Council rows back on top-slicing early years funding

Catherine Gaunt
Friday, January 6, 2017

Nursery owners in Surrey are challenging the local authority on how much early years funding should be held back for council costs.

Nurseries remain concerned that they will receive a much lower rate in the Early Years National Funding Formula than the rate published for their local authority area by the Department for Education, but say that the council is now listening.

Providers have challenged initial proposals that suggested that the council would hold back 7 per cent of the allocated early years funding for central costs (which is permitted) and deprivation funding, and potentially 5.5 per cent to set up an inclusion fund for children with special educational needs.

However, it appears that Surrey county Council is rethinking the funding plans now that providers have raised their concerns.

A statement, received after Nursery World went to press (5 January), suggests that the council plans to hold back 5 per cent of funding, not 7 per cent.

'Surrey are proposing to pass through 95 per cent of the funding immediately from April 2017 and not stagger the pass through, thereby increasing the rate more quickly to early years providers,' it said.

'There has been no decision taken on a rate as we are awaiting the results of a sector consultation on the delivery of optional supplements and the rate at which deprivation should be funded, as this is mandatory. Any decision about supplements affects the base rate and as this has not yet been agreed no rate has been set.

'Work is to be undertaken re the inclusion fund to gauge the breadth of need funded through discretionary funding and make a decision as to what constitutes high needs block funding and what can be covered from an inclusion fund for emerging needs.'

The council said it was consulting the sector on this issue, as required, and this would be sent out shortly with responses by early- to mid February. The outcome would also impact the rate.

Information was sent to the schools forum on 7 January and a final decision about rates would be made by the end of February, it said.

All LAs will be required to set up a local SEN inclusion fund from April by pooling funding from the early years and/or high needs block. There is concern that the hourly rate will be cut further by the requirement.

Surrey providers are concerned that money to create the new inclusion fund will be created from the three- and four-year-old funding, despite the council taking a higher percentage for central costs, up from 2 per cent. They claim that the council is cutting most of their support and expects providers to buy their own training, including training needed for inclusion and safeguarding.

Initial figures had suggested that Surrey County Council could top-slice the base rate funding by as much as 12 per cent to pay for central costs, deprivation funding, and to set up an inclusion fund.

The DfE has confirmed that the expected rate for providers for offering funded places for three- and four-year-olds in Surrey will be £5 an hour from April, ahead of the move to 30 hours in September.

However, the council had indicated the base rate that providers would receive for three- and four-year-olds will be £4.41. The current rate of funding for threes and fours in Surrey is £4.15 an hour.

The council has now said that two meetings have been held between the Early Years Reference Group and council officers to discuss funding rates and that the Early Years business team has developed models to show the impact of high, medium and low rate increases across the range of setting types.

The models have included business costs and income and have shown that there is a small margin within which settings cover their costs.

But the statement stressed that 'there is no additional budget beyond that which the DfE provide to Surrey, so whilst it is recognised that business costs are increasing (NI, pension, business rates, minimum wage increases)there is a fixed amount of money within which agreement must be reached.'

The DfE has confirmed that local authorities will only be allowed to retain a maximum of 7 per cent of funding for ‘central spend’ in 2017/18, and 5 per cent in 2018/19. This can be used, for example, to pay for administration and provider support. (The Government has recently said councils will be able to opt out of this requirement, in exceptional circumstances, where there is evidence that local providers would still offer the free entitlement.)


Sian Bath, who runs two Outstanding nurseries in Guildford, is one provider concerned that her Early Years National Funding Formula rate will be much lower than the headline figure from the DfE, and told Nursery World that it was ‘unsustainable’.

The nursery owner said her business was set to lose £27,000 in revenue, including £7,000 in deprivation funding.

Ms Bath is the private, voluntary and independent nurseries’ representative on the Schools Forum and a member of the local authority provider reference group.

Her nurseries – Tongham Daycare and Little Crickets Nursery (part of Nurturing Childcare) – are community-based and are in two of the most-deprived areas of Surrey. The nurseries provide 60 and 36 places respectively, and a total of 212 children are on roll.

Ms Bath argues that the inclusion pot already exists in Surrey and is currently funded in part from the high needs block, in part from the early years block, and in part from other local authority funding.

She is concerned that a cut in support to children with special educational needs will mean that fewer children’s needs will be picked up at nursery, meaning that fewer children will receive their Education Health and Care Plans at nursery and consequently that fewer will get early support, leading to greater problems at primary school.

Ms Bath told Nursery World, ‘The new draft guidance from the DfE effectively allows Surrey to slice and retain funding to a detrimental level and cut most central services, which to my understanding may leave Surrey failing its statutory duty to the DfE in delivery of the free entitlement with regards to SEND and looked-after children and render most of the PVI unsustainable and unsupported.

‘I am currently proud to be part of a service that has over 93 per cent of settings providing Good or Outstanding education and care for all children under five.’

She added, ‘The LA is facing huge funding cuts and is trying to make savings, which I feel we need to support. However, the DfE do recommend that the inclusion pot is derived from both the high needs block as well as the early years block. Schools Forum (which is made of up of school heads, governors and union reps, etc.) all agree that the current £1.2 million that currently comes out of the high needs block continues to do so, meaning that the LA can use the remaining leftover pot retained funding to plug the gap in the inclusion pot total.’

Following the council's meetings with providers, Ms Bath told Nursery World on 5 January that, ‘The local authority has recently held meetings to help shape the new early years service and the funding formula, which some representatives from the sector were invited to, and do seem to be listening. We await the final decision with bated breath.’

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