Changes to the Early Years Funding from April 2017

Changes to the Early Years Funding from April 2017

Summary Consultation and Findings

1. Introduction

1.1. Overview

As a result of the Government delivering its manifesto commitment to double the childcare offer to 30 hours per week for working parents of three and four year olds, changes are being made to how funding is allocated to Local Authorities to enable a fairer and more equitable distribution across the country. (NB: 30 hours Childcare is the term that central government is now using to describe the early years entitlement. This incorporates the current 15 hours early education entitlement and throughout this document wherever early education is referred to, this also means 30 hours childcare.)

This does not replace the existing offer of 15 hours (570 hours per year) for all three and four year olds and targeted two year olds.

The government consulted on the national early years funding formula in September 2016 and published its response on the 1st December (https://www.gov.uk/government/consultations/early-years-funding-changes-to-funding-for-3-and-4-year-olds). The document details both how the national funding formula will work and the level of funding local authorities will receive.

From 2017/18 Birmingham City Council will be required to fund all early education providers using the new formula within guidance set by the Department for Education.

An annual cycle of rates review was started in 16/17, working in partnership with sector representatives and Schools Forum to shape proposals for the Early Years budget and set rates for Early Education in line with DfE guidance and local priorities.

There have been ongoing discussions with sector reps and Head Teachers to work through anticipated and now actual challenges related to funding from 2017/18. However, it is fair to report that the confirmed actual reduction in EEE funding rates for Birmingham children, at the maximum 5% reduction allowed under national minimum funding guarantee, is a worst case scenario for early education.

Transitional protection will be applied to Birmingham by the DfE for a period of three years.

In light of the actual funding announced, funding rates in 2017/18 have been modelled over three years in line with the information available on transitional protection arrangements.

There is a requirement by the DfE that all settings are funded at the same rate by 2019/20, with additional specific protection provided to maintain nursery school funding at current levels within the funding allocations that have been announced.

There are now a number of requirements for LAs which are intended to ensure that funding is fairly distributed to providers. The main changes are:-

• A minimum amount of funding that must be passed through to providers (93% in 2017/18 and 95% thereafter).
• A universal base rate for all types of provider to be set by LAs by 2019/20 at the latest.
• Supplementary funding for Maintained Nursery Schools for the duration of this parliament.
• Reforms to mandatory and discretionary supplements LAs are able to use with a maximum 10% cap on the amount of funding that can be used.
• The introduction of a Disability Access Fund linked to children that access Disability Living Allowance.
• A requirement for LAs to establish a SEND inclusion fund (this is already in place in Birmingham – ISEY).

1.2. Consultation

A consultation was carried out to engage the early year’s professionals, providers of nursery schools/classes, childcare providers from the private, voluntary and independent sectors, and seek their views on the proposed changes to the Early Years Funding Formula. A consultation document and questionnaire was provided, both online through Be Heard and in paper form, which set out the context, process and recommendations for how funding for the Early Education Entitlement (EEE) will be allocated in 2017/18, including Birmingham City Council’s proposals for both centrally retained funding and rates for providers in Birmingham.

2. Data Sources and Scope

The questionnaire was made available to all Birmingham citizens via BeHeard, and circulated via Schools Noticeboard to all Nursery Schools and Primary Schools, and emails to all early education providers and Children’s Centres.

The survey ran from 16th January until 3rd February 2017.

3. Responses

The consultation received 192 completed questionnaires via online and paper submissions.

4. Key Findings

Respondents were asked to best describe their interest in the consultation – Early Years Professional, Childminder, Childcare provider from the PVI sector, Nursery School, School with a nursery class, or other.

Identifier / Number of responses / % of responses
Childminder / 9 / 4.39%
Childcare provider from Private, Voluntary or Independent sector / 72 / 35.12%
Nursery School / 62 / 30.24%
School with a Nursery Class / 12 / 5.85%
Early Years Professional / 30 / 14.63%
Other / 20 / 9.76%

4.1. Centrally retained

Guidance allows a maximum of 7% centrally retained funding in 2017/18, reducing to 5% from 2018/19. Proposals for centrally retained budgets are based on retaining the minimum necessary to meet statutory duties and strategic priorities so as to maximise funding that can be allocated within rates.

We proposed to move to a long-term sustainable model of DSG funded Early Education and Child-Care central functions, in line with DfE Guidance. Service redesign will follow to determine how the functions will be delivered from September 17/18. The parenting support activity currently delivered by the Foundation Years Parenting Support Team has been included within the service specification for the new Early Years Health and Well-Being offer which will be implemented from September 2017.

We estimate that within the amount that can be centrally retained there will be an amount of £0.5m available that could be used to support:-

• FYPS – Parenting support for parents of children under 5 during the transition period to the new EY Health and Well-being offer;
• The local offer of Full-Time places for vulnerable 3 year olds; or
• ISEY – SEND funding for children with additional needs.

We proposed within the centrally retained element to include a budget of £0.5million to support children with SEND (ISEY) to access their early education entitlement. A consistent message from all providers of Early Education is that there is not enough funding to support children with SEND. This proposal has received consistent support from all types of providers and will increase the total allocation across the DSG for SEND in Early Years to £1m.

Question 1: Do you agree we should prioritise the allocation of £0.5m to support ISEY rather than full-time places for vulnerable children or parenting support services?

Respondents were asked to indicate whether they agreed or disagreed with the above statement.

Overall, 81% (156) indicated they agreed with the statement, and overall 19% (36) disagreed with the statement.

Where respondents were supportive of the proposal comments generally acknowledged that it was a difficult choice that had to be made due to lack of resources – but that it was important that children with SEND are also a vulnerable group and giving access to their full 15 hours entitlement should be a higher priority than giving other vulnerable children more than their entitlement.

All of those that disagreed felt that full-time places for vulnerable children were equally if not more important than ISEY, and that ISEY funding should be drawn from elsewhere leaving the remaining £0.5m to support a more targeted group of vulnerable for full-time places.

It is important to note that this proposal to increase the ISEY funding will result in the withdrawal of the funding for full-time places under the existing local criteria. This will be effective from September 2017 and will now be subject to a separate consultation.

4.2. Supplements

There are five funding supplements that can be used and there is an overall cap of 10% of the overall early years allocation that can be allocated against them. The allowable supplements are:-

• Deprivation (mandatory)
• Rural and sparse populations
• Flexibility
• Quality
• English as an additional language

Birmingham currently has a supplement for Deprivation and allocates funding for free school meals where a child attends for their early education both before and after the lunchtime period. We proposed to maintain these supplements only.

Question 2: Do you agree that supplements should be limited to Deprivation (mandatory) and Free School Meals?

Respondents were asked to indicate whether they agreed or disagreed with the above statement.

Overall, 90% (172) agreed with this statement, with only 10% (20) disagreeing.

Of the 20 respondents that did not agree, comments were mainly supportive of including additional supplements particularly around quality and English as an additional language and were critical of the “postcode lottery” that is generated by allocating deprivation based on postcode only. However 90% of the respondents were supportive of maintaining the current supplements only – recognising that additional supplements would reduce the base rate.

4.3. Proposed Rates for three and four year olds

Two models were set out as options. In both options the 2 year old funding will be straight in-out; and within the funding for 3 and 4 year olds - central costs will be agreed with Schools Forum and from the total remaining pot, rates are modelled across the three types of providers (Maintained Nursery Schools, Schools with Nursery Classes and PVI).

4.3.1. Model 1 – Staggered implementation of flat rate funding

Question 3: Do you agree that there should be a staggered model to reach a flat rate by 2019/20 as set out in Model 1?

Respondents were asked to indicate whether they agreed or disagreed with the introduction of Model 1.

64% (122) of respondents agreed with having a staggered model to reach a flat rate, 35% (67) disagreed and 2% (3) respondents did not provide an answer.

Where respondents did not support this model, the comments received were in general consistent in the view that the PVI has been under-funded for a number of years and face increasing cost-pressures that are not sustainable. A fear that the staggered model will result in many providers going out of business before the rate is equalised.

Where support was given to this model it was in recognition that Nursery Classes will need some time to make the necessary adjustments – however there were many comments that still identified that the PVI sector have been underfunded and there is a need to increase their funding as quickly as possible.

4.4. Model 2 – Swiftest possible implementation of flat rate funding

Question 4: Do you agree that the rates should be levelled to a flat rate as quickly as possible as set out in Model 2, to reach a flat rate in 2018/19?

Respondents were asked to indicate whether they agreed or disagreed with the introduction of Model 2.

The responses to this question were actually fairly equally split with 48% (92) of respondents agreeing with the model to reach a flat rate as quickly as possible, 50% (96) disagreeing and again 2% (4) respondents did not provide an answer.

Where people did not agree to this model, the comments were mainly concerned with giving schools enough time to be able to adjust to the reduced budgets. Although many respondents had indicated that they did not support this model, many of the comments left appeared to contradict this and where actually supportive of arriving at a flat rate as quickly as possible. This may demonstrate that the question was not fully understood.

It should also be noted though that many of the respondents who disagreed with this model did not agree with having a universal rate at all – which is a government policy and therefore outside of the control of this consultation.

Where respondents did not provide an answer, comments indicated that they were in fact supportive of the model.

4.5. Rates for two year olds

The DfE is increasing the rate that Birmingham will receive for two year olds to £5.24 an hour. This is an increase from the current rate of £4.89. We proposed that this funding will be paid on a straight in/out basis.

Question 5: Do you agree the funding rates for 2 year olds should be maintained at an In/Out rate and therefore equalised to £5.24 for all providers?

Respondents were asked to indicate whether they agreed or disagreed with the proposal for 100% pass-through of the 2 year old funding.

92% (177) of respondents agreed with this proposal, only 6% (11) disagreed and 2% (4) respondents did not provide an answer.

Overwhelmingly the proposal was supported with many comments highlighting that it created a level playing field. Of those who disagreed, the comments were more centred on the continuing feeling of resentment of the existing formula and disparities with nursery schools.

5. Demographics

(NOTE: Still to be inserted)

6. Summary

The Consultation achieved a good representation across the types of providers and geographical areas.

The proposed changes to the Early Years Funding Formula as outlined in this consultation has been met, overall, with a positive response, the majority agreeing with the proposed aims and outcomes, whilst also highlighting some areas that are outside the control of the Council and are concerned more with governmental policy.

In particular, there was broad agreement with the proposals for the centrally retained elements, although there was a considerable amount of concern regarding the withdrawal of funding full-time places for vulnerable children from the DSG funding, as evidenced in the many comments received, there was acceptance that children with SEND were also a vulnerable group and it was more important to ensure those children are able to access their entitlement over other vulnerable children receiving MORE than their entitlement. There was much support for the full-time places to continue with a call for funding to be identified from elsewhere.

The issue of supplements and needing to balance the reduction of the overall base rate against the number of supplements was also well recognised. A large majority of respondents agreed with the two proposed supplements. However it is also important to note that there was a significant amount of support for a quality supplement. This has previously been considered difficult to measure, but is definitely something that should be considered when the formula is reviewed in future.

The biggest area of debate was seen within the two models proposed for the allocation of rates to providers, and responses were definitely split according to provider type. There was a very strong demonstration of feeling that the PVI sector had been under-funded for many years and without a quick timescale to get to the flat rate there was a danger many providers would cease trading or withdraw from the provision of early education. On the other hand there was vast recognition that Primary Schools with nursery classes were at risk with a quick timescale, and that time would enable the schools to plan more effectively. It is also important to note that there were a significant number of comments regarding the unfairness of the continued higher rates for Nursery Schools – but this is a government policy and therefore outside of the remit of the Council and this consultation.

Overall, the consultation received a positive response, with majority agreement on the proposed changes to the funding formula, with fairly split agreement on the model of rates to be introduced. The continuation of full-time places was a particular concern with many respondents urging for alternative funding to be found. There will be a need to undertake a separate consultation on the continuation of the Full-Time places which will need to be done as quickly as possible.

7. Recommendations

As a result of the work undertaken within the cross-sector focus group and the subsequent consultation on the early years block of the DSG, the following are recommendations for the allocation of the funding block:-

1. Centrally Retained Element – 6% in 2017/18, 5% 2018/19 onwards.

Up to 6% of the budget should be retained to support in the delivery of statutory duties. Support for ISEY to be allocated at £0.5m in addition to the £0.5m within the High Needs Block. This supports the requirement to have an SEND inclusion fund.

A full public consultation will be necessary on the future of Full-time places in order to have an outcome by the beginning of May. In the meantime a communication will be sent to all providers (including schools) advising that we will be consulting on full-time places with a request to stop the allocation of any full-time places for September.

The Early Years DSG Steering group will support service redesign of the central team with an options appraisal for future service delivery and future reporting through to Schools Forum. Detailed proposals for the EY central team will be developed for implementation from September 2017 aligned to the launch of the new Health and Well-Being Offer. Alternative options for who deliver the specific functions will be considered. Alternative funding for the FYPS team from April to Aug 17 to be sought outside of the DSG funding again aligned to the health and well-being offer.

1. Supplements – Deprivation and Free School Meals.

Only two supplements will be offered within the formula relating to deprivation and free school meals. The deprivation supplement will be added to the base rate when a child lives within an identified postcode according to the Index of Multiple Deprivation as follows:-

• 0-5% SOA - £0.59
• 5-10% SOA - £0.28
• 10-20% SOA - £0.08

Children that attend a setting before and after the lunchtime period as part of their early education entitlement also qualify for Free School Meals.

A commitment will be made to explore the introduction of a quality supplement within the rates review process for 2018/19.