide care between 8am and 6pm as part of efforts to support more parents to return to work, is to begin next summer. Local authorities from Barnsley to Wiltshire have been selected to work with the government on the scheme, described by the education secretary, Gillian Keegan, as a step forward that will be “transformational for working families and will help grow our economy”. But the announcement was criticised by Rachel Carrell, the founder and CEO of Koru Kids, a childcare company that previously featured in a conflict of interest row over Rishi Sunak’s wife, Akshata Murty, having shares in the firm. While Carrell gave a qualified welcome to the announcement, she said she was disappointed that it was “totally unclear” who was going to deliver the wraparound care, adding there was a lack of crucial detail. “Above all, I really hope that the government isn’t going to assume that what’s needed is a massive expansion of one-size-fits-all ‘after school clubs in the school hall’. One size does not fit every child, or every family. Some children can thrive with a long day – others can’t cope at all.” Meanwhile, the separate confirmation that broader hourly funding rates for each child will increase from September 2023 from an average of £5.29 to £5.62 for three- and-four-year-olds, and from an average of £6 to £7.95 for two-year-olds, was described by the Early Years Alliance as “another disappointment”. “Given that government’s own figures show that there is a £1.8bn shortfall in the existing three- and-four-year-old offer, how can anyone argue that a mere 6% increase in funding will come anywhere close to easing the pressures facing the sector, especially in the face of sky-high rates of inflation?” said Neil Leitch, the CEO of the lobby group. “Clearly, the government has grossly underestimated what early-years providers need to both keep their doors open and continue to provide high-quality education and care. While we recognise that the plans for funding the new one- and two-year-old offers have yet to be confirmed, the fact is that funding must be adequate across the whole early-years system for the sector to be able to remain sustainable, and from today’s announcement, it is clear that this simply isn’t the case.” The chancellor, Jeremy Hunt, said: “I know the cost of childcare can be a real struggle for parents and can become a barrier to work. That’s why we announced the largest ever expansion of free childcare at spring budget, and today we’re increasing hourly funding rates to make sure the system is ready to deliver, including uplifting rates for a two-year-old by a third. “These reforms will be transformative, and ensure that we build a childcare system comparable to the best.”