Appendix
SELECT COMMITTEE REPORT ON THE EARLY YEARS SINGLE
FUNDING FORMULA (EYSFF): THE GOVERNMENT'S RESPONSE
The Select Committee's recommendations are in bold
text.
The Government's response is in plain text.
Some of the recommendations and responses have been
grouped.
INTRODUCTION
The Government wishes to thank the Select Committee
for their interest in the Early Years Single Funding Formula (EYSFF).
The Government welcomes the Select Committee report which has
been of considerable value in taking the policy objectives of
the EYSFF forward. The Committee will be aware that the Government
has recently taken the decision that all local authorities will
be required to introduce an EYSFF by April 2011. For too long,
Early Years funding has been inconsistent and patchy across the
countrywith too many children, particularly from disadvantaged
families, not accessing any or all of their free nursery education
hours. As the Committee recognises the EYSFF is undeniably a more
transparent method of funding early years providers and is now
operating in 71 local authorities. The Government looks forward
to working with all local authorities across the country as they
further develop their EYSFF in partnership with providers and
move towards successful implementation.
THE IMPORTANCE OF COST ANALYSISRECOMMENDATIONS
1, 2 AND 21
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 short sighted. (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)
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)
The Government agrees that it is fundamental to the
EYSFF that it should be based on a detailed understanding of providers'
costs in both the maintained and Private Voluntary and Independent
(PVI) sectors. Local authorities cannot take full account of the
costs across different types of provision if these costs are not
shared with local authorities. This requires local authorities
to build their EYSFF in close consultation with all providers.
Through this, local authorities can build an accurate and detailed
cost analysis. Through the development of their cost analysis
local authorities will want to consider what a reasonable rate
of return for all providers is under a new formula to ensure they
remain sustainable and can deliver high quality provision. In
determining rates, local authorities should be able to explain
and justify any differences in funding between providers under
the new formula.
The Government also agrees that local authorities
should not bear sole responsibility for the lack of engagement
by some providers with the EYSFF. Some local authorities have
had more success than others in engaging their providers to participate
in cost surveys. Local authorities with high response rates have
consistently involved providers throughout the process and kept
them informed of their aims and motivations. Ultimately though
it is in the interests of PVI providers to be transparent with
their costs. The Government will continue to work with key stakeholders
such as National Day Nurseries Association, Pre-School Learning
Alliance and Federation of Small Businesses to emphasise the importance
of PVI providers involving themselves fully in this process.
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)
The Committee is correct that the EYSFF was not introduced
to boost the funding of one sector of the market over another.
Rather, the EYSFF is intended to improve the fairness and transparency
of funding free nursery education. It is correct that some PVI
settings have received an increase in funding to better reflect
the costs of delivery. It is also true, that, overall, PVI settings
are likely to see greater stability in their funding as they will
have an indicative budget at the start of the year for the first
time, but will continue to be adjusted to reflect participation
during the year.
EYSFF AND THE MAINTAINED SECTORRECOMMENDATIONS
4 AND 8
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)
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)
The coalition Government is clear that free nursery
education should be delivered by a diverse range of providers.
High quality provision is not to be found in only one part of
the market and we want parents to be able to choose the type of
setting that is best for them and their child.
The Government agrees with the Committee that many
maintained nursery schools offer an exemplary standard of early
education and it is true that children make more progress in settings
where staff have higher qualifications particularly if the manager
is highly qualified.
Maintained settings often have more highly qualified
staff and should continue to be funded accordingly under the EYSFF.
Local authorities should also ensure their EYSFF takes account
of unavoidable costssuch as those of a Headteacher. We
expect local authorities to put in appropriate transitional support
to manage maintained provision moving to the EYSFF. However, the
Government expects the maintained sector to ensure that it is
offering value for money. As part of this, we want to enable more
children to access places in nursery schools where these have
been left empty but still paid for, and we want to encourage schools,
through outreach campaigns, to move towards achieving their capacity.
As the majority of maintained nursery schools are part of Children's
Centres we are also encouraging a more integrated approach whereby,
for example, resources and governance structures might be shared
if appropriate to ensure better value for money. In addition,
the presumption against the closure of maintained nursery schools
remains in place.
FLEXIBILITYRECOMMENDATIONS 5, 6, 7 AND 16
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)
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)
The Code of Practice which came into force on 1 September
2010 has national minimum standards of flexibility. The Government
recognises that this is quite prescriptive and it will be important
to understand the impact and review these requirements. The Government
intends to streamline early years and childcare guidance next
year which will allow us to recognise where changes might need
to be made.
Parents should be able to choose when they take up
free early education for their child to fit in with their daily
lives. However, for some providers, the move to more flexible
patterns of delivery presents some real practical, and in some
cases financial barriers. The flexibility supplement of the EYSFF
is designed to support providers by recognising the costs associated
with delivering different patterns of provision and incentivising
providers to move away from sessional provision to help them to
deliver the extension to 15 hours from September 2010.
The Committee may wish to note that from an analysis
of section 251 financial returns 24 pathfinder authorities have
included a flexibility supplement within their EYSFF. Some local
authorities have built a flexibility payment into their base rate
and others will be using Standards Fund money to incentivise flexibility
as part of the extension of the free entitlement from 12.5 to
15 hours.
IMPROVING QUALITY THROUGH THE EYSFFRECOMMENDATIONS
9, 10, 11 AND 12
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)
The Government is committed to giving children the
best start in life, and recognise that high quality nursery education
plays a key role in reducing inequalities for those most at risk
of falling behind their peers. Raising the qualification
levels of staff in early years settings is one way of meeting
this aim, and we will be looking at all spending which is focused
on supporting high quality early years provision as part of the
Spending Review process. We will be talking to local authorities
and sector representatives about how best to ensure funding has
the most impact on the children who would otherwise be at the
greatest risk of experiencing inequalities.
The Committee is, of course, correct that high quality
nursery education is of paramount importance to improve the life
chances and readiness for school of children, especially the most
disadvantaged who stand to benefit the most. It rightly follows
that local authorities are encouraged to use the EYSFF to support
and promote quality and foster a culture of continuous improvement
in the quality of provision.
A quality supplement is used in around half of the
pathfinder local authorities, but many others have included an
uplift in their base rates to recognise qualityfor example
by including multiple base rates for different types of provision.
The Government agrees that the EYSFF should form part of local
authorities' strategies for driving up the quality of early years
provision and supporting continuous improvement. Local authorities
will want to use their quality supplement to address issues of
market failure and where children's outcomes are at risk through
low quality provision.
The most common indicators used to measure quality
have been workforce qualifications and Ofsted inspection ratings.
Providers are rewarded immediately on the qualifications of their
staff but are also incentivised to recruit a higher quality of
staff. Likewise, settings are incentivised to work towards achievingor
retaininga good inspection judgement. The Government agrees
with the Committee that the Early Years Quality Improvement and
Support Programme (EYQISP) should be used to serve as a good indicator
of quality. Local authorities should, through the EYQISP assessment
process make judgements about the quality of provision in their
area.
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)
The future of free early learning for two year olds
is subject to the outcomes of the Spending Review. We will consider
this recommendation when we are clearer following the Spending
Review on future status of the two year old offerbut should
the pilot be significantly expanded the Government recognises
a formula approach may need to be considered.
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)
Funding for early years provision is not ring fenced
through the Dedicated Schools Grant. It will be for Schools Forums
to decide locally how best to distribute 3-16 funding across their
locality. Local authorities will want to consider the sustainability
of their formula when setting ratesparticularly for their
quality supplement.
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 entitlement even at or slightly below
cost of provision as 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)
Current primary legislation requires local authorities
to secure fifteen hours of nursery education free of charge for
all eligible children in their area. And local authorities are
expected to work with providers to ensure that there are no conditions
of access to these places.
Local authorities are expected to make every effort
to ensure that the EYSFF is designed and implemented in a way
that enables providers to continue to offer free nursery places.
As such, the sustainability of providers is a key consideration
throughout the process. Additional factors, either to support
places or cover other cost pressures, can be allocated in exceptional
circumstances.
Local authorities should put in place Provider Agreements
with all providers delivering free nursery places. As a last resort,
local authorities should consider whether to withdraw funding
from providers who do not uphold their agreement. However, where
there is demand for a setting, or its places are needed to uphold
sufficiency of provision in the area, support should be offered
to enable that setting to meet the conditions of the agreement
and continue delivering the free places.
Whilst all providers are currently eligible to deliver
free nursery education it is optional and in making decisions
providers need to consider if their business models are viable.
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 fund even if
not at a full unit rate places 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)
The EYSFF requires all local authorities to be transparent
about the funding that they are providing for free nursery education
for three- and four-year-oldsso that parents and providers
are able to hold their local authority to account. It also requires
local authorities to fund providers for the children that attend
their nurseryrather than allowing funding to be wasted
on empty places. This will help to ensure that nurseries are making
the best effort to fill their places by attracting and encouraging
more families to take up free nursery educationparticularly
the 'hardest to reach' who stand to benefit the most.
The Government believes that settings should be funded
on the basis of participation rather than places, except for reasons
of sustainability. In recognition of the fact that local authorities
have a sufficiency duty, the school finance regulations will permit
a factor to be included in the formula for additional funding
to support sufficiency and sustainability. Furthermore, the Government
is consulting on provisions in these regulations which will allow
local authorities to reserve places, for children with special
education needs or those children in need. This will allow local
authorities to use some discretion over place-led funding.
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)
The Government agrees with this statement. Historically,
some local authorities have taken a local decision to fund full-time
placesparticularly in maintained settingsfor some
or all children of pre-school age (in excess of the 12.5-15 hour
entitlement).
The affordability of free nursery places has been
a prime consideration for pathfinder authorities and their Schools'
Forums in developing the EYSFF. Local authorities should be assessing
the affordability against an overall funding limit or a locally
defined early years budget.
The transparency of the EYSFF has thus led some local
authorities to consider the basis on which they fund full time
provision, with some introducing formal policies for the first
time to introduce a more targeted approach to allocating full-time
places for the most disadvantaged children, rather than universally
or towards a particular sector.
SHOULD THE GOVERNMENT PROCEED WITH THE SINGLE FUNDING
FORMULARECOMMENDATIONS 19, 20 AND 22
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 uncoordinated 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)
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)
The Government is grateful for the Select Committee's
view that the core principles of the EYSFFconsistency and
transparency in allocating fundingare valid and for the
first time, will ensure an improved level of fairness in the way
early years providers are funded.
However, the Government also acknowledges that it
is only through the effective implementation of the EYSFF that
all providers across the sector can have confidence in local decisions
about funding and the objectives of the EYSFF can be met.
Most childcare groups representing the PVI sector
broadly welcome the EYSFF and the greater transparency it promises,
and recognise it is a step in the right direction. Where concerns
remain about the impact that the EYSFF will have on providers,
local authorities are generally trying to manage sympathetically
the move to the EYSFF.
The Government agree with the Select Committee's
recognition of the hard work undertaken by local authorities and
providers to get to the current stage in development of the EYSFF.
The large group of pathfinders (almost half of all local authorities)
who were ready and willing to implement from April 2010 is indicative
of the scale of preparation that had been done prior to this date.
On 26 July, Ministers announced that from April 2011
all local authorities will be required to implement the EYSFF.
This provides all authorities with some time to finalise their
formula before the regulatory framework is introduced.
The Government now want to use the pathfinder authorities
to gather more examples of practice to support those local authorities
that have found implementation more difficult. Having a larger
number of pathfinders has enabled us better to understand the
different challenges being faced by different types of authority.
FUNDING EARLY YEARS PROVISIONRECOMMENDATIONS
23 AND 24
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)
The Committee will understand that, in advance of
the Spending Review, firm commitments cannot be made. However,
it should be noted that in the Coalition Agreement, the Government
is committed to supporting the provision of free nursery care
for pre-school children, and for that support to be provided by
a diverse range of providers. Further evidence of commitment to
the early years was demonstrated when the Secretary of State for
Education announced his intention to extend free nursery education
for three- and four-year-olds to 15 hours per week from September
2010. The Government has also pledged to ensure that funding
is focused on supporting those children from disadvantaged families
who benefit most from nursery education.
Funding for all sectors offering free nursery places
is provided through the ring-fenced Dedicated Schools Grant (DSG),
which supports the majority of education provision for children
aged 3-16. There is no specific ring-fence for early years provision
within the DSG and the level of funding made available for education
at all ages is defined locally in consultation with a local authority's
Schools Forum. The Committee will also be aware that take up is
already high with 95% of all three- and four-year-olds accessing
some or all of their free nursery education.
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)
The Government is committed to the EYSFF which will
fund children of three and four years. The Government has recently
launched a public consultation on Schools Funding in general,
and on the introduction of the pupil premium. Whilst funding
will continue in the same way for the immediate future, the Government
has signaled its intention to review school funding for all schools
including academies beyond 2011-12 and details will be announced
in due course.
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)
The Government agrees that the variability of hourly
rates between local authorities is acceptable in response to local
circumstances. Local authorities are well positioned to set rates,
and should be doing so with the approval of the Schools' Forum,
including representatives of all sectors. It should be noted too
that some LAs have pursued a strategy of lower base rates with
higher supplements. This means direct read across between different
local authorities rates may not in many circumstances be possible.
Differences in funding rates are in any case a local matter.
The additional year for implementation has benefited
many local authorities, enabling them to consider and consult
on proposals, arriving at sound, sensible decisions with broad
agreement. In addition, the learning of the pathfinders will be
shared with other authorities. We will be streamlining childcare
guidance next year, in an effort to make it more accessible
27. We recommend that the Government
review all early years single funding formulae whether proposed
or implemented by 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)
The Select Committee recognised the importance of
effective implementation, and recommended that the Government
review all formulae by the autumn of this year. The Government
supports the principle that underlies this recommendationthat
effective implementation is critical and the Government should
work to ensure this is achieved. Fundamentally, however, the
EYSFF is for local agreement between local authorities and childcare
providers, guided by particular local priorities and circumstances.
This being the case, the Government does not believe it would
be appropriate or practical to review the detail of every local
authority's proposed formula. However, it is our intention to
call on all local authorities to publish their formulas locally
to promote local accountability and transparency and the Government
will make this clear when early years and childcare guidance is
streamlined in the future.
The Government does have a role in assisting local
authorities to be ready to implement by April 2011. As a result
the Department intend on collecting a range of practices and experiences
from LAs who have already implemented in order to help simplify
the process for others. The Department has also published comparative
benchmarking data so those authorities still developing their
formulae can see if they are broadly in line with those who have
already implemented the EYSFF.
|