ITEM NO. 9
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REPORT FROM THE STRATEGIC DIRECTOR FOR CHILDREN’S SERVICES
TO
SALFORD SCHOOLS FORUM
ON 7TH JANUARY 2015
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TITLE:
FUTURE FUNDING ARRANGEMENTS TO SUPPORT THE DELIVERY OF
EARLY EDUCATION AND CHILDCARE FOR
3 AND 4 YEAR OLDS IN SALFORD.
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RECOMMENDATION:
Schools Forum are asked to consider the contents of this report and approve a
formal consultation to take place with all Early Years Providers on the following
proposed delivery models for the Early Years Single Funding Formula;
Delivery Model A
Proposals based on a comparison of the Early Years Single Funding Formula across
Greater Manchester
Delivery Model B
Proposals based on a cost analysis exercise undertaken with Early Years provision
in both the maintained and non-maintained sector.
Delivery Model C
Proposals based on a percentage increase based on the minimum wage between
2012 and 2014.
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EXECUTIVE SUMMARY:
This report follows on from a report submitted to Schools Forum on 17th September
2014 that set out the current funding arrangements for the universal entitlement for 3
and 4 year olds.
The purpose of the previous report was to seek permission to consult and review the
Early Years Single Funding Formula and to look at future funding options for the
delivery.
Following that report a ‘cost analysis’ has been carried out through completion of an
online questionnaire with all Private, Voluntary and Independent funding providers to
gather information on the cost of delivery for 3 and 4 year olds.
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The details of the cost analysis process and its outcomes are outlined within the
body of this report.
The purpose of this report is to seek approval to consult with Early Years providers
on their preferred funding model.
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BACKGROUND DOCUMENTS:
Early Education and Childcare Statutory Guidance for Local Authorities (September
2014)
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/35159
2/early_education_and_childcare_statutory_guidance_2014.pdf
Children and Families Bill (2014)
http://www.publications.parliament.uk/pa/bills/cbill/2012-2013/0131/2013131.pdf
Special educational needs and disability code of practice: 0 to 25 years – Statutory
guidance for organisations who work with and support children and young people
with special educational needs and disabilities (July 2014)
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/34244
0/SEND_Code_of_Practice_approved_by_Parliament_29.07.14.pdf
More Great Childcare – Raising quality and giving parents more choice (January
2013)
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/21966
0/More_20Great_20Childcare_20v2.pdf
More Affordable Childcare (2013)
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/21267
1/More_Affordable_Childcare.pdf
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KEY DECISION:
YES
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1.
Early Education and Childcare Background
1.1
The 3 and 4 Year Old Early Education and Childcare funding was introduced
in 2004 following a National report into the effective provision of Pre-School
Education commissioned by Government that made clear links between the
quality of early learning experiences on long term outcomes for children,
particularly vulnerable children. Making it a legal entitlement for all 3 and 4
year olds across the country to access up to 12.5 hours of early education and
childcare per week.
1.2
In March 2007 the DfE launched a consultation on School, Early Years and
14-16 funding. The consultation document detailed the government’s
commitment to extending the free entitlement to 15 hours’ free provision that
could be taken more flexibly. The different funding methodologies for
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maintained schools and PVI providers posed a challenge for the funding the
flexible provision in a consistent and fair manner.
1.3
The introduction of an Early Years Single Funding Formula (EYSFF) aimed to
ensure that funding of PVI settings more closely resembled that of maintained
schools. The EYSFF was implemented in April 2011.
1.4
The school funding formula changed significantly in 2013/14 in light of
Governments School Funding Reforms. Even though the EYSFF was not part
of these reforms, it was felt that at an appropriate time a review of the EYSFF
would be prudent, with a view to implement any changes in April 2015.
1.5
The principle outcome of the Early Education and Childcare is for children to
take up high quality early education, regardless of their parents’ ability to pay
– benefiting their social, physical and mental development and helping them
prepare for school. Evidence shows that regular good quality early education
has lasting benefits for all children.
1.6
The Childcare Act 2006 placed a statutory duty on all Local Authorities to
provide sufficient childcare places to meet the needs of working parents, the 3
and 4 Year Old Early Education and Childcare funding is one of the ways this
statutory duty is met.
1.7
The 3 and 4 Year Old Early Education and Childcare funding can be taken up
at nursery provision within a school or at an Ofsted registered childcare
provider to support parental choice.
1.8
The Early Education and Childcare Statutory Guidance for Local Authorities
(Sept 2014), sets out the requirements that early years providers must meet in
order to deliver the Early Education and Childcare funding.
1.9
The DfE suggest that the Early Years Single Funding Formula become more
standardised, with a minimum number of supplements added to base rates
and this is reflected in the revised ‘Early Education and Childcare Statutory
Guidance for Local Authorities (September 2014).
2.
Financial Context
2.1 The funding to support the delivery of the free entitlement for 3 and 4 year olds
comes from the Dedicated Schools Grant.
2.2 The Early Years Single Funding Formula is currently applied to the 15 hours
Early Years Education and Childcare Funding for 3 and 4 year olds.
2.3
In 2013/14 the 3 and 4 Year Old Funding had approximately £1m under
spend, £500k of this was committed to growth budget, leaving a one off under
3
spend of £500k which is committed for piloting the Early Years New Delivery
Model which was agreed at Schools Forum on 17th September 2014.
2.4
In previous years we have made provision for the increase in early year’s
numbers throughout the year; however the DfE are now providing additional
budget for any in year increase in numbers.
2.5
In 2014/15 the budget for the Early Education and Childcare Funding is
currently predicting an under spend of £500k which can be utilised to fund any
changes to the Early Years Single Funding Formula.
2.6
Currently the Early Years Single Funding Formula is allocated in the following
way;
Base Rate
Maintained Nursery Class
£3.38
Day Nursery/Independent Schools
£3.21
Pre-School/Playgroup
£3.20
Childminder
£3.00
Local Authority Nurseries
£3.26
Incentives
Deprivation
Calculated using the average IDACI
score for all children attending each
setting
Quality
Quality:
Graduate lead
£0.05
OFSTED grade good or £0.10
outstanding
OR
Commitment to complete £0.10
QIF in 12 months
3.
0% - 20%
20% - 25%
Amount per pupil
per hour
(2012/13)
£0.00
£0.00
25% - 30%
30% - 40%
40% - 50%
50% - 60%
60% - 100%
£0.10
£0.12
£0.16
£0.19
£0.22
The Early Years Single Funding Formula
3.1 The objective of the Early Years Single Funding Formula was to arrive at a
base rate that covered the cost of delivering the free entitlement.
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3.2 It became statutory for all Local Authorities to have developed and applied an
Early Years Single Funding Formula in September 2010.
3.3 The current rates for the Early Years Single Funding Formula were last
reviewed in September 2011
3.4 The current Early Years Single Funding Formula includes an hourly rate to
cover the cost of delivery plus enhancements to support quality and
deprivation. It is mandatory for all Local Authorities to apply an enhancement in
additional to the base rate to support vulnerable children living in areas of
deprivation.
3.5 The consultation process to date has included a review of the base rates and
enhancements to ensure that they covers cost of delivery and support quality
provision and meet the needs of vulnerable children.
4.
Review Process
4.1 The review of the EYSFF was split into two broad areas, namely the cost
analysis and a comparison across Greater Manchester and the proposed
formula consultation.
4.2 A cost analysis exercise with Private, Voluntary and Independent settings has
been undertaken to analyse the cost of delivery for 3 and 4 year olds in
different sectors (Private Day Nurseries, Pre-School/Playgroups, Childminders,
Independent Schools, and Local Authority Nurseries).
4.3 The aim of the Cost Analysis exercise was to establish whether current levels
of funding provided through the EYSFF are sufficient to meet the overall costs
incurred by providers to deliver the Free Entitlement for 3 and 4 year olds. Early
Years providers were asked to voluntary complete an online questionnaire.
4.4 An analysis of Consistent Financial Reporting (CFR) data has taken place to
look at the running costs of early year’s provision in individual schools.
4.5 Comparisons have been made with our Greater Manchester neighbouring
authorities in order to review the base rates for the different sectors and to
review the supplements to determine the relevance.
4.6 The analysis process undertaken arrived at the following models set out below
4.7 Out of the 9 Greater Manchester Local Authorities only two authority offer a
different rate for Pre-School/Playgroups, so therefore we have proposed to
have one base rate for PVI’s excluding Childminders.
4.8 Out of the 9 Greater Manchester Local Authorities only 2 have supplements for
qualifications and therefore to bring Salford EYFSS in line with GM we have
proposed to remove this supplement in the Early Years Single Funding
Formula.
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Model A
4.9 This model has been developed by comparing the EYSFF across Greater
Manchester. We have looked at both the base rates and the supplements that
make up the formulas across the 10 Local Authorities in Greater Manchester
excluding Salford to come up with a Salford comparable formula for the EYSFF.
4.10 The base rate has been arrived at by taking an average cost of the Greater
Manchester 9 Local Authority EYSFF base rates in the Private, Voluntary and
Independent sector and Maintained Schools.
Early Years Provision
Early Settings
Childminders
Maintained Schools
Base Rate
£3.42
£3.42
£3.91
Supplements
Quality – Ofsted Inspection
Deprivation
£0.10
£0.10 - £0.22
4.11 In this model Early Years setting will see an increase in their base rate of
£0.20p, Childminders an increase of £0.42p and Schools an increase of
£0.53p.
Cost of Financial Model
4.12 The below costs are based on all settings receiving the quality supplement of
0.10p per child and the school PAN.
Sector
PVIs
Schools
Academies
Total
2014/15
£3,959,449
£5,020,981
£425,781
£9,406,211
2015/16
£4,207,118
£5,762,748
£489,143
£10,459,009
Difference
£247,670
£741,767
£63,362
£1,052,798
4.13 This model would lead to an increased spend of £1,052,798 and therefore not a
viable option as it cannot be sustained through the 3 and 4 Year Old Funding
budget.
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Model B
4.14 This model is based on the cost analysis exercise that was undertaken with the
Private, Voluntary and Independent sector and Maintained Schools
4.15 We received the following responses for the cost analysis exercise;
Sector
Independent Schools
Local Authority Nurseries
Playgroups/pre-Schools
Childminders
Private Day Nurseries
Schools
Responses
received
3
5
13
18
16
Provided by SCC
Finance
Out of a possible
12
5
24
94
56
4.16 The responses received by the Private, Voluntary and Independent sector is
not a true representation of the sector and therefore the analysis is distorted
and does not provide a true reflection of the cost of delivery
4.17 This base rate has been arrived at by taking the average cost of the cost
analysis data based on Early Years settings hourly rates for fees
Early Years Provision
Early Settings
Childminders
Maintained Schools
Base Rate
£3.10
£3.79
£4.56
4.18 Due to the minimum funding guarantee (MFG) we would be unable to
recommend a decrease to the base rate that falls below 1.5%, therefore the
Model B base rate for Early Years settings would need to be the following;
Early Years Provision
Early Settings
Base Rate
£3.22
4.19 The proposed EYSFF for Model B is;
Early Years Provision
Early Settings
Childminders
Maintained Schools
Base Rate
£3.22
£3.79
£4.56
Supplements
Quality – Ofsted Inspection
Deprivation
£0.10
£0.10 - £0.22
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4.20 The changes in the base rates for this model would mean that Early Years
settings get an increase of £ 0.01p, an increase of £0.79p for Childminders and
an increase of £1.18p for schools.
Cost of Financial Model
4.21 The below costs are based on all settings receiving the quality supplement of
0.10p per child and the school PAN.
Sector
PVIs
Schools
Academies
Total
2014/15
£3,959,449
£5,020,981
£425,781
£9,406,211
2015/16
£3,992,654
£6,672,462
£566,850
£11,231,966
Difference
£33,205
£1,651,481
£141,069
£1,825,755
4.22 This model would lead to an increased spend of £1,825,755 and therefore not a
viable option as it cannot be sustained through the 3 and 4 Year Old Funding
budget.
4.23 This is not a viable model due to the increased cost implications for this budget.
Model C
4.24 Is based on a minimum wage increase of 4.95% between October 2012 to
October 2014.
Early Years Provision
Early Settings
Childminders
Maintained Schools
Base Rate
£3.38
£3.15
£3.55
Supplements
Quality – Ofsted Inspection
Deprivation
£0.10
£0.10 - £0.22
4.25
In Model C Early Years settings will see an increase of £0.16p; Childminders
would see an increase of £0.15p and Schools an increase of £0.17p
Cost of Financial Model
4.26 The below costs are based on all settings receiving the quality supplement of
0.10p per child and the school PAN.
Sector
PVIs
Schools
Academies
Total
2014/15
£3,959,449
£5,020,981
£425,781
£9,406,211
2015/16
£4,156,237
£5,255,141
£445,142
£9,857,162
Difference
£196,788
£234,160
£20,002
£450,950
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4.27
This is a viable model and therefore is being proposed as the recommended
model for the Early Years Single Funding Formula from April 2015.
5.
Future Financial Context
5.1
Recommended implementation of Model C EYSFF at a total cost of £450,950
5.2
It was agreed at Schools Forum on the 17th September 2014 that £50,000
would be used from the underspend to support the Early Years SEN in future
years.
5.3
We are recommending that £257,585 be allocated to support staffing costs as
part of the Early Years 0-5 offer. This is currently funded through the 2 Year
Old Funding. The participation funding model which will be introduced in April
2015 means that this alternative funding is required.
5.4
Approx £759k would be required to support these recommendations as an ongoing cost in the Early Years DSG
6.
Consultation Process
6.1 We now intend to commence a consultation with all Early Years provision in the
maintained and private sector to on the recommended model for the EYSFF
implementation in April 2015.
6.2 The process for consultation will include;
School Nursery Classes



Consultation briefings
Survey monkey
Email with Consultation Report
Private, Voluntary and Independent settings
 Consultation briefings
 Survey monkey
 Email with Consultation Report
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KEY COUNCIL POLICIES:
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ASSESSMENT OF RISK: MEDIUM
The Early Years Single Funding Formula was introduced to ensure that there was a
fair and transparent process for determining the hourly rate paid to childcare
providers to deliver the free entitlement for 3 and 4 year olds. The risk of not
reviewing the Early Years Single Funding Formula is that the current base rate does
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not meet the costs of delivery and this result in insufficient childcare to meet the
needs of working parents.
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COMMUNITY IMPACT ASSESSMENT: The delivery of the 3 and 4 year old
entitlement supports all children to start life well regardless of their circumstances.
Access to quality childcare is one of the key routes out of poverty. Any changes to
the current levels of funding need to take into account the impact on vulnerable
children so that resources can be targeted appropriately to support better life
chances.
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SOURCE OF FUNDING: The funding to support the delivery of the free entitlement
for 3 and 4 Year olds comes from the Dedicated Schools Grand (DSG).
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LEGAL IMPLICATIONS: Provided by Nicky Smith, Solicitor – tel. 219 6315
The legal entitlement for 3 and 4 year olds is 15 hours of free nursery education per
week, 38 weeks a year. Parents may choose to take this up in a maintained school
nursery or in a private, voluntary or independent sector early years setting or with a
childminder. Local authorities are required by statute to fund early education places
in al sectors using a locally-determined, transparent formula, known as the early
years single funding formula. This should be made up of a single base rate for all
providers or a number of base rates differentiated by type of provider. The formula
must include a deprivation supplement and can include a supplement to support
quality of provision.
Consideration of proposed changes to Salford’s EYSFF has included a review of the
base rates and supplements, or enhancements, a cost analysis and a comparison of
formulas across Greater Manchester. This has culminated in the 3 models outlined in
the report. It is now proposed to consult with all early years providers to determine
the preferred formula.
It is important that proper consultation is carried out before a decision is made to
change the formula. In a recent court case the Supreme Court has endorsed the
basic requirements of a “fair” consultation exercise. Four principles apply in order for
a consultation to be considered fair: it must take place when the proposal is still at a
formative stage; sufficient reasons for the proposal must be put forward to allow for
intelligent consideration and response; adequate time must be given for that
consideration and response; and responses must be conscientiously taken into
account.
Other local authorities which have undertaken consultations regarding changes to
the EYSFF have allowed on average one month for responses to be made. Whilst
there is no statutory length of consultation period, it would seem reasonable to allow
one month.
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FINANCIAL IMPLICATIONS: Supplied by: Dave McAllister, Finance Manager
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An additional £759k pa would be required to facilitate the budget changes proposed
in this report. £500k of one off funding, carried forward from 2013/14, has previously
been approved by Schools Forum to support the further development of Early Years.
The Early Years allocation of DSG to support the ongoing increased costs of this
proposal is still to be confirmed. Should the January 2015 census confirm our
expectations of rising pupil numbers, then there will be sufficient additional receipt of
DSG which can be used to fund the increased cost of these proposals.
_____________________________________________ ______________________
OTHER DIRECTORATES CONSULTED:
Customer and Support Services
Directorate
___________________________________________________________________
CONTACT OFFICER: Head of Starting Life Well Service – Rebecca Bibby 0161 778
0318
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WARD(S) TO WHICH REPORT RELATE(S): All
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Appendices
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