LSE warns against funding formula roll-out

Be the first to comment

A study by the London School of Economics is warning that introducing a new early years national funding formula at the same time as the 30 hours will cause ‘turbulence’ in the sector and could threaten the sustainability of some settings.


Washwood Heath Nursery School

The research, funded by the Nuffield Foundation, addressed the history and local implementation of early years funding policy, drawing conclusions which relate to the new Early Years National Funding Formula proposals.

Co-author Dr Philip Noden said that before the consultation document was published, ‘My main conclusion would have been don’t introduce a national funding formula at the same time as the 30 hours.

‘There’s a degree of disruption and complexity doing the two things alongside each other that will cause a lot of problems.’

He said that the purpose of introducing a national funding formula has been transformed by the promise of 30 hours.

The plan to introduce a single base rate will cause disruption, because currently two-thirds of local authorities use more than one base rate, he said.

In one case study, a local authority could pay 56 different rates. Local priorities for funding will be lost, so that removing the quality supplement will undermine efforts at local level to improve quality.

Some areas have spent substantially more on encouraging providers to employ qualified teachers or early years professionals, but these settings will lose funding, while settings without graduate-level staff
will gain.

Dr Noden pointed out that the consultation was based on Section 251 returns, which the researchers also analysed.

‘You can only know a very limited amount from that data,’ he said. ‘You cannot know the effect of removing the quality supplement and changing to a single base rate. You have the national turbulence of shifting funding from one local authority to another and then changes to funding rates within them, so you don’t quite know [what will happen] for individual providers. There are several layers of unpredictability that will be introduced at the same time.’

The report points out the problems with using Section 251 data: first, it does not provide information about the funding rates received by individual providers; and secondly it does not provide any insight into the vulnerability of providers of different types and in different areas to the introduction of the 30 hours.

It said, ‘Our findings suggest that, on the basis of that data, central government cannot be confident as to the consequences of planned reforms, either in relation to the sustainability of providers or for protecting improvements in the quality of provision.’


While the Government’s intention is to resolve historic disparities in funding and create a fairer system, providers in both the maintained and private and voluntary sectors have aired their concerns that the plans to offer 30 hours of free childcare to parents will not work because there is not enough money in the system.

Maintained nursery schools will see huge cuts to their base rate (see box). For example, Birmingham’s 27 nursery schools would lose nearly half of their funding under the plans, according to analysis by the school leaders’ union the NAHT.

The Government has promised an extra £55m for nursery schools over two years, but it is not clear how this will work.

Early years organisations responding to the consultation on the Early Years National Funding Formula are united in the belief that the proposals, for three- and four-year-olds, fall far short of what is needed to cover many providers’ true costs and many families will be turned away.

While most councils are expected to see a rise in their hourly rates, a quarter of local authorities are facing cuts under the new formula.

Among the bodies’ suggestions for a better deal are a repackaging of the pledge to parents as a subsidised offer, rather than ‘free’, and allowing providers to charge for meals and other add-ons.

The Pre-school Learning Alliance has suggested it would be fairer to cut the earnings cap of up to £200,000 per household, and divert the savings to fund a ‘real costs’ hourly rate.


Valerie Daniel, head teacher, Washwood Heath Nursery School, a Children’s Centre in Birmingham

‘Maintained nursery schools are disproportionately located in areas of need to help balance out factors surrounding poor educational and childcare provision. As such they are a huge part of delivering the Government’s remit for economic prosperity and social mobility.

‘They have been recognised for consistent, high-quality provision for all children and notably for improving the life chances of the most vulnerable in the most deprived areas. Most are graded as Good or Outstanding. They have been disappearing under the radar for quite some time with only around 400 left.

‘Their success is directly attributable to highly qualified staffing and strong leadership, including head teachers and Qualified Teacher Status teachers. Government policy seeks to ensure that children benefit from public investment, which subsumes the cost of childcare to parents while providing high-quality provision. This can only result in higher costs to meet public policy objectives.

‘There is ongoing perplexity about qualifications, expertise and experience needed in the sector. There is a lack of value and recognition of the complexity of the role of leaders and leadership in early education, and its significance for young children is misconstrued. As a result, there are entrenched professional divisions in a sector which suffers from dissonance between public policy targets and a relentless push towards a private market strategy. We need clarification on the terms “early years” and “childcare”, catch-all phrases which do not define purpose, target audiences nor the wide variety of qualifications and provision.

‘Nursery schools are usually referred to as expensive, but in my opinion something that is expensive is described as such when it is priced excessively beyond its value. My fear is the window of opportunity to define and establish nursery schools is fast closing in a hugely political agenda.

‘Equity as in the context of equal sharing is not the answer to the serious issues ensconced within the sector. In fact, equity in funding will result in inequity for children and further fragmentation.

‘The EYNFF feels like another attempt to find a simple solution for a complex issue. As US educator Stephanie Pace Marshall says, “We cannot restructure a structure that is splintered at its roots. Adding wings to caterpillars does not create butterflies – it creates awkward and dysfunctional caterpillars. Butterflies are created through transformation.”

‘The sector is crying out for transformation driven by a clear understanding of the needs of children and families in conjunction with understanding the negative impact of the loss of nursery schools to the sector and the wider educational remit.’


‘We are investing a record £6bn per year on childcare by the end of this Parliament, including £300m per year to raise the hourly funding rate for nurseries, playgroups and childminders. 

‘As a result of our proposed changes – including allocating funding more fairly across the country and a requirement for local authorities to pass on 95 per cent of funding to the
front line – the vast majority of providers can expect to see their funding increase.

‘These changes will come into effect from April next year and are based on evidence that takes account of current and expected cost pressures.’l 

blog comments powered by Disqus