Memorandum submitted by Diana Rose


Early Years Single Funding Formula inquiry


1. I am writing as a Private, Voluntary and Independent sector (PVI representative who is a member of the LB Barnet Early Years Working Group developing a single funding formula for early years' providers. There are 134 PVIs in LB Barnet and we offer the majority of funded places in the Borough.


2. Nursery provision within Barnet is very diverse, but the majority of places for the children are provided by PVIs. These include settings operated by charities and community and faith groups, and a smaller number of others which are owner run or operated by commercial companies. They display wide variations in premises, diversity of population, faith, special needs, opening times, hours and flexibility, staff qualifications, staff: children ratios and salaries.


3. The PVIs pride themselves in offering quality education which is demonstrated by most having staff: children ratios over and above the minimum OFSTED requirements, and by the qualifications of their staff. They have managers who are passionate about their work and Early Childhood Education and committed to ongoing professional development for themselves and their staff. This diversity ensures parental choice but only if the provision is financially viable. It currently is but the proposals seriously threaten this continuing.



The expected impact of new local funding formulae on providers of early years education and childcare services;


4. The stipulation that places that are free from the point of entry may not have conditions is only realistic if there is adequate funding. In our Borough, the PVIs are being given lower funding than their existing levels of expenditure. There is therefore great uncertainty as to whether all PVIs will be able to balance their books in the absence of additional charges within the core time. Reductions in quality of provision will be inevitable unless there is either more realistic funding or a sensible attitude taken towards additional fees.

5. The proposed funding on offer from the Borough Council will not cover costs for many settings, particularly those of a high quality, which employ well-qualified staff and/or have better adult/child staff ratios than the statutory minimum requirement. The Borough's proposed funding is based on a formula that allegedly gives equitability per capita. This is patently untrue as the formula does not include premises costs such as rent and rates. The maintained sector do not have to bear these costs but PVIs do.


6. We are also far from convinced that pension costs for the maintained schools are being fully met from this pot alone. Most smaller PVIs are not able to make pension contributions from within even their existing budgets. This will be an increasing problem as mandatory employer pension contributions are brought in.


7. The Borough's own Nursery Schools will additionally continue to receive money from the Standards Fund as it is acknowledged that stand alone nurseries have costs that can not be diffused among other ages e.g. the building maintenance and supernumerary Head Teacher. However, PVI's alone will be expected to meet these costs from per capita funding.


8. The Borough's proposed hourly rate of 4 per hour per child does not reflect the true cost of running a PVI setting in the Borough. Although additional funding is proposed for a qualified manager, parental flexibility, and where pupils are from deprived backgrounds, the total funding would still not meet the costs for most PVIs. Furthermore much of this additional funding will be capped at 30 funded places and this disadvantages the larger settings.


9. Many PVIs charge a deposit, which is deducted from fees, when offering a place to a child. This is the best way they can have confidence that the child will take up the place. The Code of Practice does not allow for this and PVIs will not be able to plan correct staffing levels.


10. Many PVIs consider they are being forced into a situation of withdrawing from their partnership with the Borough which they value. However, PVIs that opt out of the Nursery Education Funding (NEF) will lose finance, training and borough support, including for special needs. If settings withdraw, parents will be faced with increased fees which we estimate will be between 17%-50% and consequently may be forced to withdraw their children from those settings. PVIs that stay in the Partnership will inevitably close if their costs are not met and they fall into debt as most do not have any capital resources behind them. This will only add to pressure for places on the maintained sector and the Borough will have insufficient places to meet their obligation of a place for every three and four year old in the borough


11. Further consequences would be that choices for parents will also be limited. Closures will be inevitable resulting in redundancies amongst our staff and a failure to provide a stable environment for the children of working parents.


12. The Borough's Preschool Inclusion Team has acknowledged the excellent work that the PVIs do with children with additional and special needs. If the PVIs are forced to withdraw, these places will not be available to the children. Staff training and support from the Borough for these children will also not be available.


13. The Borough has stated that PVIs will be able to ask parents for additional fees for services over and above the funded time, however this will have to be shown to the parents as extras in the invoices. Many settings do not have the opportunity to provide these additional hours, or can offer so little, that the required transparency would make the costs of these additions, which would have to be weighted to subsidise the free entitlement, overly expensive.


14. Settings would not be able to guarantee the take up of these additional hours, making it difficult to plan for staffing and educational content and it would also have a financial impact.




15. Many of the PVIs in the Borough are Jewish settings, which require full time paid security guards. The Borough has advised that these costs would not be considered to be additional charges, but could only be recouped on a voluntary basis. Shortfalls would have to be met by the already meagre per capita funding and therefore deprive the children of the education to which they are entitled.



Difficulties which have been encountered in drawing up new funding formulae, and how

they are being overcome.


16. The Council's Early Years Working Group has had to base their financial distribution on poor evidence as only a limited number of PVIs responded to the questionnaire, partly because of the difficulties for small settings without accounting staff to provide the complex information sought.


17. There are funding streams that were not shared between all providers, but kept back for the maintained nursery schools and these have not been included in the formulae covering PVIs.


18. The pilot group of 40 settings (only 9 of which are PVIs) are not representative as the number of PVIs is significantly below the proportions of the numbers of maintained and PVI settings in the Borough.


19. The settings in the pilot group are all receiving deprivation funding and an extra grant, as they are trailblazers. This will therefore, skew the financial viability results.


20. The DCSF has stated that local authorities are not obliged to follow the guidance regarding Free Entitlement, but should only depart from it if they have good reason. It seems to us that we are neither being given our fair share of the funding pool and then further disadvantaged by not being allowed to charge top-up fees. Our view is that if the Borough Council insists on disregarding the financial implications for PVIs and not funding them equitably, that allowing a departure from Free Entitlement is essential. We therefore recommend that a clause be added to the Code of Practice that financial viability is a good reason.


21. If the per capita rate set by the Local Authority is driven by available funds and the authority is unable to distribute the money equitably between the maintained and PVI sectors in such a way as both can operate satisfactorily, it is in everybody's interests for parents to be allowed to pay towards PVIs of their choice to keep them viable.


22. The Borough states that the proposed formula is based on the requirements of the Draft Code of Practice. This has severely damaged morale amongst managers and staff of PVIs due to the impending changes and their threat to high quality provision for the children as well as their continuing viability. We would ask the Committee to consider this along with the financial implications in the interests of the children and families that we serve.




December 2009