EARLY YEARS FUNDING REFORM Consultation on the funding of early years settings from 2013/14 V1.0 29 August 2012 Not protectively marked
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CONTENTS REFERENCE DESCRIPTION PAGE NO/ COLOUR Introduction 3 Executive Summary 4 PAPER A Current Funding Arrangements 5 PAPER B Formula Review Process 6 PAPER C Recommendations 13 Annex A Early Years Working Group Membership White Annex B Early Years Business Model Green Annex C Impact on Individual Maintained Settings Blue Annex D Impact on Individual PVI & Childminder Settings Lilic 2
INTRODUCTION 1. On the 26 March 2012 the Department for Education (DfE) published its third consultation on the future of school funding titled Next Steps Towards a Fairer System. Whilst the previous consultations mainly focused on the national funding formula used to fund local authorities, the third consultation confirms the DfE s intention to move towards a national funding formula in the next spending review period but there will be minimal change to the funding each Local Authority receives in 2013/14. 2. The national funding reform proposals outlined in the third consultation focused on the simplification of the formula used to fund Primary and Secondary Schools, proposed significant change to the funding of high needs pupils in both mainstream and special schools and further simplification of the Early Years Single Funding Funding Formula (EYSFF). 3. As part of the funding reform, Local Authorities must submit a pro-forma to the Education Funding Agency (EFA) by the 31 October 2012 setting out how Schools and Early Years settings in Plymouth will be funded from April 2013. 4. In order to cope with the large amount of work needed regarding changes to schools funding, a project plan was developed and various working groups were commissioned by the Schools Forum to take on the key project strands: Project Strand Schools Block High Needs Pupils Block Early Years Block Working Group Schools Budget Modelling Group SEN Funding Group Early Years Working Group The membership of the Early Years Working Group is shown in Annex A. 5. The main areas for consideration by the Early Years Working Group include: i) Current Funding Arrangements ii) Formula Review Process iii) Funding for Deprivation iv) Funding for Quality v) Funding for Special Educational Needs 6. This report sets out the recommendations from the Early Years Working Group for consultations prior to the Schools Forum making its final recommendation to the Local Authority. 3
EXECUTIVE SUMMARY 1. All proposals put forward by the Local Authority are informed by the views of the Early Years Working Group. 2. The total costs of the proposals which are overall cost neutral are shown below. The estimated impact on individual settings can be found in the annexes. Sector Standard Funding Current Funding Deprivation Top-up Total Funding m m m Maintained Nursery Schools 0.398 0.028 0.426 Maintained Nursery Units 2.222 0.250 2.472 PVI 6.022 0.261 6.283 Child Minder 0.043 0 0.043 8.685 0.539 9.224 Sector Standard Funding Proposed Funding Deprivation Total Top-up Funding m m m Maintained Nursery Schools 0.444 0.025 0.469 Maintained Nursery Units 2.222 0.216 2.438 PVI 6.022 0.250 6.272 Child Minder 0.043 0.002 0.045 8.731 0.493 9.224 Sector Standard Funding Increase/ (decrease) Deprivation Top-up Total Funding Maintained Nursery Schools 0.046 (0.003) 0.043 Maintained Nursery Units 0 (0.034) (0.034) PVI 0 (0.011) (0.011) Child Minder 0 0.002 0.002 0.046 (0.046) 0 4
PAPER A - CURRENT FUNDING ARRANGEMENTS 1. Local authorities will continue to receive the Dedicated Schools Grant (DSG) for all pupils in the City. The starting point for 2013/14 will be 2012/13 with a few adjustments to reflect the change to the October pupil count, and transfers from other budgets to reflect the transfer of responsibilities such as Young People s Learning Agency (YPLA) and LA Formula Grant. 2. The DSG will be split into three blocks: 2012/13 DSG Adjustments Schools Block High Needs Block Early Years Block Not ringfenced at block level (still ringfenced grant overall) 3. The free entitlement to Early Education is funded from the Dedicated Schools Grant (DSG) and will be funded from the Early Years Block from 2013/14. 4. From April 2010, the Early Years Single Funding Formula (EYSFF) was implemented across all sectors of Early Education. For 2010/11 and 2011/12 there were transitional arrangements and in 2012/13 all sectors were funded using the full EYSFF rates. 5. The EYFSS included deprivation funding by setting. Settings were designated for deprivation funding if 20% of their pupils lived in the 25% most deprived areas of the City. Free Early Education Funding by Sector - 2012/13 Nursery School 5% Nursery Unit 26% Child Minder 0% Private Voluntary & Independent 69% 5
PAPER B FORMULA REVIEW PROCESS 1. The Schools Forum established an Early Years Working Group to review the Early Years Single Funding Formula (EYSFF) implemented in April 2010. 2. The membership of the group is shown in Annex A. 3. The process followed by the Early Years Working Group to develop the proposals in this document is set out below: Gathered the Evidence Benchmarking with regional & statistical neighbours Comparison of provider costs. Use Consistent Financial Reporting data from schools Modelling the Base Rate Evaluating the base rate using current costs. Comparison of changes to the 2010 EYSFF Model Modelling Deprivation & Assess Impact Review current deprivation funding by setting Update deprivation funding by using new IDACI bandings Evaluate bands selected and assess impact Consider Quality Factor Review of criteria options Evaluate how quality could be related to outcomes Removal of FSM bandings Review SEN Provision Consider Early Years Inclusion Resources Panel process Consider notional SEN Proposals for a defined support package Proposals for longer term funding for complex needs Gathered the Evidence 4. A benchmarking exercise was carried out asking the following questions to our regional and statistical neighbouring Authorities: 6
a) What is your current EYSFF rate for 2012/13? Base rates varied between 3.10 and 3.91 per hour, with Plymouth paying the highest rate at 3.91 compared with the average across the replying Authorities of 3.55 per hour. b) Is deprivation funding applied by setting or individual pupil? There was broadly a 50/50 split of Authorities paying by setting or individual pupil. Plymouth currently allocates deprivation funding by setting. c) How do you identify additional costs associated with deprivation? Varied response, fixed percentage allocation, assessing SEN needs, and most Authorities basing it on the need for additional staff. d) Do you suggest to settings how they use the additional deprivation funding? Some left it to the providers discretion, others specified lower staff ratios or other enrichment activities. 5. The Group examined the staff cost bases used in the 2010 EYSFF standard funding business model. Staffing rates for PVI settings were considered in relation to: The latest national minimum wage Increased national insurance rates Allowance for holidays Allowance for the mandatory pension contribution Inflated Childminder and Nursery leader rates for the last 3 years. 6. Within the maintained sector the current rates were updated for Nursery School Headteacher, Nursery Nurse and Nursery Teacher. 7. An analysis of the 2011/12 Consistent Financial Reporting (CFR) data for the Nursery Schools and the Primary Schools with Nursery Units was used to establish current premises and other costs. The costs of the Primary Schools were factored by the ratio of nursery children to school age children and it was evident that there is an economy of scale for Primary Schools compared with Nursery Schools. The rates established from the CFR for Nursery Schools were applied to the PVI sector and where applicable to the Childminder sector. The Nursery Units were factored downwards where an economy of scale applied. Modelling the Base Rate 8. The rates for the staffing, premises and other costs were applied to the 2010 EYFSS business model and the results were tested to check for consistency with known costs in individual settings. 9. The result showed that the nursery units and PVI base rates from the updated business model were 20p and 6p lower per hour respectively than the current funded rate. The nursery schools rate was 50p per hour higher than the current funded rate and the childminder rate was broadly similar to the current rate. 10. A comparison was made between the updated business model rates to those established in 2010. It was found that there must have been an over estimate of other costs in 2010. Whilst some of this compensated for the inflationary increases in the staff costs, the 7
business model rate was still lower than the current funding model for nursery units and PVI settings. 11. The group considered the potential sustainability of settings if a lower standard rate per hour were applied and the negative impact this could have on outcomes for children. After much discussion it was agreed to moderate the economies of scale applied to premises and admin costs for the nursery units and to bring forward the funding for manadatory pension payments (due in 2014/15) in the PVI s to ensure that no setting experiences a reduction in standard funding per hour. 12. With the nursery units, PVI and childminder rates remaining at the current rates, the cost of increasing the nursery school rate by 50p would be 46,000. 13. Annex B shows the EYSFF Business Model calculation of the base rate using the modelled costings. Modelling Deprivation & Assess Impact 14. Plymouth currently funds deprivation by setting. The deprivation as measured by the Income Deprivation Affecting Children Index (IDACI) for 3 & 4 year children attending settings in Plymouth is assessed to determine which children live in the most deprived areas. Settings are designated as receiving children from deprived areas if more than 20% of their children live in the 25% most deprived areas. 15. The value of deprivation funding in 2012/13 is estimated at 539,000 which is the difference between the actual funding paid to settings defined as supporting children from deprived areas and the funding settings would have received based on the standard funding per hour. The Group agreed to fund the increase to nursery schools from the deprivation funding which would leave 493,000 to fund deprivation in 2013/14. 16. The DfE have stated that in future deprivation funding should be applied to individual children and not by setting. A simple banding system, allowing a certain number of bands with a fixed unit rate applied to each and a minimum IDACI threshold, will be permitted to target funding at pupils living in the most deprived areas of the City through the IDACI method. The IDACI bands have been set nationally as follows: Band IDACI score lower limit IDACI score upper limit 1 0.2 0.25 2 0.25 0.3 3 0.3 0.4 4 0.4 0.5 5 0.5 0.6 6 0.6 1.0 8
17. Local Authorities are still able to set the unit values applied to each IDACI band. 18. The change from setting based deprivation funding to individual children would have the most impact on settings given that it would smooth funding across all settings including those that currently do not attract any deprivation funding. This principle was supported as it means that funding will follow the child and ensure that all settings are appropriately resourced to support children and their additional needs. 19. The group spent a considerable amount of time discussing the principles and modelling the impact of different funding options. The group assessed the occurrence of deprivation at individual settings and thought about the types of pupils coming from the different IDACI banded areas and the additional support required. 20. The spread of early years children in the city across IDACI bands is shown in the chart below: 21. After detailed modelling two final options were proposed to distribute the deprivation funding pot: IDACI Band Option 1 Option 2 1 0% 0% 2 0% 0% 3 15% 0% 4 20% 17% 5 30% 36% 6 35% 47% 9
22. Option 2 was developed to show the effect of funding only the top 3 bands 4 to 6 and shows the increase in the number of settings losing due to the medium deprivation children (band 3) in their settings. 23. The impact of both options is shown in the charts below: 24. For the purpose of the modelling, option 1 has been built into the impact of the standard hourly rate and the deprivation funding changes for individual settings shown in Annex C and D. 25. Whilst the DfE intends to introduce a Minimum Funding Guarantee (MFG) for all settings from 2013, the MFG will only ensure that base rates cannot be reduced by more than 1.5%. All other funding such as supplements for deprivation will be excluded from the MFG. 10
Consider Quality Factor 26. The Group considered whether a quality supplement could be introduced. 27. The following criteria were discussed as possible quality indicators: % of qualified staff at level 3 or above Early Years Professional or Graduate lead Ofsted outcomes/other external accreditation Attendance at Training Turnover of staff 28. Qualifications were considered the best option as all research shows that children achieve better outcomes where highly qualified practitioners are involved in their learning and development. However there are current systems in place that reward higher qualifications i.e. through higher rates of pay in the maintained sector factored into the EYSFF Business Model, and through the Graduate Leader Fund for salary enhancements in the private, voluntary and independent sector. 29. Any funding allocated to a quality supplement would have to be taken from the allocation for the standard rate or for deprivation, and would be spread very thinly across the sector. Therefore the consensus of the group was not to implement a quality supplement at this time to allow more funding to be used for deprivation and to protect the standard rate. Review Special Educational Needs (SEN) Provision 30. The National Funding Reform requires Local Authorities to consider whether a notional SEN allocation should be included wthin the standard rate. Settings would then be expected to support low level SEN from the notional allocation and would only apply for additional funding if a pupils need exceeded the expected contribution towards a high needs pupils provision. 31. The Early Years Funding Group considered the advantages and disadvantages of allocating a notional payment to each early years setting to support children with identified and emerging additional Special Educational Needs / Disabilities (SEND). 32. Following a lengthy discussion and taking into account evidence from the Early Years Inclusion Resource Panel (EYIRP) and available budget it was deemed appropriate to continue with the current arrangements, where the money follows the child through an application to the EYIRP. 33. A review of the EYIRP process of application and the nature of allocations is being reviewed and an updated policy will be provided to settings in due course following this consultation. 34. Whilst including a notional SEN allocation within the standard rate for all settings would simply spread funding too thinly and have little value to individual settings, consideration has been given to the higher staff qualifications supported in maintained settings and through the Graduate leadership Fund for PVI s in relation to SEN. It is suggested that settings with higher qualified staff will be able to support an element of low level SEN without additional support and this consultation seeks to assess whether the EYIRP ought to consider this as notional SEN funding already present when awarding additional funding to follow the pupil. 35. Currently the EYIRP allocates funding based on the additional individual support required and is generally allocated for a number of hours. The nature of early years development means that in some cases the support is only required for a short term for a specific need, 11
whereas in other cases the needs are likely to be complex and enduring. However, funding is currently only allocated for short term periods which can make it difficult for settings to rearrange staffing due to insecurity of future funding support. 36. This consultation seeks to assess whether additional support should be split into two strands in the future as follows: Specific Need - value of the funding should be determined where possible by the cost of a defined package of support; Complex and Enduring Need longer term allocation linked to the initiation of statutory assessment with advice and support from the lead professional. 37. The robustness of the EYRIP will also be improved with the aim of using specific early years banding descriptors to support the consistent allocation of additional funding in line with the individually assessed needs of the child. 38. Information will be provided to settings detailing how additional funding is to be used and settings receiving additional funding will be expected to demonstrate how the resource has been used to meet the needs of the child. SEN audits will be routinely carried out as part of the finance audits from April 2013. 12
PAPER C RECOMMENDATIONS 1. The funding rate for nursery schools should be increased from April 2013 in line with the updated business model. The standard funding rates for maintained nursery units, PVI and childminders are protected to remain at the same level as the 2012/13 rate. The proposed rates are as follows: Setting Type 2012/13 per Hour 2013/14 per Hour Nursery School 4.31 4.81 Nursery Unit 4.63 4.63 PVI 3.91 3.91 Childminder 4.68 4.68 2. The increase in the nursery school funding rate should be funding be reducing deprivation funding by 46,000. 3. Deprivation funding should be allocated in accordance with the individual pupils at each setting from 1 April 2013. 4. Deprivation funding should be determined in line with nationally defined IDACI bands with the highest deprivation bands receiving the highest funding. 5. Changes to deprivation funding should take effect from April 2013 in line with national reform and no transitional arrangements will apply to settings that lose the deprivation designation, to ensure that funding follows the pupil as soon as possible. 6. Quality should continue to be funded in the maintained sector by the teacher cost built into the base rate and in the PVI sector through the Graduate Leadership Fund. No additional quality supplement will apply. 7. Funding for Special Educational Needs should continue to be allocated by the EYIRP based on the individual assessment of pupil need with improvements to the process set out in Paper B. 8. Following consultation assess whether the EYIRP ought to consider the maintained teacher cost built into the base rate and the Graduate Leader Fund as notional SEN funding already present when awarding additional funding to follow the pupil. 9. Following consultation assess whether additional support should be provided by a defined package for a specific need and a longer term allocation for complex and enduring needs from April 2013. 10. Specific early years banding descriptors should be introduced from April 2013 to support the consistent allocation of additional funding in line with the individually assessed needs of the child. 11. Information should be provided to settings detailing how additional funding used be used and settings receiving additional funding should be expected to demonstrate how the resource has been used to meet the needs of the child. SEN audits should be routinely carried out as part of the finance audits from April 2013. 13
EARLY YEARS WORKING GROUP Annex A The membership of the Early Years Working Group is set out below: NAME ESTABLISHMENT POSITION Jo Hall Plymouth City Council Senior Advisor, Early Years Anita Martin Plymouth City Council Group Accountant Robert Owens Plymouth City Council Senior Accountant Viv Cox Plymouth City Council Early Years & Childcare Officer Meryl Wilson Plymouth City Council Early Years Advisor Suze Boot Tim Squires Plymouth City Council Noah s Ark Childcare Centre Early Years Inclusion Service Manager PVI Sector Andrea Norris Southern Way Federation Teacher Gina Vernon Brian Lee Trio Childcare Connections Ham Drive & Plymbridge Nurseries Childminder Sector Headteacher Mary Andrew Willow Childcare Centre PVI Sector Mandy Hogden Stepping Stones Pre-School PVI Sector Caroline Grant Catkins Childcare PVI Sector Ian Cording Whitleigh Community primary School Headteacher 14