London faces two-year-old places shortage and funding crisis

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London currently faces a shortfall of 25,000 nursery and childminder places to meet the Government's offer of free early education for 20 per cent of two-year-olds by September 2013.

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A survey of 30 councils in the capital by The Daycare Trust has found that providing the high number of places needed in the capital is a major problem for local authorities.

The report was commissioned by London Councils, the body which represent the 33 London boroughs.

The high level of poverty in London means that the proportions of children qualifying for the two year-old offer will be the highest of all English regions, with nearly 80 per cent of children qualifying for free provision in some London local authorities, the report claims.

The survey says that a minimum of 24,100 new early education places will be needed by next September to provide free part-time places for 20 per cent of two-year-olds.

This figure will rise to 31,700 new places by the following year, when 40 per cent of two-year-olds will become eligible.

Higher levels of poverty, rising birth rates, migration and higher staff and property costs mean that it is significantly more costly for London providers to deliver the scheme than elsewhere in the country, the report says.

The report, which makes a number of recommendations for policymakers, also says that providers will need to be paid a minimum of £8 an hour to meet the higher costs of providing places in the capital.

The Government has allocated  £86.5 million to London in revenue funding and £33.9m in capital funding in 2013-14.

Based on Government funding allocations providers in the capital will receive between £5.28 and £6.08 per hour for every two-year-old place, (on average £5.71 an hour) if they receive all of the revenue funding.

However, in at least 19 local authorities, many good and outstanding Ofsted rated providers intend to opt out of delivering free places, because the funding will not cover their costs.

The report also highlights that the way the two-year-old offer is delivered can also lead to extra costs, because the funding for 15 hours a week is provided over 38 weeks a year, while nurseries and childminders tend to work over 50 or 52 weeks a year.

This means that early years settings are left with 14 weeks of ‘unfunded dead-time. Additionally, a child that takes up a part-time place as part of the entitlement, for example, five three hour sessions per week, can prevent childcare providers from filling the rest of the day unless another child can attend during the remainder of the day. For childcare providers, these unfilled hours represent a loss of earnings that can impact on their business sustainability and willingness to deliver the entitlement,’ the report says.

Case studies

The research also includes a number of case studies to show how some local authorities are using innovative ways to deliver the two-year-old offer, such as also providing home learning and parental support alongside the places to ease the pressure on childcare providers by offering targeting and integratred support to deprived families.

It says that for early education places alone will not be enough to close the gap between disadvantaged children and their peers and that the best way is to provide support to the whole family.

In some local authorities, including Greenwich, for example, a mixture of ten hours per week of early education is combined with extra home learning and parenting support, which has enabled them to tap into existing provision, thereby putting less financial pressure on childcare providers. This model also engaged parents more fully in the entitlement.

Wandsworth would like the flexibility to be able to include their portage service in the offer to two year-olds, so that  delivering one-to-one care in the child’s home, in the company of a parent, for about 45 children, can count towards the 15 hours.

The report said, ‘It is also felt that any time children spend at drop-in services at children’s centres should also be include within the offer. It is felt that this can have a greater impact on children with additional needs, delivering good outcomes in terms of Foundation Stage Profiles. The local authority is concerned that by meeting the targets, and being forced to use settings of lower quality, they will not actually be using funding in the best way possible to bring the biggest impact to young children. In the process, these services which could be lost under pressures to meet this offer. Being able to include this in the two year-old offer would also ease the capacity and financial pressures for the local authority.’

Mayor Jules Pipe, chair of London Councils, said, ‘Today’s research shows that councils are thinking innovatively about how to create the places needed to deliver this new entitlement. However, London has more births, more poverty and more expensive childcare costs than elsewhere in the UK. The Government needs to take this into account.’

Anand Shukla, chief executive of Daycare Trust, said, ‘This policy has the potential to boost the life chances of the most deprived children in London but finding an additional 25,000 early education places for two year olds is proving a huge challenge for local authorities.

‘A shortfall in day-to-day funding, for providers and for local authorities, risks compromising this ambitious policy. A small amount of extra funding would get the buy-in of providers and the essential local authority infrastructure needed to make this scheme a success.’

Recommendations for Government:

  • An extra £48m of revenue funding on top of the £86.5m to sufficiently deliver the offer in London for 2013-2014. It is needed for providers to be paid £8 per hour, as well as ensure that local authorities can provide the infrastructure needed to deliver the offer. For 2014-2015, £190m is needed to meet the costs of delivering the entitlement.

  • Guarantee a minimum capital funding allocation of £62m between 2013 and 2015 to ensure a continued expansion of places in London.

  • Relax the requirement for the entitlement to take the form of 570 hours of funded childcare for the 2013 cohort and support an alternative model for the two-year-old offer that delivers long term improved outcomes for children combining early education with support for parents.

  • Establish a new Education Area Cost Adjustment weighting for the Dedicated Schools Grant that takes into account the different business models of the early years’ sector.

  • Include mobility weightings in the next cycle of funding made through the Dedicated School Grant, as this is currently an unfactored cost for providers

Local authorities and providers should consider:

Developing new local commissioning models of securing places for the two year-old offer, to enable providers to provide blocks of three places. Grouping two year-old together in threes amounts to a full time place as providers generally provide care over 45 hours per week.

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