Funding - Missing pieces in the 30-hour funding review

When the Government announced that it would be increasing early years funding rates ahead of the 30-hour offer roll-out, the sector’s response was cautiously positive. Positive because, after years of no change, central funding from government was finally to increase; but cautious because, while this increase was welcome, it remained unclear whether it was actually sufficient to cover the cost of delivery.

The Government sought to allay these concerns by publishing its Review of childcare costs: the analytical report – a 96-page assessment of the cost of delivering childcare. Described by the Government as ‘robust’, ‘a sound evidence base on which to ensure that the childcare market is properly funded’ and ‘the most comprehensive bottom-up analysis of the cost of childcare provision in the country’, the report’s findings are forming the basis for key funding decisions ahead of the roll-out of the 30-hour offer next year. It is extremely concerning, therefore, how quickly this ‘comprehensive’ analysis begins to fall apart under closer scrutiny.

When some in the sector –including the Pre-school Learning Alliance – raised concerns that the new funding rates were still not enough to cover the cost of delivery, the DfE argued that its figures ‘reflect the data that were given to us by the sector, including the profit and loss accounts of providers’ – a reference to the department’s call for evidence on the cost of providing childcare, which received 2,000 responses.

But look through the appendix of the Review of childcare costs, which lists the various sources from which the DfE obtained the data used in its analysis (average occupancy rates, staff-to-child ratios, number of available places and so forth), and you will see that the call for evidence is not cited once. In fact, all of the key data that you might expect the Government to gain from those 2,000 responses – such as costs stemming from wages, rents/mortgages, insurance, utilities and so on – were instead taken from the Childcare Provider Finances Survey 2012, which is already four years old and will be even more out of date by the time the scheme rolls out.

This isn’t surprising, given that the DfE previously complained that the majority of responses to its call for evidence were ‘not supported by figures’. But the question then is: why is the Government claiming its funding calculations are based on recent evidence when this is simply – and demonstrably – not the case?

So what about the external research commissioned by the Government and used to inform the Review of childcare costs? Does this stand up to scrutiny?

One research report, Cost of delivering the early education entitlement, compiled by the NLH Partnership, claims that despite the fact that central free entitlement funding has been frozen for several years and most providers have seen a real-term cut in funding, the three- and four-year-old offer is actually overfunded – by 43p per hour. The problem is, however, that while the report claims to have calculated its figures using the number of hours of childcare delivered by the 47 PVI settings it surveyed, the questionnaire it gave them didn’t distinguish between free entitlement hours and non-free entitlement hours delivered for the various age groups. What’s more, it allowed respondents to base their answers on the last month of provision, meaning that, as the data was collected in the late summer term when occupancy tends to be highest, there was a real risk of overestimating the number of hours delivered per year, and therefore underestimating the unit cost per hour. And perhaps most alarmingly, the report – all 52 pages of it – does not contain a single reference to the National Living Wage.

That said, for all its flaws, at least the NLH research was made available to the sector for scrutiny. The same cannot be said for the research carried out on behalf of the DfE by Deloitte. Despite being referenced 50 times throughout the Review of childcare costs, when the Pre-school Learning Alliance asked for a copy of the Deloitte research that the Review is based on, under the Freedom of Information Act, the department responded by claiming that it does not hold this information.

The Review of childcare costs specifically states that, ‘Deloitte were engaged to support work led by the Department for Education… through both a review of the published literature as well as primary research directly with providers; and to engage with providers to help inform the overall review. The Department for Education have interpreted these findings and research to inform this review.’

How can the DfE interpret the findings of research that it does not have? And how can we, as a sector, trust the validity of research that we are not able to scrutinise?

The Government has claimed that the 30-hour offer will provide much-needed support for working families, but it cannot succeed if it starts from such a flawed basis. The DfE previously dismissed calls for an independent review of the scheme; given the glaring holes in its own review, it may wish to rethink this decision.