Early Years Funding Reform 2008-11

Early Years Funding Reform 2008-11:

2009/10 Update & Recommendations (January 2009)

1) Introduction & Update

How the free entitlement to Nursery provision is funded in both Maintained and Private Voluntary and Independent (PVI) Early Years settings will fundamentally alter from April 2010. To support the expansion of the free entitlement up to 15 hours, and the flexibility in how this can be taken, the Government is requiring all Local Authorities to implement changes that will bring the Maintained and PVI funding mechanisms together. Bradford LA is also currently engaged in developing provision to meet the DCSF’s requirements to offer the extended 15 hours to the 25% most deprived pupils from September 2009. All 3 and 4 year olds will be entitled to 15 hours from September 2010.

The Early Years Working Group (EYWG), which is established as a sub group of Bradford’s Schools Forum, is leading on implementing these changes. The EYWG is composed of representatives from each type of PVI Early Years provider and maintained Nursery and Primary school providers, with support from officers from Bradford’s Early Years and Childcare Service and Education Bradford. A member of the EYWG is also a member of the Bradford Schools Forum.

a) School Forum Recommendations 2008-11 (made in February 2008)

Following consideration of the report from the EYWG submitted to the Forum in January 2008, the following key provisions / recommendations were made:

• The value per pupil per 2 ½ hour session was increased to £10.00 for ALL PVI providers in 2008/09.

• The EYWG should aim to implement the ‘Single Early Years Funding Formula’ from April 2009.The Schools Forum set aside £500,000 in contingency within the DSG from April 2009to support the potential additional costs of this new formula.
• Funding review work must be accompanied by discussions on ‘quality assurance’ and maximising standards in all Early Years settings.

b) Change in DCSF Requirements from April 2009

The DCSF has amended the requirements on LAs to implement changes from April 2009.

All LAs are still required to provide access to the extended 15 hours entitlement to 25% of the most deprived 3 / 4 year olds from September 2009. This is funded via standards fund and is discussed further in paragraph 5 below.

For formula funding, the original requirements stated that LAs must implement the full single formula for PVI and Maintained settings from April 2010, but that participation led funding must be introduced from April 2009. However, although LAs are still required to implement the full single formula from April 2010, there is no requirement to implement participation led funding from April 2009. In January 2009, schools via the census will start to count nursery pupils on the basis of participation. However, LAs do not have to fund on this basis until April 2010.

This amendment in the requirements is largely due to the DCSF’s acceptance of the workload involved in formula review and the very short timescale, but also because the Regulations, which will control how LAs are allowed to construct their formulae, have not yet been framed by the DCSF. LAs therefore, cannot finalise their own local formulae at this time. Since March 2008 also the DCSF has published more guidance for LAs, including case studies from the pathfinder LAs and guidance on incentive based funding, which will be very useful to us in the development of our formula.

We are not in a position to implement any formula change from April 2009 for the 2009/10 financial year and there is no expectation from the DCSF that LAs should do so.Therefore, the key recommendation that the Forum must make for 2009/10 is how to allocate the £500,000 contingency originally held within the DSG to support the potential additional costs of formula change from April 2009.

Bradford Council is currently developing, and consulting on, a long term strategy for managing Early Years provision across the district. This strategy will incorporate the continuation of the funding of full time places, which is an issue especially of interest to Nursery schools. It is expected that this strategy will be published before the 31st March and the Schools Forum will need to consider this at a future meeting.

2) Updated Funding Comparisons

All Local Authorities are currently reviewing their early years funding levels and funding formulae, in time for implementation from April 2010. Therefore, it is difficult to set a strategy for funding early years at this time with reference to current statistical neighbour comparisons, as positions and comparisons are likely to (substantially) change in 2010/11. Our formula review work, and the development of needs based funding model for nursery provision, should more influence our strategy for funding of early years from April 2010.

However, updated current comparisons are useful in assessing any immediate sustainability issues for 2009/10 and in making recommendations on the allocation of the £500,000 contingency originally set aside for the single early years formula that is now not required.

a) PVI Funding

How the total funding allocated to PVI providers Bradford compares against our statistical neighbours in 2008/09, taken from Section 52 Statements, is shown in the table below.

Table 1

Local Authority / PVI Delegated Funding 2008/09 / PVI Pupils
(FTE) / £ Per PVI
Pupil
Blackburn with Darwen / 3,510,933 / 570 / £6,158
Bolton / 2,463,900 / 818 / £3,014
Calderdale / 2,910,492 / 933 / £3,121
Coventry / 3,225,774 / 1,086 / £2,971
Derby / 2,256,066 / 666 / £3,387
Kirklees / 4,707,000 / 1,407 / £3,346
Oldham / 2,392,197 / 703 / £3,402
Peterborough / 3,666,864 / 1,246 / £2,944
Rochdale / 2,071,800 / 767 / £2,701
Walsall / 714,039 / 250 / £2,858
Total / Average / 27,919,065 / 8,444 / £3,306
Bradford / 4,136,600 / 1,170 / £3,535
Difference (Per Pupil) / +£229
Difference (Total Budget) / +£267,690

The comparison is a complicated one, due to the fluctuation in pupil numbers throughout the year and the use of estimated numbers. Different methods produce different results. For example, the DCSF has published benchmarking showing in 2008/09 that we are spending £259 per PTE pupil above the average of our statistical neighbours, giving a total budget difference of +£605,000! However, accepting the caveats, these comparisons show that, by increasing our sessional rate for PVI providers to £10.00 (£4.00 per hour) from April 2008, we now compare favourably against the average of our statistical neighbours.

This improved position is also shown in the comparison of hourly funded rates. The Section 52 Statement for 20080/9 included a new Early Years Table, in which the values of funding per hour for PVI providers are recorded. The total mean average for all Local Authorities in England is £4 per hour. Against our statistical neighbours, we compare as follows

Table 2

Local Authority / 2008/09 Average
PVI £ Per Hour
Blackburn with Darwen / 3.26
Bolton / 3.24
Calderdale / 3.28
Coventry / 3.32
Derby / 3.46
Kirklees / 3.44
Oldham / 3.25
Peterborough / 3.33
Rochdale / 3.29
Walsall / 2.91
Bradford / 4.00

b) Maintained Nursery Classes in Primary Schools

The funding for Nursery classes in Primary schools is tied up with the total funding for Primary schools as a whole and is very tricky to separate. The new Early Years Table in the Section 52 Statement does record a funded amount per hour for classes. However, this is not a robust figure as it is based on many assumptions. The easiest comparison to make for Nursery classes is to compare the values of the 3+ AWPU. Although this does not compare the full amount of Nursery funding in Primary schools, it does show the value of funding that is directly allocated for Nursery pupils in Primary schools. Against our statistical neighbour authorities in 2008/09, we compare as follows

Table 3

Local Authority / 2008/09 Nursery AWPU £
Blackburn with Darwen / 3,303
Bolton / 2,552
Calderdale / -
Coventry / -
Derby / 2,423
Kirklees / 2,992
Oldham / 2,087
Peterborough / 3,254
Rochdale / 3,114
Walsall / 3,419
Bradford / 3,198

c) Maintained Nursery Schools

As discussed in previous reports considered by the Schools Forum, there are significant issues with the comparison of funding for Nursery schools. The ‘standard’ methodology we have historically used to compare the levels of delegated funding across all phases against statistical neighbours produces a distorted result for Nursery schools. In 2007/08 the variance to the average of our statistical neighbours was recorded at -£1.01m (-41% of the Nursery ISB) and in 2008/09 the variance is -£0.90m (-35% of the Nursery ISB). From what we know from other sources about funding levels in general, this large variance does not make sense. There are many ways of calculating benchmarking figures. For example, as an alternative reference, the DCSF’s benchmarking, based on 2008/09 Section 52 Statements, records the following per pupil comparison for funding delegated to Nursery Schools. The England average delegated funding per pupil is 3,801 (£7 per hour).

Table 4

Local Authority / 2008/09 Nursery Schools Delegated Per Pupil £ / 2008/09 Rate of Funding
Per Hour £
Blackburn with Darwen / 2,580 / 5.80
Bolton / 3,673 / 5.29
Calderdale / - / -
Coventry / 5,438 / 11.00
Derby / 3,473 / 3.62
Kirklees / 3,172 / 6.68
Oldham / - / -
Peterborough / 7,994 / 8.60
Rochdale / 3,466 / 4.19
Walsall / 3,583 / 7.54
Bradford / 4,070 / 8.11

There is significant variance across these local authorities, but this comparison does illustrate thatour amount per pupil funding delegated to Nursery schools is not massively lower than the rest of our statistical neighbours. This serves further to evidence the inaccuracy of the variance calculated using the standard benchmarking methodology.

In January 2008 the Schools Forum considered a revised comparison for 2007/08, which reduced the -£1.01m variance to -£187,000, by removing the ‘distorting factors’. Using the same general methodology for 2008/09, the revised variance would be approximately -£167,000.

3) The costs of Delivering the Free Entitlement to Nursery Education in Maintained Settings

To support the major formula review work required for April 2010, and to encourage discussion at a local level, the DCSF has encouraged LAs to analyse the current costs associated with delivering the free entitlement to develop a typical cost model for each type of provider. Many of the pathfinder LAs have found the information collected from these surveys very useful as a place to start with the development of the single formula.

We carried out an analysis of the costs of PVI providers prior to the start of the 2008/09 financial year. We have now completed an analysis of the costs of maintained providers. Both are based on costs in the 2007/08 financial year.

a) Summary of PVI Cost Analysis Autumn 2007

The PVI cost analysis survey was carried out in the autumn term 2007, and the results were considered in full by the Schools Forum in January 2008. The full report was published in March 2008. Required by the DCSF, this survey was primarily usefulin the short term to compare the costs of delivering the free entitlement in the PVI sector with levels of PVI funding and to identify any sustainability issues in the PVI sector, prior to allocation of the DSG 2008-11.

The survey provided the following costs per pupil per hour for PVI providers for the 2007/08 financial year (this is just a summary. The full report is available on the Council’s website)

Table 5

Costs Per Hour (£) / Full Daycare / Playgroups / Childminders
Staffing Costs / 2.55 / 2.62 / 2.78
Non Staffing Costs / 1.12 / 1.11 / 1.16
Total Costs Per Hour (£) / 3.68 / 3.72 / 3.94

A total of 45% of PVI providers submitted responses to the survey. However, as discussed in the published report, the level of completeness of the financial information providedwas varied. The view of the EYWG was that this survey provided reasonably accurate data on non salary costs, but that salary costs, especially of full day care providers, were distinctly understated. The EYWG therefore, used the Children’s Centre funding model to develop a more accurate picture of staffing costs for full day care providers. The EYWG and the Forum also discussed other caveats and limitations of the information provided e.g. in the inconsistency in reporting of non contact time and the difficulties of developing assumptions on an accepted level of profit or reserve. However, combined with other funding information, including comparisons with Statistical Neighbours, this cost analysis indicated strongly that the level of funding allocated to PVI providers did not match the costs incurred in the delivery of the free entitlement. The Schools Forum therefore, recommended that the funding per pupil per 2.5 hour session for all PVI providers be increased from £8.40 to £10.00 in 2008/09.

b) Maintained Provision Cost Analysis Autumn 2008

In the autumn term 2008 we carried out a similar exercise with maintained providers; Nursery schools and Nursery classes in Primary schools. The key advantage of this survey is that we already hold total expenditure information for maintained schools, in end of year CFR reports, and therefore, we can use this data as a base and as a check for the information received from schools.

i) Pro Rata Pupils Analysis from School CFR Reports

Taking the total expenditure from school CFR reports for the 2007/08 financial year and assuming that the proportion of this total expenditure for Nursery provision is directly related to the proportion of Nursery pupils, as a percentage of total pupils at the school, produces the following cost analysis.

Table 6

Costs Per Hour (£) / Nursery Schools / Nursery Classes
E01 Teaching Staff / 2.76 / 1.99
E02 + E26 Supply Staff / 0.41 / 0.14
E03 Education Support Staff / 1.83 / 0.79
Sub Total Class Based Staff / 5.00 / 2.91
E04 + E05 Premises & Admin Staff / 0.39 / 0.26
E07 to E11 Other Staff / 0.33 / 0.16
Total Staffing Costs * / 5.71 / 3.33
E12 to E18 Premises / 0.38 / 0.28
E19 Learning Resources (not ICT) / 0.10 / 0.15
E20 ICT Learning Resources / 0.06 / 0.07
E22 Administrative Supplies / 0.07 / 0.06
E23 Other Insurance Premiums / 0.02 / 0.03
E27 to E29 Other Non Staffing / 0.18 / 0.09
Total Non Staffing Costs * / 0.80 / 0.67
Total Costs Per Hour (£) / 6.51 / 4.00

* Catering costs (E06 and E26), RCCO (E30) and Special Facilities (E24) are excluded

For Nursery schools, this analysis is the only information we have on the costs of Nursery provision in these settings. This is because the questionnaires received back from the Nursery schools (we received responses from 6 of the 7 schools) simply indicated that 100% of expenditure in the 2007/08 CFR reports was for delivering the free entitlement. However, please note that, because of the inclusion of children’s centre expenditure in CFR returns, the information for Canterbury Children’s Centre has not been included in the pro rata analysis. Therefore, this analysis is based on information from 5 of the 7 Nursery schools.

For Nursery classes, this is a rough basic model, which, especially for non staffing costs, is a useful cross check of the information received from schools via the survey.However, this analysis makes no allowance forthe higher staffing ratios required in Nursery classes or other potentially higher costs associated with the Foundation Stage, compared with provision across the rest of the school. We are reliant on the information received from returned questionnairesto give a clearer picture of this.

ii) Questionnaire Responses from Nursery Classes

In total we received 62 questionnaires from the 114 Primary schools with Nursery classes (54%). However, as with the PVI survey, the level of completeness of the information varied. The responses were split as follows

• Group 1: 21 of the 62 returns were fully completed, based on actual costs. The information from these has been used in full in the costs analysis
• Group 2: 20 of the 62 returns were only partially completed, recording actual spend on the main staffing groups, but either not completing the non staffing expenditure lines or completing these by giving a pro rata %, based on total Nursery numbers. Only the staffing costs information for classroom based staff (E01, E02, E26 and E03) from these has been used in the cost analysis
• The remaining 21 of the 62 returns simply indicated a pro rata % of expenditure, based on pupil numbers. As we have already carried out this type of analysis, these responses have not been used

The results for Nursery classes in Primary schools of the analysis of the questionnaires on this basis are

Table 7

Costs Per Hour (£) / Group 1 (Full) / Group 2 (Partial) / Group 1 & 2 Combined
E01 Teaching Staff / 1.51 / 1.33 / 1.43
E02 + E26 Supply Staff / 0.13 / 0.10 / 0.12
E03 Education Support Staff / 1.44 / 1.51 / 1.47
Sub Total Class Based Staff / 3.08 / 2.95 / 3.02
E04 + E05 Premises & Admin Staff / 0.31 / 0.31
E07 to E11 Other Staff / 0.11 / 0.11
Total Staffing Costs * / 3.50 / 3.44
E12 to E18 Premises / 0.30 / 0.30
E19 Learning Resources (not ICT) / 0.18 / 0.18
E20 ICT Learning Resources / 0.05 / 0.05
E22 Administrative Supplies / 0.06 / 0.06
E23 Other Insurance Premiums / 0.03 / 0.03
E27 to E29 Other Non Staffing / 0.06 / 0.06
Total Non Staffing Costs * / 0.69 / 0.69
Total Costs Per Hour (£) / 4.18 / 4.12

* Catering costs (E06 and E26), RCCO (E30) and Special Facilities (E24) are excluded

iii) Conclusions for Nursery Classes

The final column on the right hand side of this table shows the result of combining the fully and partially completed questionnaires, to give the most comprehensive analysis. Table 8 below compares this against the pro rata analysis for Nursery classes shown in Table 6

Table 8

Costs Per Hour (£) / Combined (T7) / Pro Rata (T6) / Difference
E01 Teaching Staff / 1.43 / 1.99 / -0.56
E02 + E26 Supply Staff / 0.12 / 0.14 / -0.02
E03 Education Support Staff / 1.47 / 0.79 / +0.68
Sub Total Class Based Staff / 3.02 / 2.91 / +0.11
E04 + E05 Premises & Admin Staff / 0.31 / 0.26 / +0.05
E07 to E11 Other Staff / 0.11 / 0.16 / -0.05
Total Staffing Costs / 3.44 / 3.33 / +0.11
E12 to E18 Premises / 0.30 / 0.28 / +0.02
E19 Learning Resources (not ICT) / 0.18 / 0.15 / +0.03
E20 ICT Learning Resources / 0.05 / 0.07 / -0.02
E22 Administrative Supplies / 0.06 / 0.06 / 0.00
E23 Other Insurance Premiums / 0.03 / 0.03 / 0.00
E27 to E29 Other Non Staffing / 0.06 / 0.09 / -0.03
Total Non Staffing Costs / 0.69 / 0.67 / +0.02
Total Costs Per Hour (£) / 4.12 / 4.00 / +0.12

(the slight differences in the totals are due to the rounding of decimal places)

The key conclusions from this comparison for Nursery classes are:

• We can be confident that the questionnaires give a reasonably robust picture of the actual costs associated with direct Nursery provision in the 2007/08 financial year. We can take forward the combined figures shown in Table 8 to compare against the PVI cost analysis and to use in the development of the single formula.

• Non Staffing Costs: there is very little difference between the results of the pro rata analysis and the information on actual spending taken from the questionnaires. This indicates that we can have confidence in the data taken from the questionnaires, but also indicates that non staffing costs in Nursery classes are not out of line with the costs of other classes in Primary schools. In terms of non staffing expenditure, as a whole, a Nursery class roughly costs the same amount per pupil as any other Primary school class.
• Staffing Costs: we indicated that a weakness of the pro rata analysis is that this analysis makes no allowance for the higher staffing ratios required in a Nursery class, compared with provision across the rest of a Primary school. The combined picture of staffing costs from the questionnaires, shown in Table 8 above, indicates more accurately the higher total staffing costs for Nursery provision. The actual cost of classroom support staffing, indicated by the analysis of the questionnaires, is almost double that indicated by the pro rata analysis. However, it is interesting to note that the actual cost of teaching staffing indicated by the questionnaires is lower than in the pro rata analysis. This would suggest that in 2007/08 not all schools employed a full time teacher in their Nursery classes. This is an issue to discuss in the development of the single formula and in incentivising and ensuring quality.

iv) Conclusions for Nursery Schools