Re-thinking the Early Years Funding Model

Maccs Pescatore

It is universally understood that the period from birth to five or six years is key for a child’s development of social, emotional and intellectual capabilities. At no other time in a person’s life are their brain’s synapses connecting on such a scale. The quality and level of development at this stage sets the framework for the child’s future attainment and his or her impact on society. This period cannot therefore be overlooked without significant consequences for the child and society.

The Current Model

However, the early years is currently woefully undervalued by our Government. As it stands, in the UK, primary and secondary education is legally mandated and fully state-funded (albeit parents can opt to pay for private education). Early years education, below the age of five, however, is neither. This has led the Government to adopt differing approaches to funding these two distinct services. While happy to take responsibility for education in primary and secondary age children, the Government eschews it for the early years. The principal responsibility for the care and education of children below five years rests with parents or carers and is predominantly delivered by private institutions, with just a few state-maintained nursery schools. In 2019, the Department for Education’s (DfE) last reported data set showed that there were 400 state- maintained nurseries in England serving 36,500 children of a total of 72,000 providers offering 1.7million childcare places.

To contextualise this financially, in 2020-21, the DfE’s own publication stated that it spent £31 billion on local authority schools and £24 billion on academy trusts to educate primary and secondary age children. It spent £14 billion on further and higher education. Spend on the early years was just £1.5 billion, equal to only 2% of the DfE’s total budget.

DfE funding is not paid to early years settings directly but given as a lump sum to local authorities who then dole it out. These funds have often been and continue to be dispensed inaccurately and improperly. Earlier this year, Freedom of Information requests from the National Day Nursery Association found that three-quarters of local authorities reported underspends of £62 million in Government funding for childcare places. The existing system is not properly delivering the current funding to providers who have delivered their service, essentially leaving them unpaid.

Supply and Demand

So what is the funding model for early years provision? In effect, just as they might shop for a new car or dishwasher, parents wishing to access professional early years education simply go to the market to choose a supplier and buy a service. Early years education works on the same supply and demand basis as buying almost any household product.

On the supply side, early years provision has developed in response to the needs of each community. Providers include home educators (who have at least one child in their home) and nurseries that cater for a varying number of children depending on the size of the space and local need. There are many standalone nurseries as well as nursery groups or chains. Due to a number of factors over recent years, the most significant of which is the increasing threat to financial sustainability, there is now a shortage of provision in an increasing number of communities. This supported by Coram’s Childcare Survey 2020 where it states that only around one-half of local authorities in England (56 per cent) have enough childcare for parents working full time.

Just a couple of months ago, the National Day Nurseries Association found that “year after year… nurseries and childcare settings (have been) struggl (ing) to make ends meet on the funding they receive from Government. Now… the pressures of the pandemic have been the final straw for even more nurseries.”

In setting a price, nursery owners must take into account the economics of the area in which they operate to establish what the market will bear. Crudely, in more affluent areas, it is reasonable to expect that the amounts that parents are able to pay will cover the nursery’s costs comfortably. In more disadvantaged areas, the fees are likely to be lower.

On the demand side, a number of surveys over recent years have shown that a large proportion of parents describe nursery fees as expensive because they account for a sizeable proportion of their household income. Some simply cannot afford it.

Well documented, a full-time place costs parents, on average, £14,000 per year, making it completely unaffordable for many families. Parents are forced to leave their jobs or work fewer hours, which has a negative impact on the economy and on levels of child poverty.

Funding Support

The Government does provide access to parents who are struggling financially under two main schemes; 15 free hours per week for parents of two-year-olds who meet the eligibility criteria, and 15 free hours per week available to all parents of three- and four- years-olds, with the possibility of an additional 15 hours per week for this age group available only to working parents.

There are conditions of eligibility which can restrict access or usefulness; for example, the fact that the 30 free hours are available for only 38 weeks during term time and not during the summer period, or that the times of day available do not necessarily suit working parents.

A new report this year from the Sutton Trust stated that the 30 hours per week funded childcare offer has “widened the gap” between disadvantaged children and their peers. There is no Government funding at all for children under two. In the worst cases, access is fully denied to those who most need it.

Flaws in the System

The Government’s funding model works on an amount-per-child basis depending on location. This model mirrors that for primary and secondary schools, but per-child rates are typically lower than for school pupils. Service providers are not legally allowed to ask parents for additional fees for hours falling within Government schemes.

Pertinently, the mandated teacher-to-child ratios in the early years are very much lower; between one and four children for every one teacher, than in schools. These lower ratios reflect the time that is necessary for each age to ensure that each child gets optimal attention. Ratios play a key role when considering the costs of teacher salaries in running a nursery.

In practice, an early years practitioner is ordinarily employed all year round rather than solely in term time because parents and carers require year-round support. They may also be required to carry out activities outside of teaching to help operate a nursery. Settings may not always have the maximum number of children allowed in the classroom at any one time. Government funding does not cover the costs of providing products such as wipes that are used in the classroom. These all complicate the financial landscape and add further pressures.

The insufficiency of the fee income means that salaries are low. The level of qualifications within the sector are typically lower than for primary teaching. Furthermore, continuing professional development (CPD) is often overlooked because of lack of funding. Investment in the sector is pressurised and low, career progression is hampered and teachers regularly become disillusioned and leave.

Research carried out by the Open University that the Montessori Group commissioned last year showed that over half of Montessori teachers earn less than £10 an hour. These rates are slightly higher than for the early years sector as a whole. Warnings that the early years sector is at risk of collapse have been largely ignored and morale is low: earlier this year, research by Nursery World magazine found that one in ten childcare workers is living in poverty.

Fundamentally, there are flaws in the Government’s funding model. At best, the funding can be described as a contribution to the cost of providing teachers. As a result of low ratios, low rates per-child funding paid by the Government as part of for the free hours schemes, incomplete payments to nurseries from local authorities and the inability of nursery owners to ask parents to top up the fees to help cover costs, means that the amount that each teacher brings in is lower than is required to provide their services. It is simple maths.

Further, the fees earned by nurseries outside the free 15- or 30-hours categories are not sufficient to bridge the gap. Research by the Early Years Alliance found that there is a shortfall of £2.60 per child, per hour, for every 30-hours place between the cost of providing the service and the funding provided. Given this model, it is highly probable that nursery owners, particularly those with small numbers of children, fewer children per session than ratios permit and lower age groups (ratios are highest for youngest children) operate on small profit margins.

Treating early years education like a product or service in the traded economy can only lead to fewer teachers and nurseries unable to operate. A race to failure.

Fighting Back

Along with our fellow sponsors of the All Party Parliamentary Group (APPG) on childcare and early education, the Montessori Group was pleased to support the letter from the group’s Chair, Steve Brine MP, to the DfE, Chancellor Rishi Sunak and the Treasury in June this year asking that Government funds be efficiently and effectively distributed to ensure that each eligible child receives the maximum entitlement and that the future of early years childcare and education be rethought.

In this letter, we urged the Government to use the upcoming Comprehensive Spending Review to provide a catch-up premium of £2,964 per child, per year, under the 30-hours entitlement to ensure the early years sector can play its role in meeting the needs of children and supporting parents getting back into work to help drive post-COVID economic recovery.

We also pointed out that the underfunding of places has caused a shortfall of availability which affects parental employment opportunities, further affecting the country’s economic recovery.

In summing up, we called on the government to conduct a meaningful review of early years funding covering the following areas:

• A multi-year funding settlement to allow providers certainty and planning over the coming years.

• Developing a mechanism for funding allocation to address rising costs, especially ensuring providers can pay early years professionals the National Living Wage.

• Simplifying the funding system to ensure it follows the child and that parental understanding around the entitlement is improved, especially regarding two-year olds and tax-free childcare.

• Ensuring effective use of public money and maximum investment in children’s early education and care by minimising barriers like VAT and business rates on providers delivering publicly funded places.

• All allocations of early years funding to consider the needs of children with SEND.

• Setting out a clear vision for achieving a wellqualified, high-status and better rewarded early years workforce.

The APPG is awaiting a meeting with the Secretary of State for Education as promised in response to the letter.

Just a few weeks ago, an e-petition signed by over 100,000 parents and carers asking for an independent review of early years funding sparked a debate in Parliament. But despite crossparty support, Vicky Ford, then Parliamentary Under-Secretary at the DfE, speaking on behalf of the Government, gave a categorical no to the petition’s request, and refused to acknowledge there was even a problem.

On the morning of the debate, a group of organisations, fronted by Pregnant Then Screwed and including the Fawcett Society, Black Mums Upfront, Mumsnet, and the Fatherhood Institute, published their survey of over 20,000 parents. Of the respondents, 97% said childcare in the UK was too expensive, whilst 96% believed ministers were not doing enough to support parents with the cost and availability of childcare.

Society fares better when we all take collective responsibility for the outcome of each child. When it comes to the next steps required to establish collective responsibility for the funding of early years childcare and early education, the professionals are clear, the parents and carers are clear, the data are clear. How much longer can the Government remain so unclear?

Maccs Pescatore – Chief Executive Officer of the Montessori Centre International (MCI) which is one of the UK’s leading providers of Montessori training to meet the needs of the Early Years communities in the UK and around the world. Her passion for the outdoors includes mountaineering, skiing, cycling and running which she marries with her interests in education in her non-executive roles.

References

1. DfE’s Survey of Childcare and Early Years Providers: Main Summary, England, 2019 https://assets.publishing.service.gov.uk/government/ uploads/system/uploads/attachment_data/file/845080/SCEYP_2019_ Main_Report_Nov19.pdf 2. DfE’s 2020-21 Expenditure https://committees.parliament.uk/publications/1476/documents/13541/ default/ 3. Coram’s Childcare Survey 2020 https://www.familyandchildcaretrust.org/sites/default/files/Resource%20 Library/Coram%20Childcare%20Survey%202020_240220.pdf 4. NDNA’s announcement https://www.ndna.org.uk/NDNA/News/ Press_releases/2021/Closures_of_nurseries_increase_as_impact_of_ pandemic_takes_hold.aspx 5. Government funding schemes: https://www.gov.uk/help-with-childcare-costs/free-childcare-2-year-olds https://www.gov.uk/30-hours-free-childcare https://www.gov.uk/government/publications/early-yearsfunding-2021-2022 https://www.gov.uk/government/publications/early-yearsfunding-2020-2021/early-years-national-funding-formula-technical-notefor-2020-21 6. Sutton Trust‘s “A Fair Start” report https://www.suttontrust.com/wp-content/uploads/2021/08/A-Fair-Start. pdf 7. Guardian article of survey fronted by Pregnant Then Screwed. https://www.theguardian.com/money/2021/sep/12/uk-failing-onchildcare-finds-survey-of-over-20000-working-parents