Pre-School Learning Alliance Mythbuster

30 hours and early years funding: a

Pre-school Learning Alliance mythbuster

There is much confusion and misinformation surrounding the 30 hour offer and the early years sector’s concerns around underfunding.

The Pre-school Learning Alliance has produced the below guide to help dispel some of the most common myths surrounding government’s ‘free childcare’ policy.

MYTH: Early years providers are getting £4.94 an hour from the government

FACT:The government often cites an average funding rate of £4.94 (previously £4.88) in relation to the 30-hours. However, this is the average funding rate given to local councils, notchildcareproviders.

A Pre-school Learning Alliance Freedom of Information Act request to all local councils in England found that the average funding rate to childcare providers is actually £4.27 per child per hour – and in reality, this varies considerably from area to area, and provider to provider, with some providers receiving less than £3.60.

MYTH: It costs £3.72 per hour to deliver a childcare place for a three-/four-year-old

FACT: A government-commissioned report by Frontier Economics on the cost of delivering funded education concluded that the average cost of delivery for three- and four-year-olds is £3.72 per hour. However, it is important to note that:

• the data used in this study was collected in 2015, and so does not take into account significant increases in delivery costs such as staff wages, mortgages and rents, and business rates that have occurred since the report’s publication.
• it is unclear how key cost drivers, such as training, holidays and sickness, were factored into Frontier’s cost estimates.
• an earlier research report by research company Ceeda, published in 2014, found that the average hourly cost of delivering a three-/four-year-old place was £4.53 (and again, this figure doesn’t take into account business cost rises over the past three years). Ceeda’s calculations were based on a real-time recording of staff movements.

MYTH: The government is spending an extra £1 billion on increasing funding rates

FACT:It is often suggested that the government has invested £1 billion into increasing early years funding rates. However, the £1 billion figure includes around £700 million spent just to extend the ‘free entitlement’ offer to 30 hours a week for working families. The remaining £300 million is what’s been spent on actually increasing funding rates (by approximately 40p per child per hour).

However, again, this is only an average increase and varies from area to area. An Alliance Freedom of Information request found that, in 28% of local authority areas in England, average provider funding rates have increased at less than the rate of inflation (7.6%, according to ONS figures) over the past five years.

What’s more, the government previously dismissed the extended ‘free entitlement’ as unaffordable. In November 2014, five months before the Conservative Party announced their 30-hour pledge, then-early years minister Sam Gyimah criticised the Labour Party pledge of 25 hours of funded childcare per week when giving oral evidence to the House of Lords Affordable Childcare Committee. He said:

“More broadly on the 15 hours, there are some other parties who would say, ‘Why do you not offer 25 hours?’, for example. But the EPPSE evidence tells us that a little and often is best. Also, I am not sure that providers necessarily want to deliver 25 hours of state subsidised childcare, because it limits their ability to offer other childcare that may come to them at a higher rate, to be brutally honest. The increased cost of that is quite enormous. Going from something like 15 hours to 25 hours would cost an extra £1.5 billion at least.”

MYTH: The 30 hours pilots show that the scheme will work well

FACT:An independent evaluation of the early implementer scheme (launched in September 2017 in Hertfordshire, Newham, Northumberland, Portsmouth, Staffordshire, Swindon, Wigan and York) unsurprisingly found that the offer was popular with parents. However, the evaluation also noted that:

• The levels of funding that providers received during the pilot weren’t the same rates that will be used when the scheme roll outs in full.
• The pilot was carried out at the quietest time of the year, when providers have the more spaces than normal spare.
• The trial was a ‘limited test of sufficiency' because seven of the eight pilot schemes only provided a few hundred places to parents.
• In York, the only pilot area to roll out the 30-hour offer to all eligible parents, many providers reported that they only managed to make the scheme work by charging parents for (voluntary) extras such as meals, snack and trips. One provider running a nursery in York said: “… but what the Government isn’t telling you, is virtually every nursery has been charging for additional services to make ends meet, which we never did before. The vast majority can’t do it with the funding they are getting, so the unspoken truth is they are charging an inflated rate for additional services. We have been charging around £8 a day on top of funding and parents are very happy to pay that. We are using it to pay wages and cover our costs and it’s allowing us to make ends meet.”
• The evaluation also noted that childcare providers in the trial tended to see “higher delivery costs and lower profits”.

An independent evaluation of the early rollout scheme (launched in April 2017 in Dorset, Tower Hamlets, North Yorkshire and Leicestershire) found that:

• across all four LAs, some providers noted a “massive increased in their admin” as a result of administering the 30 hours.
• some parents were “paying considerably more than they had expected when they first heard about the extended hours and were not happy about it”.
• providers again tended to experience an increase in costs and decrease in profits

The evaluation also recommended that “in future reviews of funding rates in the EYNFF, there is a need to be explicit about the level of service that the funding rates are expected to support in terms of quality and flexibility. In addition, these reviews need to consider the drivers of ongoing changes in delivery costs”.

MYTH: More than 80% of providers are willing and able to offer the 30 hours

FACT:The government has said that “a recently published independent evaluation of the early roll-out programme shows that more than 80% of providers are willing and able to offer the extended hours”. However, the early rollout evaluation – which this statement is referring to – actually found that 83% of providers already delivering the free entitlement were “willing and able” to offer the extended hours. Of all registered providers, only 62% were “willing and able” to offer the 30 hours, meaning that nearly four in 10 weren’t.

In addition, a survey of around 1400 providers conducted by the Pre-school Learning Alliance in August 2017 found that 38% of respondents did not think their businesses would be sustainable in 12 months’ time as a result of the 30 hours.

MYTH:The big childcare chains are happy to offer the 30 hours

FACT:The government has stated that “BusyBeesand the Co-operative Childcare group are “keen to deliver [the 30 hours] at the prices given”. However:

• Busy Bees have stated on their website that delivering the 30 hours is “only possible by varying the number of funded hours per day as the funding rate falls well short of the normal daily rate charged which makes the delivery unsustainable…”
• The Co-operative have stated that“We are not able to offer the scheme the way the Government has sold it” and that “The funding available doesn’t cover all the costs associated with operating our nurseries, so we will be introducing fees for funded parents to cover services such as meals and trips, and there will also be some reduced flexibility on the days available during which funded parents will be able to use their hours.”

MYTH:Current funding rates must be sufficient as they are based on the government comprehensive review of childcare, which was described as ‘thorough and wide-ranging”

FACT:The National Audit Office’sEntitlement to free early education and childcare report published in March 2016 did indeed state that “The Department’s work[on reviewing childcare delivery costs] was thorough and wide-ranging” However, it immediately goes on to state that the government’s cost of childcare review “used a variety of sources, including evidence from 2,000 providers and other stakeholders…”

On the contrary, while the government did receive around 2000 provider responses to a call for evidence on delivery costs, it subsequently admitted that because providers’ responses were “were often not supported by figures”, they were “unable to determine from the responses what providers’ unit costs were”.

As a result, the government review of the cost of delivering childcare based its modelling not on the responses to the call for evidence, but rather, on departmental research on key costs drivers such as staff costs, rent/mortgages, business rates; insurance; utilities and maintenance costsfrom 2012/13.

MYTH: Lots of providers signing up to the 30-hours in an area proves that the scheme is going well

FACT:

• Childcare providers offering just one 30-hours place are counted as ‘offering the 30-hours’.
• Some local councils are also stating that if a provider is offering 15 hours only, but their parents are also taking up a further 15 hours at another setting, both they and the other setting will be counted as delivering the extended entitlement.

Both the above mean that a local council could report a high level of childcare provider take-up for the offer, but still have a relatively low number of 30-hours places on offer. What’s more, providers may sign up to the scheme simply to test if it is viable, or because they feel they will lose business if they don’t, and may be relying on additional charges to stay afloat.

MYTH: The government is offering business rate support to settings

FACT: Former early years minister Sam Gyimah wrote to local authorities in 2014 to encourage them to apply business rates relief to nurseries and confirm that that central government would meet 50% of the costs involved. However, there is no evidence that any council applied this relief.

MYTH: Parents will be able to access 30-hours places completely free

FACT: Government funding only covers the cost of delivering early years care and education, not additional goods and services such as food and trips. In the past, many providers absorbed the cost of these optional extras; however, many are now introducing or increasing the (voluntary) fees for these services as a result of underfunding.

In July 2017, the Department for Education amended its guidance on delivering the 30 hours to state that parents can “expect to pay for any meals offered by the provider alongside their free entitlement [and] other consumables or additional activities offered by the provider, such as nappies or trips.”The Pre-school Learning Alliance has warned that this, combined with underfunding, could prevent families on lower incomes from accessing the funded entitlement as some struggling providers are more likely to prioritise those families that are able to pay for optional extras.

MYTH: Parents will be able to access a full 30 hours of childcare per week, all year round

FACT: Although parents have been promised “30 hours of free childcare per week”, government funding only covers this for 38 weeks of the year (i.e. during term-time). The ‘free’ entitlement is actually 1140 hours of childcare per year, meaning that if a parents wants to access funded childcare for 52 weeks of the year, they can only take up 22 hours per week – and have to pay for any additional hours.