ECE Service Closures Down, Risks Up: OECE Warns Budget 2026 Must Change Course
PRESS RELEASE – 26 May 2026
Claims that hundreds of early childhood services would struggle to survive and shut their doors after the tiny 0.5 percent subsidy increase in Budget 2025 and because funding has not kept pace with inflation have not materialised.
Despite tough economic conditions across NZ, the ECE sector has instead recorded its lowest number of service closures in five years, with just 79 ECE licences cancelled in 2025 – down from 87 in 2024 and far below the 173 peak in 2023.
Dr Sarah Alexander, Chief Advisor at the Office of Early Childhood Education (OECE), says the data shows the sector is far from collapse.
“The sector is not in freefall. Closures are trending downward, and we’re seeing renewed investor interest in building and owning more centres.”
But she cautions that growth brings its own risks.
“If a surge of new centres occurs over the coming year or two, financial pressures could intensify. When a new service opens down the road, the same number of children are suddenly spread across more providers and that is already financially hurting services in communities where supply exceeds demand.”
Dr Alexander says one policy change would make a significant difference: reinstating Network Management so new services must demonstrate community need before they can apply for a licence.
“The early childhood sector does not need a big funding boost to paper over problems.
“What it needs is for the government to reverse the policy settings that are driving down safety and quality – settings that make it easier for service operators to generate profit, but harder for children to thrive.”
She notes that the Government has stepped back from measures designed to keep fees down for parents. The reversal of the Budget 2023 20 Hours ECE initiative removed requirements for services to publish fee schedules, provide fee data to the Ministry of Education, and charge by the hour with the 20 hours clearly marked as $0. Without strong requirements on how funding must translate into savings for families, she says, parents are left exposed to rising fees.
“We have seen this government make it easier for services to operate by reducing teacher pay costs, freezing teacher pay‑parity rates, removing and softening regulatory standards, and making licence cancellations even less likely when there are serious and multiple breaches. These changes support services to maintain profitability, but they do so by lowering quality even further and increasing risks for children.”
She says the consequences of declining standards, driven by policy decisions that put cost‑cutting ahead of children’s needs, are well understood.
“When standards fall, children receive poorer quality care and education. The consequences typically include more children exhibiting challenging behaviour and learning difficulties, more serious incidents, more frequent sickness, and a workforce under significant strain.”
And she stresses that the impact will not remain within the ECE sector.
“These problems do not stop at the ECE gate. They flow into schools, into the health system, and into wider social and educational disadvantage. Cutting quality simply shifts the burden to other parts of the system and ultimately, children pay the price.”
ENDS
