Conclusions and recommendations
Drawing up new formulae: practice and consequences
1. Early
years single funding formulae which are based upon inaccurate
information on the costs of providing early years education and
care will not command the confidence of providers in either the
maintained sector or the private, voluntary and independent (PVI)
sector. However, criticisms of local authorities for basing their
funding formulae on incomplete cost data are not necessarily justified:
many early years providers in the private, voluntary and independent
sector failed to share key information. The reluctance of some
PVI providers to offer cost information to local authoritiesperhaps
because of a perception that they were in competition for children
to fill placesis understandable but ultimately shortsighted. (Paragraph
50)
2. Accurate data on
costs to providers must be obtained: this may require the use
of a consultancy or other third party to secure information which
private, voluntary and independent providers deem to be commercially
confidential. Representative bodies for businesses in the private,
voluntary and independent sector should encourage their members
to participate in cost surveys, guide them through survey forms,
and provide advice. Local authorities have a similar role in relation
to maintained settings. (Paragraph 51)
3. Although we believe
that only a minority of private, voluntary and independent providerschiefly
those with highly qualified staffwill actually lose out through
introduction of the Single Funding Formula, it will not provide
the significant boost to the stability of private, voluntary and
independent sector enterprises which some had anticipated. This
was not, however, the purpose of the Single Funding Formula.
(Paragraph 54)
4. We welcome the
Minister's clear signal, in her letter of 28 October 2009 to local
authority directors of children's services, that good quality
nursery schools should not be forced into closure by the Single
Funding Formula. We believe that it was no accident that her letter
was prepared just as the Committee was announcing that it would
take oral evidence on the effects of the Formula. Although the
letter may have come too late to influence local authorities implementing
the Formula in April 2010, we encourage local authorities aiming
for implementation in 2011 to reassess their formulae in the light
of the Minister's letter and to find ways of improving prospects
for the sustainability of their maintained nursery schools. (Paragraph
61)
5. Although the picture
remains unclear, there is little evidence so far that the Single
Funding Formula has encouraged greater flexibility in provision
of the free entitlement to early years education and care. (Paragraph
64)
6. We accept that
flexible care may suit parents; however, it risks serving the
interests of the parent but not of the child. (Paragraph 68)
7. We approve of steps
taken by local authorities to ensure that take-up of the free
entitlement to early years education and care is spread reasonably
over the week. We believe this to be the ideal for most children,
and the design of any flexibility supplement should favour such
a pattern. (Paragraph 68)
8. Evidence from Ofsted,
academic research and local authorities is overwhelming: the quality
of early years education and care offered by maintained nursery
schools is almost invariably very high indeed. The standards set
are there for others to follow, and they should not be put at
risk by implementation of the Single Funding Formula. (Paragraph
71)
9. Whatever the stated
purposes of the Early Years Single Funding Formula, it is unacceptable
for a local authority not to use it to try to stimulate improvement
in quality of early years education and care. (Paragraph 80)
10. Every local authority
should include a quality supplement in its single funding formula,
and the level of that supplement should be credible and not minimal.
We recommend that the Department specify in future guidance to
local authorities that a quality supplement is mandatory. At the
very least, local authorities which have decided that a quality
supplement is unnecessary should be challenged by the Department.
(Paragraph 80)
11. We believe that
a quality supplement should normally be payable to settings not
on an aspirational basis but rather to those which demonstrate
that a standard has been or is on the way to being achieved. Local
authorities should be using funding from other sources, such as
the Outcomes, Quality and Inclusion element of the Sure Start,
Early Years and Childcare Grant, to improve quality in settings
needing intensive or targeted support. In order to continue stimulating
the recruitment and retention of graduate level staff in early
years settings, the Government should not allow the Graduate Leader
Fund to peter out after 2011. (Paragraph 83)
12. Early Years Quality
Improvement and Support Programme (EYQISP) ratings of early years
settings are reached following a consistent process across local
authorities. We believe that they would serve as good indicators
of quality for the purposes of allocating a quality supplement
under the Single Funding Formula. (Paragraph 84)
13. As access to the
entitlement to free early years education and care is extended
to disadvantaged two-year-olds more widely, and given the possibility
that such provision may in time need to be funded from the Dedicated
Schools Grant or its equivalent, single funding formulae may need
revision to acknowledge the cost of high quality care for two-year-olds.
(Paragraph 85)
14. We draw the Department's
attention to the possibility that the cost to local authorities
of early years provision may rise significantly if quality levels
rise and parents make more use of high-cost provision under the
free entitlement. (Paragraph 86)
15. The free entitlement
to early years education and care is available to any parent.
We do not support any erosion of that universal availability through
allowing providers to charge top-up fees for 'free' hours. Nor
are we convinced that it is necessarily good economics to regard
a constant element of income, such as local authority funding
for early education and care under the free entitlementeven at
or slightly below cost of provisionas dispensable if it provides
a reliable basis for other, more profitable activity, as long
as there is demand. One form of income would sustain the other.
If the costs of providing the free entitlement are far exceeding
the income received for it, then either providers should be re-examining
those costs or they should be making a forceful case to local
authorities for those extra costs to be recognised through supplements.
This is particularly so for the cost of highly qualified staff.
(Paragraph 93)
16. It is in local
authorities' interests to ensure that provision under the free
entitlement continues to be offered by a wide range of private
and independent providers, who may offer the greatest degree of
flexibility. Otherwise, local authorities will risk being unable
to discharge their statutory duty to secure sufficient childcare
for working parents. (Paragraph 94)
17. Strict application
of participation-led funding is not in a child's best interest
if the effect is to pressure them into early years education and
care prematurely. The Department should permit local authorities
to fundeven if not at a full unit rateplaces which have been allocated
to a child whose entry has been deferred until they reach a suitable
stage of development. Such arrangements should apply equally to
settings in the maintained and private, voluntary and independent
sectors. (Paragraph 98)
18. Local authorities
may be perfectly justified in deciding that they can no longer
afford to fund full-time early years education and care, but they
should not portray the cessation of funding as a direct consequence
of the Early Years Single Funding Formula. (Paragraph 100)
Should the Government proceed with the Single
Funding Formula?
19. While
the Early Years Single Funding Formula may have its faults, it
can, if the underlying principles are applied carefully and consistently,
be sufficiently versatile to fund all settings sustainably and
in a way which respects and rewards the varying provision offered.
It is undeniably more transparent than the unco-ordinated methods
which it replaces. If greater stress is placed in future on using
the Single Funding Formula as a way to improve and reward quality
of early years provision, it should develop that provision over
time in a way which brings substantial long-term benefits for
children and parents. We do not believe that the concept of the
Single Funding Formula is flawed. (Paragraph 104)
20. A great deal of
work has been done by local authorities to prepare single funding
formulae: that work should not be abandoned without very good
reason. Given the advantage of greater transparency, and the work
done so far in gaining a greater understanding of costs and the
economics of operating an early years setting, we believe that
the Government, local authorities and providers should continue
to work towards implementation of the Early Years Single Funding
Formula throughout England. (Paragraph 105)
21. Whatever the reasons
why many providers did not become engaged with the Single Funding
Formulaand it may be that in many settings staff did not feel
confident or able to spare the time to engagewe do not believe
that local authorities should bear sole responsibility for that
failure. (Paragraph 108)
22. Given the difficulties
faced by local authorities and early years providers in achieving
such a major reform, the Government was correct in deciding not
to press ahead with the introduction of the Early Years Single
Funding Formula by all local authorities in April 2010. We suspect
that the Committee's inquiry helped to focus minds on this decision.
The year's delay in full implementation must be used to settle
nerves and restore some stability in the sector, and to rework
funding formulae where necessary. We welcome the chance for pathfinder
local authorities to disseminate good practice. (Paragraph 109)
23. The prospect of
an increase in funding for early years provision being met by
a corresponding decrease in funding for primary or secondary school
provision is not attractive, although this is largely a matter
for local determination. Nevertheless, there is compelling evidence
to show that a child's experience in its first years is key to
its development, and we believe that the Government should re-iterate
to local authorities the primary importance of properly funded
early years provision. (Paragraph 115)
24. Constraints on
public spending and difficult financial times lie ahead. If the
Government's policies lead to greater take-up of the entitlement
to free early years education and care, and to full-time rather
than part-time funding for four-year-olds, at public expense,
the Government should make a commitment to extra long-term core
funding to allow for those extra financial demands. (Paragraph
118)
25. We recommend that
the Government examine whether a unified funding system should
be introduced for all children aged from 2 to 11 years old. (Paragraph
119)
26. Inconsistencies
between local authorities' base hourly rates and their approaches
to supplements for funding early years settings are not necessarily
a bad thing: they may merely show necessary sensitivity to local
circumstances and needs. However, there have clearly been some
wayward and potentially damaging decisions by local authorities,
and Departmental guidance appears to have been interpreted differently
in some cases. (Paragraph 124)
27. We recommend that
the Government review all early years single funding formulaewhether
proposed or implementedby the autumn of 2010. In particular, the
Government should assess:
— The
use made by local authorities of the quality supplement, with
a view to making it mandatory;
— The supply of cost information, with
a view to requiring private, voluntary and independent settings
to supply that information if they are to receive payments for
provision under the free entitlement;
— The impact on Children's Centres, to
inform the development of Phase 3 centres and the evolution of
Phase 1 and Phase 2 centres; and
— Whether local authorities are setting
formulae which assume unrealistic rates of take-up. (Paragraph
125)
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