UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 1065

HOUSE OF COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE THE

CHILDREN, SCHOOLS AND FAMILIES COMMITTEE

 

EARLY YEARS SINGLE FUNDING FORMULA

WEDNESDAY 28 OCTOBER 2009

 

JEAN ENSING, NINA NEWELL, MEGAN PACEY, BARBARA RIDDELL, CLAIRE SCHOFIELD, and COLIN WILLMAN

TIM DAVIS, THANOS MORPHITIS and JENNY SPRATT

 

Evidence heard in Public

Questions 1 - 63

 

USE OF THE TRANSCRIPT

1.	This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.
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Oral Evidence

Taken before the Children, Schools and Families Committee

on Wednesday 28 October 2009

Members present:

Mr. Barry Sheerman (Chairman)

Annette Brooke

Mr. David Chaytor

Paul Holmes

Mr. Andrew Pelling

Helen Southworth

Mr. Edward Timpson

 

Examination of Witnesses

Witnesses: Jean Ensing CBE, Chair of Governors, Bognor Regis Nursery School and Children's Centre, Nina Newell, Area Manager, Pre-School Learning Alliance, Megan Pacey, Chief Executive, Early Education, Barbara Riddell, Freelance consultant, Claire Schofield, Director of Membership, Policy and Communications, National Day Nurseries Association and Colin Willman, Chair, Education, Skills and Business Support Policy Unit, Federation of Small Businesses, gave evidence.

 

<Chairman:> Good morning. May I welcome you all here while people are settling down? We are delighted that we have such an array of talent and knowledge, which I understand, was put together at quite short notice. So we are very grateful to Megan Pacey, Jean Ensing, Barbara Riddell, Colin Willman, Claire Schofield and Nina Newell. I think that one member of the Committee has a declaration of interest.

<Annette Brooke:> Yes. I am president of the Campaign for Real Nursery Education.

<Chairman:> Claire, should I make a declaration of interest because the National Day Nurseries Association is based in Huddersfield, in my constituency?

<Claire Schofield:> Probably.

 

Q<1> <Chairman:> We are going to get started. I am going to ask all of you whether you want to say a few words, and I mean quite brief words, about where we are. Barbara Riddell sent me a piece of paper, so I will start with her. After that, I will work left and then right.

<Barbara Riddell:> Thank you, Chairman. My particular concern-I know that it is shared by other people on the panel-is that although the single funding formula purports to introduce a more level playing field, I think that is a myth. It is a myth because the decision in the Childcare Act 2006 that all child care is, effectively, education-the definition of child care is education-has led to the idea that the funding of child care and education should be based on exactly the same thing. Really, my contention is that we are talking about apples and eggs, and you cannot fund apples and eggs on a level playing field-that is perhaps a very confusing mixed metaphor.

My particular concern is maintained nursery schools. They are the absolute bedrock of the high-quality nursery education of which this country has quite rightly been so proud. Indeed, they have been the basis of the Government's planned, and continual, expansion of early years services.

 

Q<2> <Chairman:> Just for the outside people here, what do you mean by maintained?

<Barbara Riddell:> Maintained nursery schools are local authority schools, but they are separate schools. They are not a nursery class or part of a primary school; they are independent schools and they have the same status as other schools. They have head teachers, governing bodies and delegated budgets. With the introduction of the single funding formula, I fear very much that the quality of these nursery schools will be so compromised that they will not be able to continue in the way that they have.

More than that-just a last point-nursery schools are important for two reasons. They are important because of the early education that they offer, and that quality is supported by Ofsted evidence. Over the 2005-08 period, 47% of nursery schools had outstanding Ofsted reports. During the same period, 3% of child care and other settings were deemed outstanding, but we should be clear that it is a different funding regime, and, of course, there are real improvements in the private and voluntary sector.

My point is that these nursery schools are vital not only in terms of the quality they offer the children who attend, although as you will see from my paper, those children predominantly come from communities where there are real needs; 62% of maintained nursery schools are in the most disadvantaged areas and they have admissions policies that make sure that they take some of the most deprived children. The point really is that these schools have a vital role not only in terms of the quality in their areas, but as training institutions. Like teaching hospitals, we need them more than ever to improve and raise the quality of early education across the sector as a whole.

<Chairman:> Thank you for that Barbara. I am going to go to first names. Is that all right? Megan, would you like to come in?

<Megan Pacey:> I am Megan Pacey. I was appointed chief exec relatively recently at Early Education. We share Barbara's concerns. Over the last 10 years, we have had significant investment in early education and care. If the single funding formula is implemented as it is proposed, we risk undoing a decade's good work, particularly where that work has benefited the most disadvantaged children and their families. There are issues about children at risk and children under safeguarding measures, and all that will be lost. We are on a continuing and long road in terms of improving the quality of provision and we are not in a proud place in England-one where quality has been fantastic across the board. It's a very slow process. I am particularly concerned that if this measure goes ahead in its current form without further investment, we are going to be in a situation where the quality is dire, and that's not going to be particularly helpful to our children or our families, particularly those most in need.

<Jean Ensing:> I am the Chair of Governors at Bognor Regis Nursery School and Children's Centre. The remit of the centre, as Barbara said, is to take all children, to prioritise need, to provide the highest quality education and care and to lead on development and training. We've done all of that. We've been judged outstanding over the past 14 years in every single inspection on every single aspect.

I guess, like everyone at this table, we thought "level playing field" meant that everybody was going to receive a really good level of funding. Certainly, as a person who is seeing what's happening on the ground, I would be delighted if everybody else had the same funding that we have at the moment. Under the single funding formula, we will lose 52%.

<Chairman:> 52% of your overall funding?

<Jean Ensing:> Yes, the overall funding, if you're looking at amount per hour per child. We stand to lose-I said £100,000 in my little brief, but I was wrong-£99,000 and several hundreds, but I rounded it up. It particularly badly hits authorities like ours: West Sussex, a big county but with historically a low level of what used to be called the old county council services. So we only have four nursery schools, which are children's centres, 12 nursery classes that are left now and 430 private, voluntary and independent providers-and good relationships with them. But we stand to lose, in the maintain-the-county-council bit, half a million pounds from our budgets. Averaging it out on the 430, they are going to get £1,100 each. It's taking a lot from relatively few to give little to many. I think that's going to cause so many problems and yes, my real fear is the loss of the maintained sector.

<Colin Willman:> Obviously, I am looking at it from the PVI area. The funding formula was going to be the light at the end of the tunnel for most of the PVI providers, because they've been operating the early years at a loss since the code of practice changed, or was implemented. Many who have been informed of the figures do feel that it's going to be useful for them and raise the price above the cost so they are not going to be operating at a loss in that area, which may change our survey, when we do it next year, to show that they are going to stay in the trade-18% say they won't be there in 2015. We're already seeing some members selling their nurseries either to chains or to other people who probably haven't done sufficient due diligence.

I don't know how you can work the formula out fairly to make sure of the maintained sector because you have two different structures. It is in our members' interests as well to make sure of that because, in general, they need to have the children of their employees going to nurseries so they can go to work. If they can't afford to pay for the nurseries, they are looking to the people in the maintained sector, and if they don't get sufficient funds, they won't be able to do it.

<Claire Schofield:> I am Director of Membership, Policy and Communications, National Day Nurseries Association, and we represent private and voluntary nurseries. Our perspective is similar to Colin's. Our members have had a history of not meeting their costs in delivering free entitlement sessions. So the commitment from Government to bring in a single funding formula really came in response to problems being recognised there.

I think the issues are around quality. I would say that two thirds of private and voluntary nurseries are good or outstanding, which is equivalent to about 9,000 providers across England. Quality is improving-that has been recognised by Ofsted-but funding needs to support that improvement. Naturally, low funding caps salaries and the way that you can reward your staff, so if we want graduate leadership, which we do-we want everybody more highly qualified working in nurseries-that needs to be funded appropriately. The single funding formula is not a perfect process, but for our members, we are seeing signs and we are hopeful it will make a difference. It is a mixed picture across different local authorities, but we would like some progress to be made, because for them that is the best chance of getting improved funding so that they can do more to raise quality and improve things for their work force.

<Chairman:> We'll come back to that, Claire.

<Nina Newell:> I represent the private and voluntary sector also. As an organisation, the Pre-School Learning Alliance has a large membership within sessional pre-schools or playgroups. Often those are the settings working in areas of deprivation and as my colleagues have quite rightly said, they have been considerably underfunded, particularly in certain areas, for a number of years. In fact, they rely very heavily on the good will of their volunteers. Indeed, when it is a privately run sessional pre-school, they rely on the good will of the owners, who often do not necessarily take out salaries for themselves.

I probably have a slightly more grassroots view because, as an area manager, I have been involved in the initial discussions in various local authorities within the south of England since this was first mooted. The general reaction from providers was one of relief that somebody had at last acknowledged that they were being expected to operate on an even playing field with their maintained colleagues, and that with the advent of the early years foundation stage they were also going to be inspected on the same basis. I think they all thought this would then mean that they would have an increase in funding that would bring them up to the level of their maintained colleagues. It does not look as though that will be the case, because from the discussions I have been involved with in two of my areas, there is no more funding available. Obviously, the consequences are that if you are going to pay Peter you have to rob Paul, and that has a huge impact on the maintained provision.

However, I would point out that there is not always a maintained nursery school within an area, so parents do not have that choice. Often, it is parents in areas of deprivation who do not have a choice of good high-quality provision. With the need to close the gap, we need to make sure that there is choice for parents to enable them to access high-quality provision. I am not sure that the single funding formula is the best way in its present format to do that, because it is so dependent on the relationship that each authority has with its members and the other demands on the direct schools grant. At the moment, funding comes down through the direct schools grant. If there is to be an increase, it has to be justified and argued at Schools Forum against all the competing demands from primary and secondary education as well, and that obviously is a challenge.

 

Q<3> <Chairman:> Can I just press you, Nina, Claire and Colin, on one thing? For those of us who did our economics at university many years ago, tell us a bit about the economics of a private or independent nursery. The free provision guaranteed by the Government-12.5, now going to 15 hours-is only a part of your market. You have lots of other children who are there eight hours a day, who pay higher fees, so in a sense, looked at overall, if I was in another business I would say that the guaranteed 12.5 or 15 hours, even at a low rate, is a steady income that helps you balance the books, and your higher paying, longer staying clients are part of that mix.

<Nina Newell:> Can I take that for the sessional sector? I won't speak about day care, I'll let Claire do that. I am talking about pre-schools that are probably operating either in a community hall or in a church hall within a local community and are offering the minimum entitlement to children, probably from two and a half and above.

 

Q<4> <Chairman:> They're what we used to call pre-school playgroups, are they?

<Nina Newell:> They're still called pre-school playgroups. It hasn't changed. There is still a demand for them and often that is what parents will access, because the people who work there are familiar and they feel able to go to those settings. We obviously want them to be of high quality. You can't look at the single formula in isolation. Alongside it, there is the increase in free entitlement to 15 hours and the drive towards more flexibility. That, alongside the new code of practice-the final draft is under consultation at the moment-limits the amount that those sessional providers, and, indeed, day care, can actually charge for the rest of their services. They are not allowed to charge; the free entitlement has to be free at the point of delivery. That therefore limits their ability to charge for their additional services. So a sessional group that is only able to open for three hours a morning and has two thirds of its children aged three and above-quite a common make-up, because usually Ofsted will only register for perhaps four children under three-is capped as to the amount of income that it can get. It can't charge at all; it has just got to offer the free entitlement for those children.

<Chairman:> That is different, Claire.

<Claire Schofield:> There are similarities. Historically, most children were attending nurseries full-time many years ago, but now, because of the improvements to maternity leave, paternity leave and flexible working, the pattern is much more about part-time. A child may have 15 hours of free provision, but only be attending for 20 hours, even in a private setting. The other issue is that you get perverse things happening to nursery fees and cross-subsidies, so what happens is that to recover the losses on free sessions, children under the age of three pay a higher rate, and parents that use nursery full-time pay a higher rate for the hours outside that free entitlement. So it is raising fees elsewhere to recover losses.

<Chairman:> That's what businesses do, isn't it? All businesses do that.

<Claire Schofield:> They do, but that then has an impact on the fees that parents are charged and on the affordability for all parents using child care settings.

 

Q<5> <Chairman:> I was talking to someone who has a young child in nursery three days a week for £600 a month. Is that a pretty normal cost?

<Claire Schofield:> For three days a week that is higher than normal. It depends on where they are and the type of nursery. In a city area with expensive property costs and wages, that sounds perfectly possible.

 

Q<6> <Chairman:> Colin, these are businesses after all; you represent businesses. Should you complain too much if some of your businesses are guaranteed a customer base at a lower rate, but you are free to charge what you like for other customers?

<Colin Willman:> For some businesses, that would work, but when you are dealing with people, or children in this case, you've got to have a level playing field in the nursery. You cannot have one group receiving high-quality provision, and another receiving medium-quality provision.

 

Q<7> <Chairman:> But we know from Ofsted that that's true, don't we?

<Colin Willman:> Well, perhaps that is Ofsted. We don't necessarily trust the way Ofsted judges us.

<Chairman:> Whatever you think of Ofsted, with most other parts of the educational system, we pretty much know that the quality mark is what Ofsted is rating. In fact, Nina was just boasting about the number of good or outstanding nurseries.

<Colin Willman:> I stand corrected. Economy-wise, the day nursery people we talk to say that they cannot actually provide all the services they would like, because the free entitlement is taken up and they cannot afford to put more into a loss-making area and encourage people to come along. Where people pay £600, those are quite often completely independent nurseries not taking the free care, which some of our members have threatened to do-they are going to break away from the system. They boast about quality, and what they can offer is in competition with the people who are taking in the early years, and they cannot offer the service. So the economies mean that the products cannot be the same.

 

Q<8> <Chairman:> So we've got it all wrong? Everybody on this side wants a level playing field, but the fee isn't enough to make it profitable enough as a level playing field?

<Barbara Riddell:> I do not want to trespass on the details of fees, but I think there is a real issue in terms of the economics of a nursery as I understand it, with children under three and children over three, because you need different staff-child ratios. You need far more adults for younger children. Therefore the cost to any nursery, whether in the maintained, private or voluntary sector, is far higher for younger children. So there is an element of cross-subsidy anyway within the nursery, if you are charging every child of every age the same. Quite a lot of nurseries, not unreasonably, charge more for children under three, so that is one issue.

On the point about flexibility, there is another concern. Flexibility is an element of the single funding formula, and many local authorities are giving additional supplements to nurseries that are able to offer greater flexibility. Of course, we are all anxious to provide really good nurseries and really good opportunities for parents to return to work. But if you look at the actual details-I don't know how many of you have got, or remember, three-year-olds, if you have children or grandchildren and so on-for some three-year-olds this is their first time away from home. There is concern about the idea that you could actually choose that your free entitlement is to be used for 10 hours in one day and then on two other days-let alone issues about what good nursery education is. In my view much of it is to do with the social development of children, the opportunity to make friends and the peer groups they make, let alone the consistency that a good nursery can offer by really organising the curriculum over five days, which is frankly, by and large, better for children.

One of the crucial issues-this applies to school nursery classes as well as separate, local authority nursery schools-is that with flexibility there is an extra supplement, a financial incentive, for them to be as flexible as possible. How compatible is that with maintaining really good quality for children? The idea of a 10-year-old being able to do all their learning in 10 hours-

<Chairman:> A 10-year-old?

<Barbara Riddell:> Sorry, a three-year-old.

<Jean Ensing:> Even a 10-year-old.

<Barbara Riddell:> Jean is right-even a 10-year-old. We don't expect children in secondary school to work for 10 hours a day. I think it is part of the confusion about the idea that all child care is education.

<Jean Ensing:> It's not just a single change. One of the difficulties, and I am sure this affects all sectors, is that it is too much too soon. We have four pressures on us. I was thinking of a pincer movement earlier, but it is not, it is like being in a box and all the sides are coming in. We've got reduced funding from next April. We've got reduced places, because under the old funding system you were allowed protected places. You were funded as a school, as all schools are, and you have so many places and can take children in to fill them over the year. But we are going to have reduced places, because the single funding formula says, or part of the guidance says, that you cannot have planned places. I think there are exceptions, but our authority is not choosing to interpret it that way. I am not blaming them for that either-totally. Reduced funding and reduced places take our funding down even further.

As well as that we've got the flexible time for the 15 hours. We are piloting it and some parents have chosen-it suits them-two and a half days, rather than five mornings or five afternoons. It suits the family and we can understand that fully. But it means, for example, that if your child has speech and language delay, and you choose Wednesday afternoons, Thursday and Friday, and the speech therapist is there on Monday, you lose that entitlement. It also means, for children with behaviour "problems"-children who need a lot of social development-that to have it squashed into two and a half days is not as good as having it spread over five days.

Equally, in terms of the fee-paying part, if you have your two and a half days, you take out the sessions that would have been paid for if you were coming in for your five half days, plus adding extra time for child care in the afternoon, or a lunch or a breakfast to go with it. So we are losing out on funding. It has made quite a big impact on us already and we have only been piloting for two or three months.

The other pressure is to take in the two-year-olds. In our case, these are referred children with particular problems-mental health problems, sudden bereavement, isolation, depression, sudden mounting debt and poverty because of unemployment-and for two-year-olds you have to have a higher level of staffing. So we feel that to have all this complexity coming in at once is very hard to deal with.

<Chairman:> I understand that. Shall we have a quick word from you, Megan?

<Megan Pacey:> Can I just add that it's a no-win situation for anybody? I represent a body that has members in both the maintained sector and the private, voluntary, independent child minding world. Our members join our organisation because they're interested in the quality of provision that they can provide across the entire spectrum. Certainly the feeling I'm getting from my membership is that I have people in the maintained sector who're losing somewhere between 20 and 35% of their budgets almost overnight and that is having a huge impact. At the same time, I have members on the telephone telling me that what has been proposed under the single funding formula might add pennies to their bottom line but they need a lot more than pennies to deliver what the single funding formula is about.

It strikes me that that's not working for anybody. It's time to put the brakes on, reassess the whole situation, look properly at what this is about and then take it forward from there. We have real inconsistency across the local authorities in this country as to how they're interpreting the guidance, and that's starting to come through in what they see as a sensible base rate. At this point, I have base rates being reported of anything from £2.79 per hour per child to £9.40 per hour per child. That is a huge difference and questions have to be asked. Where's the equity for all children in that?

<Chairman:> Thank you for that. I've warmed you up, I think. David?

 

Q<9> <Mr. Chaytor:> Picking up Megan's point, is the objection in the sector to a single funding formula as such, or just to the way this particular formula seems to be impacting on different areas?

<Megan Pacey:> From the point of view of my members, there's no problem with a single funding formula if it is equitable, if it raises the bar and particularly if it raises the quality across all sectors, but we have found ourselves in a kind of us-and-them situation, with the maintained protecting their interests and the PVI protecting theirs. They are very different beasts; we need to be honest about that. The downfall here is that what's good for children and their families, those needs-that's why we're in this game-are not being met at all. That's been lost sight of.

 

Q<10> <Mr. Chaytor:> So it's an issue of detail rather than of principle?

<Megan Pacey:> And an issue of interpretation as to what this is all about. We're getting 150 different versions of what this is about across 150 different local authorities.

<Chairman:> Barbara's shaking her head.

<Barbara Riddell:> Yes, I am shaking my head because, for me, the idea that nursery education, as part of schools funding, and nursery schools and indeed nursery classes should no longer be funded in line with other schools and other activities of schools is a matter of huge regret and will lead to dilution of quality. I was talking right at the beginning about the idea that all child care and education are indistinguishable.

Some anomalies that are coming out of the single funding formula-for example, in some authorities, the highest hourly rate proposed is for child minders. I'm not suggesting for a moment that child minders aren't an absolutely crucial part of child care and early years provision-indeed, in some authorities, they are particularly skilled at looking after children under three with particular medical, social and all kinds of special educational needs-but that's what comes out of a formula that just takes costs and then divides them by children. What it doesn't take account of is that there might be a beacon nursery school two streets away, which is getting a proposed lesser amount per hour than that child minder, and which is providing the most enormous range of other services to children.

The statistics that I included in my paper are really persuasive, I think. It just shows the kinds of children and the differences in terms of the levels of children with special educational needs and other needs and children who have English as a second language-that is an absolutely crucial point. If the single funding formula in its present form goes ahead, there's a nursery school I can think of in Westminster that is going to lose all its Standards Fund. Another consequence of the single funding formula, as I understand it, is that the Standards Fund will no longer go to nursery schools in the way that it does to every other school. That school will lose its EMAS teacher who works with children who have English as a second language. That is an absolutely crucial point.

 

Q<11> <Mr. Chaytor:> But isn't this really an issue for each individual local authority? If there are particular elements of the formula that each individual local authority has constructed, it's a matter of local determination and local lobbying, isn't it? Surely it would be even more problematic if a single national funding formula was imposed on each local authority, regardless of the circumstances.

<Nina Newell:> I take on what you are saying, but all the issues that you are mentioning and the challenges-

<Chairman:> Through the Chair, please.

<Nina Newell:> Sorry. Those are issues for the private, voluntary and independent sector as well, and they do not get additional funding for that at the moment. Under the formula, a lot of local authorities-I have had experience of four-are trying to redress the balance by having the supplement built in, for example, around special educational needs or quality of provision. The problem is that sufficient funding is not available-or may not be-to enable them necessarily to incorporate that. They are having to decide whether to include the supplements and top-slice their existing level of nursery education funding, which is what some authorities have had to decide to do, so that ultimately people are getting very little more, which one of my colleagues was alluding to, or to keep their current rate and add on the supplements. Of course, everybody would like that, but there is a doubt about whether or not it can be achieved if the funding cannot be found out of the dedicated schools grant. Under those circumstances, they are having to prioritise their supplements. Then, of course, you get a dilution. The one supplement that has to be there-it has been dictated-is the deprivation supplement. We could reach a situation where the only settings that get a supplement because of the level of funding that is available are those settings in areas of deprivation. It would be a real pity if we were not able to include quality because, obviously, the whole point is to close the gap, and it has been proved that a quality provision does that. I do not think that any of us on this panel would disagree.

We need to make sure that the formula does what it is set out to do, which is improve the settings in an area to give parents real choice and make sure that, wherever they live and whatever their financial circumstances, they can access quality provision. I am not sure that that will be possible in all areas, but I do not think that there is a problem with the funding formula per se. The feedback that I have had from providers is not that they disagree with the basic principles of the formula or that there should be transparency, but that they are concerned about the level of funding that they will ultimately receive.

 

Q<12> <Mr. Chaytor:> I want to ask Claire or Colin for a quick comment on the issue of the 15 hours. Is part of the problem that the extension to 15 hours has been brought in at roughly the same time as the introduction of the new formula?

<Claire Schofield:> From the perspective of full-day care, 15 hours is less of an issue because they are open all the time, and it is quite manageable-it is sessional settings with their shorter hours that are struggling-so that is not part of the problem. However, flexibility and achieving it go hand in hand with the funding formula. The message from our members was very strongly in support of delivering free sessions, but as for whether that is extended to two-year-olds or extending the hours, please, give us the funding we need to cover the costs of that delivery.

<Colin Willman:> In our survey in February, 62% of our members said that they thought it would have a negative effect on their businesses. Our concern is the amount of money that is available. The funding put in for the early years actually worked out to be sufficient: it just did not get to the delivery end in the PVI sector.

It seems a great shame that the adjustment of that £1 per hour per child, which was the shortfall, is now creating such a hole in the finances of the maintained sector. One asks if any sleight of hand is going on and putting funds in other areas. Perhaps that is where the rules should come in on how the rates are calculated for the local authorities. Another ignored area is bureaucracy: if you are operating with different local authorities, you have different requirements and different paperwork to complete. That creates a lot more labour, which isn't always taken into account.

 

Q<13> <Mr. Chaytor:> Finally, may I ask about linking the funding to the outcomes achieved by the child? Megan, you are smiling a lot at that, so you have some strong views.

<Megan Pacey:> In many respects, we have a situation where we have not been required to measure outcomes in perhaps the way that we ought to have over a period of time. Outcomes and the impact of the investment is something that has only recently started to come to the fore-in a related issue, the inquiry into children's centres, which I understand you are hearing next week, we submitted evidence to that effect, and that was one of the key questions of the inquiry. It is very early days in terms of how practitioners start to measure those outcomes. What we do have, though, is some vision of the early years foundation stage in England, which is hugely helpful in the way that practitioners can easily start to measure those outcomes so that would be quantifiable in the not-too-distant future.

How then do you do the funding? Do you take away funding because those outcomes are not being met or do you invest more because they are not being met-the reward and the discipline that may or may not go depending on the expectation of whatever Government is in power when those rules and regulations come in? That is a huge moot point and we could spend an entire day debating the pros and cons of that. I do not think that there is a fear in the sector of needing to demonstrate the money being invested, but it does need to demonstrate the role that it's doing. I think that the maintained sector at the moment is much better at doing that than, potentially, the private, voluntary and independent sector, which has not been so heavily regulated in that area by Ofsted over a period of time.

<Chairman:> Thank you very much for that. We are now going to move on to the cost of provision-meeting that cost-and Annette will lead. Annette, I think, has already been to your centre.

<Jean Ensing:> Yes.

 

Q<14> <Annette Brooke:> I have indeed.

I'm sure it's in the paperwork somewhere, so please forgive me, but how many maintained nurseries are there in England?

<Jean Ensing:> When I was an HMI in the '90s there were about 600. Even with the presumption against closure, there are only 437 or something now, so we have lost nearly 200 in the past 15 years.

 

Q<15> <Annette Brooke:> I do see that as quite significant in my constituency. We are totally dependent on the private and voluntary sectors, and therefore quite involved in the lobbying around the single funding formula. Equally, I have visited some maintained nursery schools, and you clearly see the difference of the money being spent. It has to be something that we aspire to. Can you-particularly Megan and Nina-give us some idea of the cost per child per hour of provision, give or take, in the different parts of the country?

<Megan Pacey:> In terms of the rates being proposed, I have a range of between £2.79 and £9.40 an hour. What I am not able to give you off the top of my head is how that is being put together. I did have a lady on the phone yesterday who has got a proposed rate of £2.79 saying, "I have just been to Sainsbury's and what can I buy for £2.79? Barely a box of wet wipes." These are key things in an early years setting. Her frustration was that she did not really believe that the local authority had done the due diligence and had really understand the costs of delivering the quality. It was interested in the basic provision, let alone the additional quality aspects. She was wondering how she was going to deliver-or attempt to deliver-what she is currently delivering on £2.79 per hour per child.

<Annette Brooke:> So that's the amount of money that the local authority will pay for the free entitlement per hour-between £2.79 and £9.40.

<Megan Pacey:> Yes.

 

Q<16> <Annette Brooke:> I just wondered whether you had done any work on the actual cost of provision. What sort of range are we talking about?

<Megan Pacey:> It varies enormously. It is very difficult to give you a ballpark figure, because there are so many different variables. I think this is part of what is starting to unravel as people try to set these hourly rates. No one has ever done the work to know what that is. Local authorities are taking, at best, finger-in-the-wind estimates based on a whole range of factors, and then getting a bit further down the line and realising that not all of the factors have been taken into account, or that the figures that have been given for some of those factors are just complete guesstimates.

 

Q<17> <Chairman:> But that can't be true in the private sector, can it, Claire? You must know the average of your members' costs, surely.

<Claire Schofield:> In terms of fees-

<Chairman:> No, costs.

<Claire Schofield:> I think it's a different picture in every area, and that is why with 150 local authorities doing the cost-analysis process, we have had such variable results. Extracting the cost of that nursery session is a very complex process. There isn't a straightforward answer to say that the average cost is exactly this amount.

<Annette Brooke:> Can anybody give me any idea?

<Jean Ensing:> It is complex so I am going to say "I believe". Based on workings out, I believe the actual cost is about £9.40 an hour per child at the moment.

 

Q<18> <Chairman:> Where?

<Jean Ensing:> In nursery.

 

Q<19> <Chairman:> In any nursery?

<Jean Ensing:> In our nursery, with qualified teachers and qualified nursery nurses. All of ours are at the top of the range, which is why we are a good school and a good centre. They are skilled and experienced and have been there many years-someone retiring has just completed 27 years. You build up quality that way. Under the new arrangement, we have been offered £4.92 an hour.

 

Q<20> <Chairman:> Does that include your rent?

<Jean Ensing:> That's for everything. Yes.

<Chairman:> That does include rent for the building you're in?

<Jean Ensing:> We're supposed to cover all of our bills. Yes.

 

Q<21> <Chairman:> How do you work that out, though? It is more difficult in a maintained setting.

<Jean Ensing:> Absolutely. It is. The PVI in our authority has been offered £3.88. It is difficult all round.

<Barbara Riddell:> I can't give you an average cost of maintained schools, although with nursery schools you could work it out. It is a question of what you're working out. In the case of nursery schools, many are providing extensive training to other providers within their area. They are taking on students; they have PGCE students and NVQ students-they are doing all kinds of other things. That is one of the difficulties. Rates of pay is an issue. If you look at this week's "Nursery World" you will see advertisements for senior nursery workers at £12,500, a nursery manager at £9 per hour and level 3 staff at £6 per hour. That is in the private and voluntary sector. Rates in the maintained sector in some instances can be two and half times that, because local authorities are using national scales. It is part of our contention although those kinds of salaries and qualifications do cost more, look at the results-47% of nursery schools in those areas are outstanding. It makes a difference.

<Colin Willman:> We surveyed our 1,100 members in the nursery sector. They came up with an average cost of £4.70 per hour per child for early years provision. There was a range of less than £1 in that, covering the whole of England. The amount of money they were receiving from local authorities was on average £3.64. Again, there was a smaller range of about 50p, varying from London boroughs to other areas of the country. We have been lobbying about that shortfall of £1.06. Many complain they can't keep their staff once they've trained them because they go off and get jobs in the maintained sector at far higher salaries. They can't pay people on the amount of money they can raise from the activities of the nursery.

<Nina Newell:> I think that's why it has been so difficult to get a proper hourly costing because the variables are so huge, not just between maintained and the private and voluntary sector, but between different types of private sector and voluntary sector organisations. One concern that has been raised continually by providers at meetings I've attended is that the costings have been done in general. With the best will in the world, they have taken a sample of providers across an area, but they have been costing them on now and not on aspiration. Of course there is a huge drive for there to be a graduate leading practice within all provision. There is also a requirement for there to be a 1:8 ratio within the non-maintained sector provision where there is not a qualified teacher leading practice.

At the moment the graduate leader fund goes some way towards stopping the gap and enabling private and voluntary sector provision to pay their staff who are qualified to graduate level at a higher level, but there is no guarantee that that is going to continue. A lot of providers wanted this to be an aspiration. They wanted an aspirational element to the single funding formula so that they could perform on an even playing field with their maintained colleagues. At the moment they sometimes struggle with the quality because they are able to pay only £9 or £6 an hour for qualified members of staff, some of whom have 20 years' experience in the sector. Even if we came up with an hourly rate, and I think that Colin's hourly rate is probably there or thereabouts, we are still not comparing like with like. We are not including the need for continually increased funding to pay for more highly qualified staff and we are not enabling them to aspire to that. It is a challenge.

 

Q<22> <Annette Brooke:> Following through on that, given that local authorities can, in special circumstances, pay individual nurseries more than the single funding formula, are any local authorities taking on board those settings that are supporting training when there are highly trained and qualified workers?

<Megan Pacey:> Some, but not all. The final guidance that has been issued in July relates to this-the fact that the quality aspect is no longer a compulsory supplement to have. The only supplement you are required to have is a deprivation level, so if local authorities do not value the quality aspect of what goes on in their early years settings, then that is just something they have not invested in.

<Jean Ensing:> In West Sussex, we only have the deprivation supplement. No common ground was found for a quality supplement. The maintained sector was pushing for it to be linked to qualifications, but the non-maintaineds did not want it linked and there was no common ground, so we have no quality supplement at all.

<Annette Brooke:> I am staggered by that.

<Chairman:> That is staggering.

<Claire Schofield:> In some areas, the quality supplements are being put in place, but it is a very mixed picture. Some are putting them in, tending to be based on qualifications. It may be worth mentioning something that is under consultation in the code of practice for free entitlement, which is encouraging or requiring local authorities to rate nurseries and all their providers in terms of quality and then to fund them in a way that incentivises quality. It is has not been implemented across the board yet, but that will certainly be the direction when the new code of practice comes in.

<Megan Pacey:> May I add to that? That has a knock-on effect on the question that was asked earlier about how you measure the impact. If the quality is not there and is not required to be there, if implementation and instruments are not in place to support that quality, then it is very difficult to measure the impact. It is a vicious circle that is going nowhere very fast.

<Nina Newell:> It is also a question of how the quality supplement is implemented. There has been a lot of debate around the table at meetings I have attended about whether you are rewarding existing quality, which obviously you need to do, but also encouraging quality to be improved. When we are talking about areas of deprivation you have to fund the settings in those areas to enable them to improve their quality because otherwise there will be no quality provision for families to access there at all. Not all families are able to access a quality provision elsewhere. It is a bit of a dilemma and it is not one that has been finally bottomed out anywhere.

 

Q<23> <Annette Brooke:> I just have a very brief question, which you half-answered in your introduction, Jean, about the fact that you won't have funding for all your places if they're not filled on day one in September. Does this affect the private and voluntary sector as well?

<Claire Schofield:> The private and voluntary sector has always been funded on participation-on the numbers of children attending-so it is not a change in position for that sector.

<Annette Brooke:> So the change has been to make you all the same in that respect.

<Chairman:> Who is answering that?

<Annette Brooke:> I think I got my answer there.

 

Q<24> <Mr. Timpson:> Jean, can I take you back to an answer that you gave earlier in connection with your projected loss-I think you said £99,700-to your nursery?

<Jean Ensing:> Yes, it's almost £100,000.

<Mr. Timpson:> Should this funding reform be brought in? Could you perhaps break that figure down for us and explain how you've come to it? How much of it is due to the losses that you can tangibly find within the nursery, and how much of this is you projecting what the loss may be?

<Jean Ensing:> It is based on the figures we've been given. We had this year's budget. If there wasn't the single funding formula, we were told the figure would be say, £400,000-I can't remember it for all nurseries together. That is what it would be, but under the single funding formula, with the new rates, it would be £100,000 less. That is only the first year; it gets worse in the next two years. That is also with a transition arrangement in place. It's not just us-the three other nursery schools in West Sussex stand to lose more than £80,000 each in the first year-but you're given a global figure. One of the difficulties for us is that we try to provide a seamless service as a children's centre/nursery school, but we handle three separate budgets coming in, and in those three budgets there are more than 27 funding streams. However pleased you are to have these bits of money, it is incredibly complex to handle.

 

Q<25> <Mr. Timpson:> You also told us earlier that your nurseries have 14 years of outstanding Ofsted reports across every single indicator, and you told us that a lot of that is due to the long-term commitment of your staff-their experience, their high quality, etcetera. What is the likelihood that, because of the losses that you've described, you're going to have to make some cuts to your staff, and what will the implications be for your nursery?

<Jean Ensing:> The nursery is a Victorian building. Half of it, the children's centre, is in the new bit. We've got lots of small rooms set up as workshops, and obviously you can't have one person between two rooms. We know we've probably got to make five people redundant. We've already closed one room and we try to squeeze the activities into the other rooms. You've got to be legal. You've got to have supervision and sight of children, let alone teaching or working with them.

We also have a garden that we use 100% of the time. In the very best of practice children are in and out. Although we are a seaside town, 43% of our children live in flats with no gardens or access, and we know that it makes a tremendous difference, especially on a Monday morning if children have been cooped up for the weekend, to come in and be in a garden. We have all the areas of learning outside. We have a garden room focused on science-scientific and sensual learning. We won't have sufficient people to have it all open at once. That then reduces your quality, so you are in the worst of practice really, almost like a secondary school; all the children over here for this and then out for that and in for this, and so on.

 

Q<26> <Mr. Timpson:> You have a children's centre affiliated with the nursery. I assume that in your children's centre, like many others across the country, there is a smaller involvement from the private and voluntary sector, is that the case?

<Jean Ensing:> We have day care provision for 24 children. We also have child minders coming in. We have so many services that they are difficult to go through: toddler groups, family learning, adult learning, Jobcentre Plus, baby clinics, health clinics, breast feeding clinics, teenage pre and post-natal support groups and dads' breakfast on Saturdays for dads and granddads, which is especially for parents who have access to their children, so they can come in and play and be involved, with support workers there, rather than going to the nearest pub or McDonald's for their access.

 

Q<27> <Mr. Timpson:> What is the likely impact of the single family formula on your ability to provide all those services that you describe? I think that Barbara is itching to get in as well.

<Jean Ensing:> Because many of the babies and siblings of the children in the nursery are in the other bits and pieces, and we are working with a lot of families. We have some lovely case histories where we have worked with people coming in from babyhood and have supported them, so we have the mums-quite a group now-who are in adult education and are on to their NVQs and one or two are now planning to go to college. They would have been write-offs without the support that they have had in the system. They would have been a huge cost later; they would have been a huge cost already.

I'm sorry to take the space, but we really use and need the planned places. We have referrals that suddenly come in as a result of bereavements, a parent with mental health problems, a parent going to prison, social isolation, children being found on their own or substance abuse. If we had to fill up in September and we did not have the extra space, we could not take them in. It is going to cost society a great deal more for those children and those families to be broken up and the different elements dealt with elsewhere. But the impact-

<Chairman:> I bet you want one of these in your place, don't you Edward? I'm drooling with envy that this isn't in Huddersfield.

<Mr. Timpson:> Absolutely, yes.

<Barbara Riddell:> Very briefly, I just want to say that many maintained nursery schools are children's centres. Your question was about whether day care was run privately or separately. No, it's run as an absolutely fully integrated single institution-the head teacher, whom I know well, at the wonderful Bognor Regis nursery school and children's centre is the head of the children's centre as well. It goes back to the point that the maintained sector is able to cater for a significantly different group of children because of admissions policies and because it is giving absolute priority to those children who are most in need. That goes back to my contention, which is that it really is not reasonable to compare them to a private nursery that may be providing an absolutely excellent service but has admissions criteria based on the ability of parents to pay.

 

Q<28> <Mr. Pelling:> I am not a supporter of the Government but I think that it is important not to have a ritual debagging of the Government when they are not here. The Government have put a lot of resources into early years; education spending is up a lot and it has had a particular emphasis. I appreciate how a formula can be so destructive and disruptive, but in terms of the resources that have gone into children's centres/nursery schools, surely they have been more significant over the years than the cuts that you are being obliged to make by the formula. Is that right?

<Jean Ensing:> We have had more than £1 million-maybe up to £2 million-spent on extending our nursery into a children's centre. To me, it seems ridiculous that it should now be half-empty or underused because we can't afford to run it. In terms of the funding coming in to run it-I mentioned three budgets and 27 funding streams-we actually subsidise it by moving our qualified teachers, if they are not recruits, into work with parents. So it's the other way round: it isn't huge resources going into the children's centre, it's a balancing act so that we can provide all these services.

If we reduce the time and the number of qualified teachers, which we will under the cuts, we won't be able to do some of the really good things that we've done across the centre. I would hate you to think that it's a cycle of deprivation. We do prioritise needy families, but because we are so good, the people buying in to the day care side are largely professionals such as teachers and nurses-people who know where the quality is. So 10 or 15 % of our children are gifted and talented. Across the board, all the children achieve well, but those children do particularly well.

 

Q<29> <Mr. Pelling:> To the extent that there is cross-subsidisation, would that be an argument for saying that nursery schools are too expensive, that it would be better for provision to be in another educational establishment and that, in some ways, what the Government are doing is making you face up to the issues raised by increased economies of scale? Many LEAs aspire to close nursery schools and to tack nursery classes on to schools.

<Megan Pacey:> We've talked a lot about maintained nursery schools, and that is very important, but there is another part of the maintained sector. This single funding formula is having a bigger detrimental impact on all the other maintained provision-be it the nursery units in primary schools or nursery classes in primary schools. Given the nature of the maintained world and the children whose needs are prioritised to be met in it, the maintained nursery schools are probably being hit hardest, because they are, for the most part, small stand-alone units, but there is certainly common ground between units that are contained in primary schools and maintained nursery classes in terms of the impact that the funding formula will have.

 

Q<30> <Paul Holmes:> To go back to something that Colin said, I want to clarify one point. The general written and oral evidence that we have had has said that the implementation of the formula will mean that maintained places will get less money and that private and voluntary places will get more. Colin said there was agreement that there was enough money generally in the pool, but that it did not seem to be coming through-some of it was disappearing somewhere in the process. What did you mean exactly?

<Colin Willman:> I'm just trying to remember the actual figure that was agreed. I think it was £3 billion for the early years. It was worked through that that would be sufficient for all the places in the PVI sector to be fully covered, but they were not getting that-they were getting £1 short per hour. Those funds were being taken for administration down the line or going into other parts of the DSG. The formula was not clear and transparent, so you couldn't actually find out where the money was falling out.

 

Q<31> <Paul Holmes:> So clearly the local authorities are not diverting that money from the private and voluntary sector to the maintained sector, because the maintained sector is taking cuts. Where are they diverting it?

<Colin Willman:> We don't know, because the system is not clear and transparent. That was one of our questions-we wanted a clear and transparent system.

 

Q<32> <Paul Holmes:> Some of the extra money that was specifically provided has supposedly been ring-fenced by the Government, but you are still fairly clear that some money is disappearing somewhere in the system into some other purpose?

<Colin Willman:> It is not just us-some people from the Conservative party worked it out as well. They worked out that what was going in the top wasn't coming out the bottom.

<Paul Holmes:> What you are telling us has just become less reliable because you said that, but never mind.

<Megan Pacey:> To give an example, in one local authority a maintained nursery school was losing 25% of its budget, but if you talked to a PVI in that same local authority that was one of our members, they were gaining pennies. Somewhere along the way, somebody is not being clear and transparent about what is happening with the redistribution of this money. If you take the guidance at face value, it is about a clear and transparent process, but there is something not clear and transparent at local authority level about where the money is being siphoned off to.

 

Q<33> <Paul Holmes:> Have you asked your local authority, "If we're losing 25% and they're gaining 5%, what's happening?"

<Megan Pacey:> It is certainly a question that is being asked in the Schools Forum at the moment: if I am losing 25% of my budget yet my PVI colleagues are only gaining pennies on their bottom line to deliver what is required, where is all the money going? I am not certain at this point whether they have got a straight answer, but there is a real need to hold local authorities accountable for the decisions they are making under the single funding formula.

 

Q<34> <Paul Holmes:> Right, that leads to the general question. Obviously the local authorities are at the centre of working out this standard formula. Are they the right people to do it? What alternative would there be?

<Megan Pacey:> Again, it is a national impression as opposed to hard evidence. I certainly have a sense from numbers of members that they are very frustrated with the local authority officers they are having to deal with because they just do not understand the issues. The person with the most capacity in the local authority has been put on the job, more or less told to get on with it and they are not being supported for the most part. There have been people who are interested in bottom lines rather than the education elements, and they just do not understand the consequences of the decisions that they are making.

 

Q<35> <Paul Holmes:> The research that you did on early education specifically said 59% of respondents. Are you saying that the knowledge of the local authority officers who were doing the job seemed quite patchy?

<Megan Pacey:> Indeed, yes. I don't have a huge sense from my membership that there are lot of people out there in local authorities who really understand this.

<Paul Holmes:> Does that fit with anybody else's impressions?

<Claire Schofield:> It is certainly a mixed picture. Our members are very aware of the tensions that local authorities are under and the difficulties of the officers who are trying to implement this. In some areas it is a very challenging thing for them to do.

 

Q<36> <Chairman:> But this money is ring-fenced. You wouldn't want local authorities not to be able to make decisions. Jean has just said that West Sussex might take deprivation into account but not the quality and the pay of higher-paid professionals. That is down to West Sussex. It isn't down to the Government, is it? I thought we were wanting to trust local authorities more with their money.

<Nina Newell:> I don't think all the money is ring-fenced. The bit that has been ring-fenced is the amount that has come down to pay for the additional free entitlement. The existing pot of money was not ring-fenced. That was changed several years ago. It comes down in the general direct schools grant, with all of its competing demands. It is a very complicated formula. Indeed, I have tried to bottom it out in one of the areas I work in. Even the officers involved find it difficult. There is a will on the part of some local authorities to work very much in partnership, particularly when they have engaged with partners at an early stage. I think that a lot of them are trying very hard to get to grips with it and to make it fair and equitable. However, when there is a limited pot of money, it is very difficult for them to do.

I would like to go back to Megan's point about when a maintained nursery is getting a reduction of 25% and other PVI colleagues are only getting pennies at the bottom. If you have a situation, which I have in one of my areas, where there are only 11 maintained nurseries and the rest of the provision is all in the private, voluntary and independent sector and therefore the bit of money that is being taken from the maintained is being divided out, it is going to seem a lot less, but when you add it all up together than maybe that is where the discrepancy is.

 

Q<37> <Paul Holmes:> What about the time scale? There were six pilot authorities that were doing it this year, but everybody has to be doing it from next year, which means budget-setting in the next month or two ready for next April. Again, the Early Education survey found that 81% of respondents said that by the end of July, when the formula was supposed to have been decided, it had not been.

<Megan Pacey:> No. We are now just about at the end of the second phase of consultation. It is wrapping up in the next 10 days or so. The reaction from Government was that the second phase of consultation would sort all this out and all would be rosy from the middle of November. I am currently talking to the membership again and asking for more evidence at the end of that phase, but the impression I am getting so far from local authorities who have already proposed a rate is that that is anything but the case. I know the Local Government Association has said that another year would be helpful. Many of the pilot areas that I had contact with are still grappling with some of these key issues. It does feel like a situation with quite large cracks that are being papered over to get us through this calendar date. I have grave concerns that it will all unravel as this is rolled out, between when the budgets are implemented in April and when it has to kick in-in the next school year, in September.

 

Q<38> <Paul Holmes:> Local authorities could be voting on their budgets this autumn, although it will not come into effect until April, so they have very few weeks left. Generally, given the time scale, is a year too short?

<Megan Pacey:> Really tight, and so much is going on in a very tight time scale, as Jean has already explained. There are four issues in her area that all need to be implemented at the same time. I don't think that we understand the consequences of any of them, so we can't understand what the knock-on effect is going to be.

<Chairman:> Thank you very much. It has been a very good session. We learned a lot, as you can see. Will you remain in touch with us? This is quite a short inquiry, but a very valuable one we think. As you wend your way home or back to work-I think for you lot it's back to work-could you think of anything you didn't tell the Committee or questions you wish you'd been asked? We want to write a good report and we can only do that if we know what you think. Thank you very much.

 

Examination of Witnesses

Witnesses: Tim Davis, Policy Co-ordinator, Southampton City Council, Thanos Morphitis, Assistant Director, Strategy and Commissioning, Children's Services, Islington Borough Council and Jenny Spratt, Head of Early Years and Childcare Services, Peterborough City Council, gave evidence.

 

Q<39> <Chairman:> I welcome Jenny Spratt, head of early years and child care services at Peterborough city council, Tim Davis, policy co-ordinator at Southampton city council, and Thanos Morphitis from Islington borough council, who is replacing Alison Ruddock.

I think that the three of you were sitting at the back during that first session, so you'll know what people feel is wrong with the single funding formula situation. I'm going to give you what the others had-two minutes to say where you think we are. You've heard all the rest of the evidence we've had. What do think of where we are now?

<Jenny Spratt:> I think the situation for local authorities is very different, because we are all at different time scales in the process. If we're thinking about the flexible 15 hours, in Peterborough we were part of the pilot authority for that, so delivering it to our providers is very well embedded. The introduction of the single formula is the next phase. In our sector in Peterborough we have one maintained nursery school and five nursery units, and the rest of our provision is from the private, voluntary and independent sector. We have tried to engage with the whole of that sector throughout the whole of this process. The decision making on any single funding formula has been done in partnership with a working party group, which has taken all the decisions and has taken them forward to the Schools Forum.

<Tim Davis:> In Southampton, we were a pilot for the single funding formula, and at the same time we were invited to become a pilot for the extension of early years to 15 hours. From our perspective, we did engage early, I think, with all the people we needed to engage with. Touch wood, it is going very smoothly in terms of the PVI formula having been rolled out in April. We delayed the roll-out of the new formula to the maintaineds for a year, until April next year, because there were some additional difficulties that we needed to iron out with them in a bit more detail. Those are now sorted out, as far as we're concerned. It hasn't been too bad, though it was a lot of hard work and it took a lot of engagement early on with the right people to make sure that everything went reasonably smoothly. One thing that helped make a difference in making it smoother in Southampton, which does not appear to have been the experience in some other places, was that we identified early on to our Schools Forum that to do it properly without big negative consequences would cost a larger share of the dedicated schools grant. We communicated that as soon as we took part in the pilot. As soon as we started modelling the cost, we started a dialogue with them in terms of what levels of supplement for what sorts of things would have what sort of price tags. Having that debate early and repeatedly with the Schools Forum helped make that a mature debate about outcome.

<Thanos Morphitis:> We are not a pilot authority in Islington. Obviously, we have heard that there is different practice and interpretation across the country-150 different authorities. Everything I say is in the context of where we're starting from in terms of our provision and our duties. That is one thing I am concerned about-that the single funding formula is seen in the context of the whole policy requirements and duties of the local authority: to provide sufficient child care and a range of children's centre services, and to improve outcomes for children at the end of the foundation stage. In Islington, the context is a very high level of provision, so that 38 of our 44 primary schools have got one or more nursery classes, and we have a range of 16 children's centres provided through nursery schools, primary schools and the voluntary sector, and four by the local authority directly. Our priority overall is to ensure that all provision is the highest quality possible. We have built an integrated service in Islington from the strength of our nursery schools. That has been our raison d'être. We have developed 16 children's centres offering a comprehensive range of services for nought to five. In terms of the single funding formula, for us it is, where does it fit into the whole picture rather than dominate our developed services?

Our priority is for all our centres to be good or outstanding and for all our providers to reach those standards. Of our three and four-year-olds, 70% are getting free provision, either in nursery schools or primary schools. All four-year-olds are being offered full-time provision already and, of those three-year-olds in schools, 70% of them are full-time. It is a very different picture. We have a diverse range of providers, and we fund a number of voluntary sector organisations to provide under a subsidised scheme for working parents, and provide additional funding for them. The private sector is small but thriving because it picks up the areas where we are not able to make provision, typically with the under-threes and also for those people who work in Islington or on its borders who are taking advantage of the provision available.

From our point of view, it is a matter of how we can sustain the good-quality provision from the range of different funding sources. The single funding formula is one element. We have also got to look at the children's centre funding element and the other school funding formula that goes into our institutions, and seek to ensure sustainability. We are concerned that a simplistic approach could lead to a real reduction in funding for nursery schools and classes. We are trying to look at funding across the piece and how we are looking at the factors. We are including factors-obviously deprivation, and also around quality to reflect that.

The other thing that we are concerned about, which was picked up in some of the earlier evidence, is that institutions have very different functions. I wouldn't describe this as a level playing field as I don't think it is a very helpful description. I don't think that institutions are playing the same game-it's different aspects of the same game. Institutions have different objectives. For our context, if we are saying that our children's centres are there to provide for those most in need-and indeed 30% of all places are reserved for children in need-then we have to have a funding methodology that reflects that. It has to reflect the fact that children in need don't all turn up at the same time to meet particular dates. We have to have an allocation that allows for that, to supplement the single funding formula. We also need to recognise the additional needs of individual children with special educational needs, so we fund those, again, on top. We're trying to sustain the comprehensive range of services through different funding formulae and trying to ensure that our basic objective of high-quality provision for all children is sustained.

 

Q<40> <Chairman:> Listening to the evidence in the previous session, did you recognise that picture in terms of the feeling that the maintained sector was going to suffer disproportionately to the rest of the sector?

<Thanos Morphitis:> It depends how it's interpreted. If people take a very simplistic approach, dividing the total costs of an institution by the number of children, and say that therefore the cost is x per hour, and the approach does not differentiate between children of different ages and different services that are provided, it can lead to a simplistic answer, which would lead to significant turbulence in those institutions. That's why we're trying to break-

 

Q<41> <Chairman:> Is it simplistic to say, "My budget's going to be cut by £100,000, so I won't be able to employ as many people with professional qualifications"?

<Thanos Morphitis:> Sorry?

<Chairman:> Are you not sympathetic to the view of one of the witnesses who was going to lose a budget of £100,000 and would no longer be able to appoint or maintain the employment of skilled professionals?

<Thanos Morphitis:> Absolutely, which is why we're putting quality within our formula to ensure that for those institutions that have qualified head teachers and qualified staff, the costs are reflected in that formula.

 

Q<42> <Chairman:> Where do you get that resource?

<Thanos Morphitis:> From the additional funding.

 

Q<43> <Chairman:> Who loses out? If you're going to give more to that, who loses out? You saw the allegation. People don't quite know where the local government money goes.

<Thanos Morphitis:> This is why I explain the context. We fund at a high level already, so this is additional funding and it's not replacing-we have to be careful it doesn't impact on the core way we fund our nursery schools. I don't think people are losing, from that point of view.

<Chairman:> How does that compare with Jenny's experience in Peterborough?

<Jenny Spratt:> We did the initial cost analysis through the National Day Nurseries Association; we asked it to undertake it for us. We then appointed a project manager and, once the results came in from the cost analysis, we followed that through and did some direct questioning of the providers. We got a 92% response, so we feel we got a pretty accurate picture of the situation out in the field.

We've created a formula with a base rate that represents a variance from £3.21 an hour, which would be for a pre-school, through to £8.75, which would be for our maintained nursery school. On top of that, we have incentive payments and we have two different incentives for quality. We have one that reflects the qualifications of the staff and we have another that reflects the undertaking of a quality assurance programme, so we feel that quality is being supported very well, and it is there as a lever. For those settings that aren't engaging in improving their quality, obviously we can say, "If you start a quality assurance scheme and improve your qualifications, you'll get more money on top of your base rate."

We also have a flexibility supplement and the deprivation supplement. There is a head teacher supplement for the nursery schools, which we are required to put in. On top of that, as a result of listening to our working party, we've put in a supplement for administration, because obviously the administration of all this is quite a heavy burden for some pre-schools and some day nurseries if they don't have admin staff.

So we've gone through the process and the process has been costed. The cost modelling has been undertaken. We have now the figures that we can give to any of our settings as to what their budget would look like, but we're also using the head count data of the funding for the three and four-year-olds as they come in this term, to look at the accuracy of what it's looking like for them.

<Chairman:> Tim, what's your perspective on this?

<Tim Davis:> One of the reasons why we delayed the implementation to our maintained settings was that exactly those sorts of issues and complications around maintained providers applied. We have one maintained nursery school and eight nursery classes attached to primary schools. In particular, there wasn't a problem for the nursery school. The equated cost per child per hour of provision in the maintained nursery school was approximately £8.29 an hour, and the equivalent rate for the maintained nursery classes was about £4.50 an hour. So there is quite a big difference in running a maintained nursery school.

We were uncomfortable with the funding formula that would pay nursery schools at anything like that level, because it makes them extremely vulnerable to swings in the number of children who attend them once you fund them on a participation basis, rather than a place basis. We spent the first part of this year modelling other things. Effectively, the maintained nursery school is also a children's centre, and we looked at making its cost base more similar to that of the other maintained provision. We then looked at commissioning separately the other children's centre and the leadership roles that it contributes as a high-quality early years setting within Southampton, and funding that separately. So our single funding formula for the maintaineds, when we roll it out, will cover a range of rates from about £4.64 an hour to £5.12 an hour per child in different maintained settings. The maintained nursery school will sit within that range, but it will also get a payment, which will be us commissioning the other services that it provides within the community. That is how we approach solving that particular problem. I certainly see the problem.

On the allegation about where the money goes within the dedicated schools grant, we did quite a lot of work on that, because when all of our settings complete the early years census every January, our dedicated schools grant for under-fives is based on the number of children in all settings, and we receive it at the same level. The funding then goes into the dedicated schools grant, from which the individual schools' budgets and other pupil-related provision are calculated. Local authorities do not get to use that funding-it is pupil-related provision funding-but historically, quite a lot of it has gone into main schools' budgets. Part of the debate we had with the Schools Forum was to say, "This is what we are spending per child at the moment on PVI provision; it isn't anything like what has come in." So there was a moral case to be made if we wanted to improve the quality of early years provision to claim back from the whole dedicated schools grant just a slightly larger part of that.

 

Q<44> <Mr. Chaytor:> When the Government first issued their circular calling on local authorities to start work on this, was there a general consensus in your authorities that this was a problem that needed to be tackled, or did you think it was irrelevant and that you would have been far better carrying on in the way you had been previously?

<Tim Davis:> We were a pilot, so yes, we thought it was a problem that needed to be solved. Many of the supplements that have been talked about in terms of incentivising quality, reflecting some of the costs of deprivation in terms of how we close the gap on outcomes, and helping to incentivise the costs around delivering the whole early years offer more flexibly were, effectively, ticking time-bombs. The old way of funding PVI nurseries was a problem, in that it was fairly arbitrarily decided at some point in the past that there was a rate. It was the same for everyone irrespective of their costs, and it was going to struggle to deliver staff throughout nurseries with the sort of qualifications that they needed to help close the gap in terms of addressing some of the deprivation problems in different communities, and to deliver it all flexibly. It was eventually going to put huge pressure on private day nursery providers that might have driven them out of the marketplace entirely, and would then push us on sufficiency. So, from our perspective in Southampton, it was a problem that we were very interested in having a chance to solve.

<Jenny Spratt:> I would agree with what Tim has said. Also, from our perspective, we felt that it would help us with issues around recruitment and retention of staff in the private, voluntary and independent sector because that is a big issue that we have to deal with. We saw it as a big lever for quality improvement.

<Thanos Morphitis:> We weren't a pilot, so we are moving into the stage of more detailed consultation with the different sectors about base rates and so on. We have had a working party at the Schools Forum dealing with this for nearly two years now, and we have PVI representation on the forum and the working party, and it is complex. It is not the only issue that people are dealing with, as was mentioned earlier. We are also tackling the interface between funding and admissions policies. Clearly, the Rose review-perhaps we will say something later on that-may well have an impact. It is quite hard for institutions to get their heads round all the different issues, and we are trying to work through them with each sector.

 

Q<45> <Mr. Chaytor:> In one sense, the idea of 150 local authorities each doing their own thing and having their own two-year consultations and dedicating a team of staff to spending months working at their own formula seems a very cumbersome way of doing it. I am interested in what model there was available for the six pilot authorities to work on to start with; and now that it is due to be implemented next year, are the other 144 local authorities going to use the models that the pilots have agreed on, or are they still essentially working on their own formula?

<Tim Davis:> From our perspective as a pilot, we were supported by the DCSF in modelling where we wanted to go from a policy point of view. Consultants were brought in to advise us, but to be honest, we knew where we wanted to go with it in terms of the sorts of supplements that we have talked about. From the DCSF's perspective, there was quite a lot of lobbying historically from private nurseries in particular that were really making the point that the arbitrary single rate of funding in each local authority was just not sustainable. To a certain extent, they knew that that was the problem they wanted us to help solve, but they were very open about what other issues we might address through doing that, and they were very supportive. The consultants we had access to were very supportive in terms of helping us to model some of the things that we wanted to do.

 

Q<46> <Mr. Chaytor:> And from the point of view of Thanos and Jenny, are your authorities now using the models that were developed by the six pilots, or have you started from scratch?

<Jenny Spratt:> We had already started the process before we began to get the results through from the pilot authorities. Obviously, having that information has helped us to readjust and refine what we are putting into our formula.

<Thanos Morphitis:> We are the same. We are looking at some of the methodologies that have been used and applying them in the context that we have.

 

Q<47> <Mr. Chaytor:> And now that you are coming towards the end of the process-because implementation is due to take place on 1 April next year-are you confident that it is an exercise that has been worth doing; and has, does and will your formula reflect the 16 criteria that the DCSF sent to you in the first place?

<Jenny Spratt:> We think that ours does. We have worked on it for quite a long time, and we have done it with full representation from the sector. So, our working party has been fully represented, and we have members from that working party from the private, voluntary and maintained sector who sit on the Schools Forum. They have absolutely been able to take the work forward and to argue the case of what we are doing.

 

Q<48> <Mr. Chaytor:> Thanos, has confidence been worth while, and will something better come out of it than you had before?

<Thanos Morphitis:> Whether it is equivalent to the amount of effort put in, I am not sure. In a well-funded authority, top priority is around quality of provision, and that is where we want to focus our officer time and resources. It has not been unhelpful because it has given us the opportunity to look at some different elements of funding that exist and iron some of those out.

<Tim Davis:> We introduced it earlier this year. It does broadly seem to be working fine. We haven't had significant problems with any of our providers over it, and it certainly has helped significantly to close some of the funding gaps between different providers of good quality and the maintained sector. There is one thing we're going to need to keep a very close eye on. Basically, choice within the market drives different financial pressures from year to year. We used to have some 75% of our provision in the PVI sector. We still more or less do, but now there is a whole of range of costs, and it will be interesting to see whether it is the more expensive or the less expensive of those that grow to fill up more of the provision.

We have also, because we linked it to the flexibility and the extended offer, started to experience some sufficiency issues in terms of the combination of an extra 20% of places that can be taken up in terms of the total number of hours, and a fairly significant rise in birth rates in Southampton-about a quarter over the last five years-which is being sustained and is starting to squeeze capacity all over the place. It will mean that we are unlikely to have maintained settings struggling to fill their places. I think they used to have a buffer of guaranteed place funding, and they were worried about whether they could fill all those places with real children. There are other issues as well around that, but one concern they shouldn't have is that there aren't going to be enough three and four-year-olds to fill all the provision we have currently got within the city.

 

Q<49> <Chairman:> Have we made a terrible mistake in inviting you three here, because you are all very competent authorities and are doing a really good job? Perhaps there are 147 other stories out there. Is that the case? Have we just picked on the wrong authorities, do you think? You are full of professionals and you have met members of professional organisations. Do you think you are exemplars that people ought to copy, or an average representation of what is going on out there?

<Thanos Morphitis:> It is difficult to say. I think we probably have some characteristics in common with other inner-London authorities, where there has been a legacy of a higher level of provision overall. But I wouldn't like to judge what the views are of the different sectors in different authorities, because obviously we know what sectors in our borough are saying, and we are trying to take them along and be open and transparent about the money that's coming in and how we are preferring to use it. I don't know.

 

Q<50> <Chairman:> It seems that, listening to all three of you, you fully understand the point that was made by the head from West Sussex, who needs that capacity because she is running a whole range of services and provision for exactly the people this sort of provision is aiming for-people from stressed backgrounds. You went right through the card, didn't you, of how many-27-funding streams and different things? You have to have capacity to do that. So it's not just a tidy question about, "Do we have enough places to fill?", as you were saying, Tim. If you don't have the capacity to be flexible, to move and to adjust to crises, you're not providing the service, are you?

<Tim Davis:> No, but at the same time, you don't want to be funding large numbers of vacant spaces all the time. You can, under the single funding formula-probably, in fairly small numbers-guarantee to buy a few places at schools where you want to have the ability to hold capacity effectively. In relation to what we are doing on the two-year-old funding, we are having to commission places of high quality because they are for very vulnerable two-year-olds. We can't necessarily afford to take the risk that those settings will fill those places, which they would have to do in a market, so that we know we can effectively fill those places on referral when we need to.

One of the other perspectives that is difficult for a single maintained nursery school to take on this is that it's unlikely we can afford to have that quality of provision in place in all the places we want it. I cannot speak for Sussex, but if an authority is trying to deliver the single funding formula and the policy drivers behind it, without taking a larger share of the dedicated schools grant, it will be difficult because it will probably have to undermine some of its more expensive provisions. I cannot think how you would do it within the same envelope otherwise.

 

Q<51> <Chairman:> But that is the rub, isn't it, Jenny? You are responsible for child care and child protection. If you are responsible for that side, the two things are not separate worlds, are they? The crises that we have found through the Committee's responsibility to look at child protection clearly show that such emergencies and dreadful things happen and you need the facilities and the capacity to respond to them.

<Jenny Spratt:> You also need a really good range of people on the working group to do the single funding formula. In our case, our sufficiency officer was part of that; so was our families information service, to deal with the issues about places and where they might be. That brings a deep understanding from the people who need to have it, so that we are able to allocate the places that might be needed very quickly.

<Thanos Morphitis:> On that point, you made a comment earlier, Chair, to a colleague in the private voluntary sector about balancing the business. The single funding formula is one income stream, but you have to look at the whole. It is the same principle in the maintained sector with nursery schools and children's centres. You must look at the whole operation to see how you can sustain it. It is the local authority's responsibility to look at what it requires of its institutions and to make sure that it can help each institution to balance its overall services within the budget available.

About 17 or 18 years ago, we established that nursery schools would not be just for three and four-year-olds; they would be for 0 to five-year-olds and provide a whole range of services. That is the business. It is unequivocal. That is the role of our nursery schools, which are now children's centres. In that context, we have a responsibility to look at the various funding streams to ensure that they can continue and thrive.

 

Q<52> <Chairman:> Thank you for reminding me of that question. Perhaps the three of you can help me because I did not understand something that the earlier witnesses said and they are not in front of me now, although some of them are sitting at the back. One of the concerns they expressed was that now you can have a bit of a session here and have all your free sessions on one day. That seemed to be disruptive. It is much more intelligent to have a session each day across five days. Do the new rules that are coming in mean that you can choose what you like and move them around? Is that a substantive change in the arrangements?

<Thanos Morphitis:> Yes, it will be. We are consulting on a proposal that we will fund no more than six hours in one day. For Islington, we think that is a reasonable way of interpreting the requirements. If parents choose to take six hours in two institutions in one day, I am not clear about which institution takes precedence for the single funding formula. You may know because you may have interpreted that.

<Chairman:> That is a possibility, is it? You can just mix and match.

<Thanos Morphitis:> Yes. You can go to a school from 1 until 3.30 or 4 and then go to a voluntary provider from 4 until 7 to suit the requirements of the family. If the free provision was in the school, the parent could either take the provision outside free as part of their 15, or they could pay. If they chose the voluntary provider as free provision, we would be caught and might not be able to claim the funding because schools do not charge for that core day. I do not know if that is an issue you have picked up.

<Tim Davis:> I do not know how it will work after April, but historically, it is a local authority issue to resolve where the funding split happens. Because we have funded guaranteed places at schools, if you go to a maintained provider and a non-maintained provider, you do not as a parent have the choice of whether you are funded for the maintained provider. You are funded for the maintained provider; you can take some extra hours at other providers, but actually that will change under the new mechanism and we will probably give parents choice on that, but only if schools are able to charge.

 

Q<53> <Chairman:> Let's get this right Jenny: you can use your entitlement to 15 hours and still get free provision from the maintained sector.

<Jenny Spratt:> Yes; we set a limit of six hours, as well, that would be funded free in a day. The difference for a child could mean that, previously, if the child had a morning session in a nursery every morning but the parent was working, they may have had to go to another child carer in the afternoon and be transported maybe across town; now that child can be in that provision for the whole day, funded for six hours. It might also be that the school, nursery or pre-school has a breakfast club and an after-school club; the parent might have to pay for that facility, but the child can be more in one place. It suits the parental need for matching child care with work. In our flexibility, for the six hours we added in an additional payment if the six hours included lunch time because that meant that the child did not have to go away and come back again.

 

Q<54> <Helen Southworth:> You described the very measured process to us of taking the providers with you in your working out of how this is going to happen, but also of taking the authorities with you in making changes about how they are going to deal with things. Having gone through that process, do you have any anxieties about how robust it is?

<Jenny Spratt:> The cost modelling shows that it looks okay on paper. We are currently doing the head count for the current children who get the three and four-year-old funding, so we are looking at every one of our settings to see how much they have claimed and what it would look like in the new formula. Obviously, it then will go back to the working party and, once we have made any final adjustments, it goes to the Schools Forum in December. Obviously, we are saying to the Schools Forum, "This is what it looks like; we have tested and trialled it", and it is either working or we need to make some adjustments. We then have time to do that ready for April.

<Tim Davis:> The only thing that I would add to the anxieties around the cost-funding model is in terms of how often we will need to revisit it. This reflects a point I made earlier, which is that I have a slight anxiety that as parental choice reflects a different take-up of demand, particularly as flexibility really comes into the marketplace, it is very difficult to predict how much of the dedicated schools grant the early years offer will cost. Because we have a range of rates for PVIs, from £3.58 to £4.41 for different providers per child per hour, the bottom-line effect of that upon the school's budget at the end of the year could be quite massive, so we are going to need to keep a very, very close eye on it. Previously, when we had one rate for all PVI provision, it was fairly simple. You could monitor whether there was more take-up that year but not necessarily the cost implications of where that take-up was, so it is another variable. It's a good thing and it's for a good reason, but the implications for local authorities' and schools' budgets could be quite significant, so I have a slight anxiety about it.

<Thanos Morphitis:> I think that the anxiety that some of our schools have expressed on the Schools Forum is around the participation-that funding is based on participation at a termly count-and whether we need some flexibility around that. Currently we have an annual count for our nursery classes, so the children on the roll in January provide the funding for that class for the year. We fund on places in our children's centres and nursery schools, so that clearly is going to have implications. One of the problems in the future is that there will be a push for schools to fill up the nursery classes in September, particularly when the Rose review recommendations are implemented, because there is currently consultation to introduce one point of admission to reception classes. Head teachers will have nursery classes where a number of children move out in September, and they will be under pressure to fill those places immediately, because funding will be based on the count in the middle of October or beginning of November.

That will have an impact on children born either during the spring term or the summer term. The term after the children are three, for the younger children, they may find that places have been taken up in the nursery classes in the September term. We are thinking about how we can deal with that within the confines of the single funding formula, which is based very much around determining count.

 

Q<55> <Helen Southworth:> In terms of your experiences of this process, what would you see as being the critical points that will determine success or failure, spread across a wider geographical area rather than your own authorities?

<Tim Davis:> From our perspective, it was always about the drive that we have had-this should be true of authorities across the country-to improve standards of good attainment at the end of foundation stage and to close the gap at the end of the foundation stage. There are some degrees of separation. Because we have a single point of entry for reception year so that children have a year at school before they finish the foundation stage, we obviously have a degree of separation which makes it a little bit difficult to evaluate the direct impact and contribution of the nursery that the child went to, but we can and have measured that to try to give us some flavour of it.

The other things we are doing are all about improving their quality. And if we're not improving quality-we are looking at it more from the point of view of flexibility for child care-it's to improve the circumstances of those families by helping support them to get into work. While 15 hours in five three-hour sessions might be an ideal over five days, other things being equal, other things quite often aren't equal. If we're helping families get back into work and children not to grow up in poverty as a consequence of that, that can outweigh the slight educational disadvantages of delivering over fewer days. That's a crass way of describing quite sophisticated issues with individual children, but that's why we're doing it. I believe there is certainly some reason and rationale behind that.

<Thanos Morphitis:> I think the danger is if authorities take too narrow a view of the implementation of the formula and don't look at the points that Tim has raised about the broader objectives of the authority to tackle poverty and ensure that there is sufficient child care and, critically, that the quality provision is of the highest order. If authorities keep that focus in mind, it's a matter of how they can then interpret the requirements in a way that is going to serve the objectives they are trying to achieve. Too narrow a focus on the formula, I think, could lead to unintended consequences.

<Jenny Spratt:> I think from our perspective as well, where we've tracked back the formula, we know we've got some winners and some losers in this. The losers tend to be where they're not engaging in improving qualifications, they're not improving quality and they're not undertaking training, and we can see that we can use this as a key lever to say, "If you want to improve the finance that you've got coming into your setting, then please, this is the way you can do it," and we can go out there and talk to them about that.

 

Q<56> <Chairman:> When you look at your Ofsted reports on this provision, how active are you in going out, shaking things up and getting things to happen better? You see the Ofsted report on a provision-

<Jenny Spratt:> Yes, always.

<Chairman> And as was explained to us earlier, there's some real cause for concern about the fact that there are few outstanding private independent providers. Quite a bit of it is good, but there are some serious failings. What do you do when you find severe, almost systemic underperformance in a local authority area?

<Jenny Spratt:> We monitor very closely the results of the Ofsted inspections, but we would always know what was likely to be happening in one of our settings anyway because we have a team of really high-quality people who go out to support and challenge those settings. We also look at the early years foundation stage results when they come out and we track them back to the children who have left those pre-school settings, so we know exactly the kind of areas that we need to be supporting and making an input into in our entire sector.

 

Q<57> <Chairman:> Is it still true, though, that people from more deprived backgrounds get less of a choice of quality provision?

<Jenny Spratt:> I would say that the quality is improving all the time. We currently have at least 60 practitioners undertaking foundation degrees. They started off doing their NVQ level 3, they worked their way up and they are now on their foundation degrees and hopefully going through to early years professional status. So there is a continual want and desire in the sector to improve quality, and I think that people understand far more now about that quality. The nursery schools provide us with a really key beacon in terms of where the theory and practice of good early childhood education sit, and that can be disseminated. People like to see modelling and to see something in practice because it helps them to visualise and understand it, and we use our nursery school in that way.

 

Q<58> <Chairman:> But Thanos, that resonates with something from the earlier session, too, doesn't it? If you do not have that capacity to have market leaders with good practice, innovation and all the rest, there is no yeast to raise the whole system.

<Thanos Morphitis:> Absolutely. That's why I made the point earlier about building our service from the quality of our nursery schools. What we aim for is for the children with the most challenges and the most deprivation to be in the best-quality provision. The other thing we've done is to say that nursery schools and children's centres are not just for children who are deprived, and ensure that there's a balance. As well as the 30% of children in need who will be admitted, we have parents paying across the income spectrum, and we also market some places at a private sector rate. So a comprehensive range of children attend these high-quality centres, within which our most deprived are provided with priority placements. Similarly, we will support all sectors in inverse proportion to need in relation to Ofsted outcomes. We will support them and encourage people to go on training, to take advantage of the graduate fund and to be part of a network that is associated with our children's centres. The children's centre is seen as the hub for an area, supporting providers and providing services to the children in the catchment area.

 

Q<59> <Paul Holmes:> Just one question. The Federation of Small Businesses' evidence suggested that the money that the Government are putting into all this is not all coming out at the other end. There was a suggestion that local authorities are diverting some of it somewhere. Have you got any comments on that?

<Jenny Spratt:> I think that for some years it was difficult to find out how much money was sent through to local authorities for early years, but that is far more public knowledge now. In the past, the private provider on our Schools Forum has challenged things and said, "I don't think we're getting enough," and he got a funding increase through from the Schools Forum by doing that.

<Tim Davis:> On that particular point, I touched a little earlier on the fact that the rate we get per child under the age of five in our dedicated schools grant is the same for all children. Historically, because the money goes into the dedicated schools grant, local authorities cannot use it for their own sorts of things; it goes into pupil-related provision, mainly in schools. Before the funding formula was introduced, most PVI provision was funded at a lower rate, which was more or less standard across the country-it varied a bit but not by a huge amount. What happened was that there was a little more to go into schools' budgets a few years ago. It is not a large amount in the whole schools pot, but it has got swallowed up for the most part. But schools were pretty mature when we were making the case-"This is the money that comes in. We've got this many three and four-year-olds. This is what we are effectively asking for to fund the delivery of this. It is less than that; we think we have got a case." They were pretty good and mature about that debate, but I don't think there has been any great conspiracy within local authorities, or Schools Forum, about how they build schools' budgets. Generally speaking, to ensure we can deliver the minimum funding guarantee and other things, we have tried to make sure, through whatever money is in the DSG, that that is delivered.

 

Q<60> <Paul Holmes:> Would it be fair to say-or too simplistic-that the areas of the 150 authorities where the biggest problems are becoming apparent in the new formula are the ones who did not provide very much maintained provision in the first place and are now slicing the cake very thinly anyway, whereas other authorities who put a lot of extra in in the first place have got less of a problem? Is that accurate?

<Thanos Morphitis:> I think that could be a fair reflection. Ironically, with our Schools Forum, the question has often been the other way around-why are we spending so much on early years, historically? When we go through the arguments about our duties and our objectives, the forum then says "Okay, we understand and we support that, because of early intervention and prevention." So the argument has sometimes been the opposite in Islington. But I think in terms of your hypothesis, it is probably true, because the funding then has to be spread more thinly if it is going from a low base.

 

Q<61> <Paul Holmes:> Typically-I am generalising-an inner-city authority with more deprivation has usually put more money into this, and shire authorities traditionally have not done so, and they are the ones who are going to see the biggest problem again. Is that a fair judgment?

<Tim Davis:> I would say that that is probably a fairer judgment than necessarily what share of PVIs there were in the first place. We have quite a small maintained sector. It's 80% PVI and I don't think it has been hugely problematic for us. From my experience of the shire authorities who were pilots-I can't speak for them in detail, but certainly this was said on a number of occasions-some of the complicating factors around moving to participation-led funding when you have quite small provisions a long way from other provision make the early years marketplace quite a funny marketplace. It is going to be potentially quite difficult for the single funding formula to work in some of those areas, because it requires some fairly large sufficiency payments just to make it at all viable.

 

Q<62> <Chairman:> Can we make this single funding system work? Are we making a big fuss about something that can be solved-sorted out-by April?

<Thanos Morphitis:> I think the problem is the "we", because the "we" is so dispersed. There are 150 questions and there are probably 150 different answers. I think that that is probably the most difficult thing at the moment for the Government to look at, in terms of how they can ensure that it actually adds value to what we are doing, and not add to its detriment.

<Chairman:> Jenny, what's your view?

<Jenny Spratt:> I think that's been evidenced this morning, hasn't it? Listening to Jean and the situation with her nursery school, if her nursery school was in Peterborough, she would be getting a very different rate.

<Chairman:> Tim?

<Tim Davis:> Yes, I'm fairly confident it will work in Southampton, but certainly from the evidence I've heard, there will probably be some consequences around the country which are not especially desirable. The damage that they do before they are sorted out in particular areas could be significant, particularly when you are talking about the loss of some of your really high-quality provision. It should work; it is certainly not an insurmountable problem to use the single funding formula to deliver these sorts of outlets.

 

Q<63> <Chairman:> We mustn't lose that high quality of provision, in your view? You're all nodding.

<Tim Davis:> I think you need the leadership of high-quality provision. We used it when we piloted our extended provision. Before we were admitted on to the pilot, we used early years funding to pilot it in some of our maintained settings, just to make sure that we could then share that message across to other settings once we were trying to prepare them. It is an essential leadership role to actually to bring the quality up everywhere.

<Chairman:> So a Government who have put an awful lot of money into early years provision should just make sure that we don't lose this particular jewel in the crown.

Look, it's been a very good session. Can I thank Jenny, Tim and Thanos? We may ask you to let some of us to dip into your local authorities, if that's possible, to have a look at provision on the ground. Jenny will know that that is always convenient for me, because it is halfway between here and my constituency on a very good rail line. But could you remain in touch with the Committee, because this is a short report, we want to make it a good one and we may want to ask you some more questions. Is that okay?

<Thanos Morphitis:> Yes. It is a pleasure.

<Jenny Spratt:> Yes.

<Tim Davis:> Yes.

<Chairman:> Thank you very much.