The Early Years Single Funding Formula - Children, Schools and Families Committee Contents

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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