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


The Early Years Single Funding Formula is intended to replace the different methods currently used to fund early years settings in the maintained sector and in the private, voluntary and independent (PVI) sector. Each local authority will in future use the same criteria for every setting in its area when allocating funds for education and care provided under the free entitlement for three and four year olds.

Hopes were highparticularly among providers in the private, voluntary and independent sector, which have historically been funded at lower hourly ratesthat the Single Funding Formula would be fairer and more transparent than the unco-ordinated system which it replaced. However, the anticipated "level playing field" has turned out to be a field in which many have gained less and a few have lost a lot more than they might have expected.

The greatest losers would be maintained nursery schools, which could find their budgets reduced by tens of thousands of pounds or more each year. Staffing levels and services would be cut, and some fear closure. Yet evidence from Ofsted, academic research and local authorities shows overwhelmingly that the quality of education and care offered by maintained nursery schools is very high indeed and sets the standard for others to follow. It would be disastrous if this standard of provision were to be lost.

Overall, however, we find that the difficulties encountered so far with the Single Funding Formula have arisen because of the way in which it has been implemented, rather than because of the concept. It is undeniably more transparent; and, if properly applied, we believe that it can be sufficiently versatile to fund all settings sustainably and in a way which respects and rewards the varying provision offered.

Local authorities were encouraged to offer settings a supplement to the basic hourly rate of funding to recognise high quality provision, for instance when teachers and other well qualified staff were employed. We were astonished to learn of local authorities that had not incorporated any quality supplement into their local funding formula, in at least one instance because providers themselves could not agree on a suitable measure of quality. Almost half of local authorities responding to a data collection exercise by the Department in November 2009 reported no quality supplement. This is unacceptable, and we recommend that a quality supplement should be made mandatory.

The Government encourages flexibility under the entitlement to free early years education and care, for instance through moving away from 'sessional' provision in blocks to 'wraparound' care starting early or finishing late in the day. While we accept that flexible care may suit parents, there is a distinct risk that it will not serve the interests of the child. It would be possible, in theory, for a parent to use a continuous session of 10 hours on one day as part of their free entitlement of 15 hours. We do not believe that this would be good practice, and we approve of steps taken by local authorities to ensure that take-up of the free entitlement is spread reasonably over the week.

Many local authorities were struggling to implement their local single funding formulae by April 2010, and the Government was correct in deciding to defer full implementation until April 2011. We suspect that the Committee's inquiry helped to focus minds on this decision. The year's delay must be used to settle nerves and restore some stability in the sector, and to rework funding formulae where necessary. In the meantime, the Government should review all local formulae, examining in particular the use of the quality supplement, the willingness of providers to supply information on the cost to them of provision, the impact on Children's Centres, and whether formulae are being based upon unrealistic assumptions on levels of take-up of places.

Lastly, it seems to us that the implementation of Sir Jim Rose's proposals to encourage entry to primary school in the September following a child's fourth birthday will have far-reaching consequences for early years funding. The distinction between early years and primary education is being blurred: some four-year-olds will be in school while others will be in early years settings. The former will be funded by local authorities according to the schools funding formula, the latter through the early years single funding formula. We question whether this is fair or logical, and we recommend that the Government examine whether a unified funding system should be introduced for all children aged from 2 to 11 years old.

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