Borough of Poole

Proposed Changes to the Early Years Single

Funding Formula for the Free Entitlement for 3 & 4

Year Olds from April 2017

Children, Young People and Learning

5 January 2017

Consultation closes on 26th January 2017

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1. Introduction

In 2016 the Department for Education (DfE) launched its plan for an Early Years National Funding Formula (EYNFF) for 3 & 4 year olds to reduce variations in funding for local authorities. The DfE consulted on the proposed changes and the outcome was published in December, which can be found here. This has provided an increase in the hourly funding rate to Poole for the next financial year starting in April 2017. To distribute funding between providers to reflect the new arrangements, local authorities are required to implement a new Early Years Single Funding Formula (EYSFF) by April 2017. Planned changes must reflect a universal base rate for all providers by April 2019 with an appropriate use of supplements to incentivise market changes needed locally in the sector. The current supplement to recognise provider quality based on the latest Ofsted rating must end from April as it will no longer be permitted. As well as meeting the new DfE requirements, Poole’s proposed funding strategy is designed to:

Facilitate the required market changes to support parents.

Continue the child focussed support for disadvantaged children

Protect local quality and sufficiency of provision Settings will be aware that the 3 & 4 year free entitlement is expanding for eligible working parents from September 2017. As part of the changes to the EYSFF, we are also expected to incentivise providers to deliver the existing and the extended 30hrs entitlement with greater flexibility to meet the needs of parents. The DfE have kept the Deprivation Supplement as a mandatory part of the EYSFF and we are not proposing to change how this works locally for next year. We realise these changes will be significant for settings and particularly those currently receiving higher base rate funding than other providers. Proposals have been developed to support a period of transition.

2. Poole Priorities 2017-2020

There have been many factors driving improvement in the sector including hard work from providers and Poole’s central support teams. This has been supported by the effective use of funding to drive quality and support disadvantaged children through the use of supplements.

The real measure of progress is reflected in outcomes for children at the end of the reception year. This is illustrated in the table below. This shows the rising trend of all children, and particularly those from disadvantaged backgrounds, being assessed as achieving a Good Level of Development (GLD) in the Early Years Foundation Stage Profile (EYFSP).

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Table 1 – Progress of Children in the EYFSP 2013 to 2016

Child Group 2013 2014 2015 2016

Disadvantaged GLD 30% 47% 52% 57%

Non Disadvantaged GLD 51% 62% 69% 75%

LA Gap 21% 15% 17% 18%

National Non Disadvantaged 55% 64% 69% 72%

The above results show that 57% of disadvantaged children in Poole schools were assessed with a GLD in summer 2016. This compares with only 30% when the current measure was introduced in 2013. The assessments for non disadvantaged children have also improved from those with a GLD rising from 51% to 75% over the same period. These results show that the gap between these 2 groups of children has reduced from 21% to 18% over this period. We need this positive trend to continue but also with an increased number of places available with greater flexibility of provision to meet the needs of working parents. Our priorities for funding over the next 3 years are as follows: Flexible provision for families - there is a need in Poole to increase the number of all year round flexible places to support the needs of working families. Parents have told us, for example, that they want to be able to stretch their free entitlement across school holiday periods. Currently in Poole a large proportion (63%) of the childcare sector operates during school term time only. The map in Appendix 1 shows the distribution of term time only and all year round provision in Poole. Providers are responding to the new agenda. A number of term time only providers are working on extending their childcare offer and some maintained schools are considering opening new all year round flexible provision. The revenue funding mechanism needs to be designed to support these changes and encourage other providers to offer childcare more flexibly. Disadvantaged children receive greater support - ensuring high quality places for disadvantaged 2 year olds remains a priority for Poole. The take up of free early education places for 2 year olds has been growing steadily and is currently 83%, which is high compared with January 2016 data for other areas nationally (68%) and with the South West (75%). It is believed that this increase has been hugely supported by the EYSFF Deprivation Supplement payable to providers when these children move on to the universally free 3 & 4 year old provision. . The Deprivation Supplement was redesigned for 2016/17 with greater targeting towards the children that most need it, being those previously funded as 2 year olds and others eligible for the pupil premium as 3 & 4 year olds. There are no plans to change this supplement again in 2017/18. Quality of Providers - alongside the Deprivation Supplement the Poole EYSFF has included a Quality Supplement since its introduction in 2011. The DfE new

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Regulations include that Quality alone can no longer be used to differentiate funding between providers in future. In Poole, the Supplement has supported the drive to increase quality over time with now 100% of group settings inspected in Poole being rated by Ofsted as Good or Outstanding. This compares with only 65% in 2009. This improvement will have benefitted all children. Base rates from 2017/18 will include the funding previously allocated for Quality to manage the transition to lower base rates for a number of providers. Sufficient places available - we must ensure that large funding changes do not destabilise the market with a sudden loss of places when we need the market to grow, There is, therefore, a need for a transition period over which a number of providers move towards lower funding. This will give them time to consider their options, adjust their provision if needed, and remain financially viable.

3. Proposed Changes to the Poole EYSFF

The DfE have provided local authorities with a timeframe of three years to fully implement universal base rates in the local EYSFF. The following principles have been used in considering proposals:

1) Supplements to represent 10% of the EYSFF. Given the success of

funding supplements in the EYSFF to date, the maximum permitted 10% of the formula is to be allocated for supplements by 2019/20 when a universal base rate is to apply. This is a reduction from the 14% allocated to supplements currently.

2) Deprivation Supplement is to remain unchanged for group settings and for all 3 years. The supplement represents approximately 6% of funding and is at the level of £0.80 per hour per eligible child. No changes to the eligibility criteria are proposed.

3) Deprivation Supplement will become applicable for childminders from 2017/18. The eligibility criteria will be the same as for a group setting but the hourly funding rate will be adjusted to reflect any base rate protection over the period to 2019/20.

4) Flexibility supplement to be re-introduced for the remaining (approximate) 4% of funding. This is to fulfil our local need to incentivise the sector to provide a more flexible offer (longer working hours and a stretched offer).

5) Transitional protection for providers with reduced funding (childminders and schools) over the period to 2019/20 to support sustainability of providers and the LA sufficiency duty.

The expectation is that funding needed for the flexibility supplement will grow over time as settings adapt to the changing agenda. The transitional protection released over the 3 years can be used to fund increased eligibility for the flexibility supplement without the need to reduce hourly funding rates.

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Proposed eligibility for the Flexibility Supplement is as follows:

Operate all year round to support working families, (at least 48 weeks per year).

Offer Free Early Education places, to eligible 2 year olds and both 15 hour and 30 hour places to 3 and 4 year olds

Offer free Early Education places between the hours of 8am and 6pm as a

minimum and include a stretched offer across school holiday periods.

To comply with the proposed new Regulations for a universal base rate by 2019/20, Poole’s formula would need to be adjusted over the next 3 years to increase the base rate (plus current ‘quality supplement’) for group PVI providers from £3.71 per hour and reduce the equivalent base rates for childminders from £4.54 and nursery classes from £4.07 over 2017/18 to 2019/20. Table 2: Poole EYSFF for 3&4s Hourly Funding Rates in 2016/17

Currently all group PVI providers and schools are in receipt of the quality supplement with 97% of childminders qualifying.

Over the next three years a new base rate of £3.77 is being proposed for all providers, with a new supplement introduced for flexibility and transitional funding protection arrangements to be in place for childminders and school nursery classes. Transitional funding protection is described below.

4. Transitional Base Rate Protection

The DfE require all providers in the sector to receive the same base rate from 2019/20. If we followed this instruction immediately, from April 2017, childminders and nursery school classes would face a significant reduction in their funding rate. We therefore recommend a three year transition to base rate equality, as demonstrated in Table 3 on page 6. This means that in 2017/18 childminders who fulfil the flexibility supplement criteria will be paid at £4.54 per hour (equal to the 2016/17 base rate plus quality). Schools that fulfil the flexibility supplement criteria will, in 2017/18, be paid at £4.07 per hour (equal to the 2016/17 base rate plus quality). Schools will still receive the 80p per hour for children who fulfil the criteria for deprivation supplement.as in 2016/17. Childminders do not receive the deprivation supplement in 2016/17. To achieve parity with group settings for these children, the base rate protection level will be taken into account and a lower deprivation supplement than for group settings and

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schools will apply. In these instances where eligibility for the flexibility supplement is achieved neither childminders nor schools see a reduction in funding in 2017/18. If no protection was given to childminders and school nursery classes the base rate could increase in 2017/18 by only £0.04 per hour, as these settings account for only a small share of the overall free entitlement hours. The release of protection over time can be reallocated to either future base rates or supplements (with the latter subject to an overall cap of 10%). It is expected that flexibility will grow over time and that the protection released will be needed to maintain hourly funding levels. Without the reallocation of the transitional funding, future hourly funding values would need to reduce. The advantage of base rate protection is it allows:

Greater stability of funding values for the 3 year period to aid financial planning for existing and new providers.

Transition time for the market to respond to the 30 hour extended free entitlement to be delivered flexibility to meet parental demand.

Mitigation of sufficiency risk with providers supported through transition to lower funding levels. Although accounting of only 12% of the total hours of provision, childminders and school nursery classes are important in meeting the needs of parents.

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5. EYSFF Funding Rates by Provider for 3 & 4 Year Olds 2017-2020 The proposed hourly funding rates for each type of provider are shown in Table 3 below for each of the next 3 years. Table 3: Provider Funding Rates (with Protections) 2017-2020

A Childminder currently in 2016/17 receives £4.54 for all hours (base rate plus quality), regardless of whether a child would qualify as eligible for the deprivation supplement in a group setting. This is because the childminder ratio of 3 children to 1 adult is favourable compared with group PVI settings of 8 children to 1 adult for 3 and 4 year olds.

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6. Impact on Providers

Table 4 demonstrates the progress made in 2017/18 by implementing the EYSFF proposals. There are four scenarios and each type of provider can see the variations in funding per scenario. There are is no scenario where a Group PVI will see a fall in funding.

Table 4 - Comparison of Provider Funding

Scenario 1 Setting not flexible Child not deprived

Total Rate 16/17

Base Rate 17/18

Flexibility Deprivation Total Rate 17/18

Change from 16/17

Childminder 4.54 4.29 0 0 4.29 -0.25

Group PVI 3.71 3.77 0 0 3.77 +0.06

School Nursery Classes 4.07 3.82 0 0 3.82 -0.25

Scenario 2 Setting is flexible Child not deprived

Total Rate 16/17

Base Rate 17/18

Flexibility Deprivation Total Rate 17/18

Change from 16/17

Childminder 4.54 4.29 0.25 0 4.54 0

Group PVI 3.71 3.77 0.25 0 4.02 +0.31

School Nursery Classes 4.07 3.82 0.25 0 4.07 0

Scenario 3 Setting not flexible Child is deprived

Total Rate 16/17

Base Rate 17/18

Flexibility Deprivation Total Rate 17/18

Change from 16/17

Childminder 4.54 4.29 0 0.28 4.57 +0.03

Group PVI 4.51 3.77 0 0.80 4.57 +0.06

School Nursery Classes 4.87 3.82 0 0.80 4.62 -0.25

Scenario 4 Setting is Flexible Child is deprived

Total Rate 16/17

Base Rate 17/18

Flexibility Deprivation Total Rate 17/18

Change from 16/17

Childminder 4.54 4.29 0.25 0.28 4.82 +0.28

Group PVI 4.51 3.77 0.25 0.80 4.82 +0.31

School Nursery Classes 4.87 3.82 0.25 0.80 4.87 0

The impact on providers is shown assuming that over time the reduction in protection funding for schools and childminders can be used to fund the increased cost of supplements.

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This is expected because:

The new 30 hour free entitlement from September 2017 will increase the need for flexible hours in the sector.

The decrease in the childminder base rate is converted to deprivation funding for eligible children over the protection transition period.

Summary Impact for Childminders:

Reduction in base rate over 2017/18 and 2018/19 with the universal rate being achieved as required by 2019/20.

Reductions can be mitigated in 2017/18 by: o Qualifying for the flexibility supplement to maintain 2016/17 funding o Not qualifying for the flexibility supplement but taking a child eligible for

the deprivation supplement with an increase in funding of £0.03 per hour for that child.

Hourly funding for an individual child can be increased by £0.28 by qualifying for both the flexibility supplement and taking a child eligible for the deprivation supplement. This rate is the same as for a child qualifying for deprivation funding in a group PVI setting.

If not qualifying for any supplements the funding level will reduce from £4.54 to only £3.77 (17% reduction) by 2019/20. This is equivalent to £439 per child per year (for 15 hours per week)

Summary Impact for Group PVI

The funding rates for group PVI’s will be the same in all 3 years 2017/18, 2018/19 and 2019/20 as no group PVI settings loses funding under any scenario.

Group providers with a flexible offer receive an increase in funding of £0.31 overall per hour (8.4%) in 2017/18. Those with an inflexible offer receive an increase of £0.06 (1.6%).

Impact on School Nursery Classes

There is no scenario where schools can increase funding as they are already in receipt of the deprivation supplement at the same level as group PVI settings. Schools saw a reduction for 2016/17 with the change in eligibility from setting level to being based on individual qualifying children.

The base rate is to reduce over time to the new universal rate. The largest element of funding is lost in the first year if flexibility is not achieved.

If a school is unable to achieve the flexibility supplement in each year then compared with 2016/17 hourly funding will reduce by £0.30 (7.4%) by 2019/20. This is equivalent to £171 per child per year (for 15 hours per week).

7. Next Steps

We will review the outcome with the Early Years Subgroup on January 30th and also share the outcome with the Overview and Scrutiny Committee as part of the Consultation Process and then with Schools Forum. Our final recommendation and feedback from all parties and will be presented to Cabinet and Members for a final decision on February 21st.

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8. Timeline

5 January Consultation papers sent out to the sector

9, 12, 16 and 18 January

Consultation events at the Dolphin Centre

26 January Consultation closes

30 January Consultation outcome discussed at Subgroup

31 January Consultation outcome discussed at Poole Overview and Scrutiny Committee

8 February Consultation outcome discussed at Schools Forum

21 February Council Members decide EYSFF

1 April 2017 Changes are implemented

A questionnaire is attached with this paper for you to make any comments. If you wish to contribute to this consultation this should be emailed to Darren Buckley d.buckley@poole.gov.uk by 5pm Thursday 26th January 2017. If you would like to discuss any of this information there is an opportunity for you to attend an informal consultation briefing here at Children, Young People and Learning above Poole Central Library in the Dolphin Centre with:

Mandy Gridley, Early Years Service Manager

Nicola Webb, Head of Accountancy

Darren Buckley, Childcare Sufficiency and Funding Officer

Steve Ellis, Education Accountant

on either:

Monday 9th January 4pm-6pm (Group PVI’s, Schools, Childminders)

Thursday 12th January 6pm-8pm (Group PVI’s, Schools, Childminders)

Monday 16th January 4pm-6pm (Group PVI’s, Schools, Childminders)

Wednesday 18th January 6pm-8pm (Childminders) We appreciate this consultation is complicated and quite challenging. You are all urged to attend a briefing session. Childminders are welcome to all, but do note we have one session reserved for this group specifically.

Please email Darren Buckley d.buckley@poole.gov.uk to confirm your attendance at one of these sessions.

Please note the closing date for the consultation is 5pm Thursday 26th January. Any questionnaires received after this time cannot be used as part of the reported feedback from the consultation.

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Appendix 1 (a)

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Appendix 1 (b)

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FAQ’s Why are you reducing funding for school nursery classes and childminders? The government has tasked all local authorities to provide a universal base rate for every type of business within the childcare sector. We have until April 2019 to achieve this, which is why we are proposing some financial protections for those two groups to give them time to plan for the change. Although every business type will eventually receive the same base rate there are still opportunities for providers through the qualification for supplements to maintain or increase their funding by adapting their business models and becoming more flexible or taking more children from deprived backgrounds. Why do we need any supplements? Can’t that 10% reserved for supplements simply stay in the base rate? A supplement for deprivation continues to be mandatory in the funding formula to help children from deprived backgrounds catch up with their peers and we believe the current Supplement is working well. The Early Years Foundation Stage Profile (Table 1, page 2) shows the progress made for children who start school achieving a good level of development. We believe the way we have distributed funding with the use of significant supplements to influence the childcare market locally has contributed this positive trend. Since its introduction in 2011, the Quality Supplement has been used to support a drive for the market to achieve better ratings with Ofsted. At the time of writing 100% of inspected group providers had a rating of Good or Outstanding. This improvement will have benefitted all children in Table 1 referenced above. The market now needs to develop further to support working parents take up the extended 30 hour free entitlement with greater flexibility than is currently provided across Poole. Why is the Flexibility Supplement so high? The level of the supplement needs to incentivise providers. It is proposed to be lower then the current quality supplement. It should be noted that because the Flexibility Supplement is not expected to be paid for all hours (only in eligible settings) if we removed it all together the base rate would increase by 15p. If we lowered the rate by, say, 5p to 20p per hour the base rate would increase by only 3p and have little impact overall for non-flexible providers. We need the market to change. Poole has a high proportion of term time only providers and in some areas there is no all year round provision. Parents do tell us they would like to use their entitlement more flexibly, whether that is a longer day and/or during school holidays. We know there are low numbers in some school nursery classes and also in some term time only preschools. In addition, more children leave Poole to attend settings in Bournemouth and Dorset than the other way around. This suggests that come parents currently want a more flexible offer than is available in their communities. From September 2017, the extended 30 hours

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free entitlement is expected to further increase pressure from parents for greater flexibility. For example, if a provider could offer longer hours, would that parent choose to settle their child close to home then commute, rather than take their children with them to their work area? Why are we rewarding Day Nurseries that are already flexible? This is working in the same way as when we introduced the Quality supplement. Existing good quality providers received the supplement from day 1. Most Day Nurseries are already supporting many working families with the flexible offer that they need, but some may still need to extend their opening hours to be eligible for the supplement when the 30 hours offer is introduced. In addition, the greatest financial impact of the extension will be in this sector. The additional 15 hours will have previously been paid for by parents at a rate set by the provider. Now these hours are ‘free’. What if my community doesn’t need me to be flexible? You can certainly stay as you are. Bear in mind the changes 30 hours will bring. Some parents will happily share their hours between two providers however many would prefer the consistency of a single provider with a flexible offer. You should survey the families with young children in your community to gather their opinions, but becoming flexible offers the chance to increase your hourly rate for all children in attendance by 31p in comparison to the 2016 rate. It seems that you’re not supporting preschools and term time only providers, why is that? All Group PVIs are receiving an increase per hour compared to 2016. There is no scenario where a term time only group PVI provider can lose funding in 2017, only opportunity to increase their business and funding rate. Schools however are seeing a reduction in funding, as will childminders as we are no longer permitted to recognise any expected differences in the cost of provision between sectors. We have put in place some measures to offer those two groups the chance to, for 2017, be paid at the same hourly rate as currently.