Essex County Council Developing Single Funding Formula for Early Years Education in Essex Annex B

1111 Presentation Outline Background and context Key issues from the working group and consultation Understanding current funding and service delivery Basic formula content and structure Supplements to the basic formula Delivery and implementation issues

2222 New Funding Formula: Rationale Support the extension and increased flexibility of the free entitlement for 3 and 4 year-olds Tackle inequalities in access and outcomes particularly for children from deprived areas Address inconsistencies in current funding mechanisms across the maintained and PVI sectors e.g. participation vs place-led funding Review surplus places in maintained sector Raise quality of provision across all settings Deliver fully flexible offer and support other developments in early years education

3333 The Fully Flexible Offer - Definition From September 2010, every local authority must offer 15 hours of free early education to all 3 and 4 year olds, over a minimum of 38 weeks. That offer must be made available flexibly, to meet parental demand over a minimum of three days. As a step towards that, from September 2009, all local authorities will be required to make the offer available to 25 per cent of their most disadvantaged 3 and 4 year olds.

4444 New Funding Formula: Requirements To be implemented by April 2010 All settings must be included in the formula Formula must be participation-based Formula should not simply replicate existing funding differences or use lump sums to continue existing funding differences Formula must include deprivation element Authorities should strongly consider including supplements supporting quality and flexibility All costs need to be validated

5555 New Funding Formula: Learning from Pilots Follow the core principles (see handout) Simple formula structures have been more straightforward to implement Consistency with schools formula has been important e.g. deprivation Authorities have tried to future proof the formula to support the delivery of the fully flexible offer Additional work will be required after implementation – formula needs to be reviewed Supplement for quality has been supported but not generally incorporated

6666 Views from the Early Years Working Group New formula needs to be simple to understand and funding differences should be much more transparent Existing funding is not (always) sufficient to deliver quality therefore cost of quality provision needs to be acknowledged Settings currently have to make use of funding from other sources (e.g. fees from parents) to cross- subsidise current funding levels Existing funding levels should be maintained where possible and increases would be needed to improve quality Additional funding should be allocated to deprivation but not at the detriment of overall funding available (or other children will be penalised)

7777 Views from the Early Years Working Group (2) Implications of reductions to existing funding: Lower quality provision Children less prepared for starting school with knock-on impact on primary outcome and performance indicators Lack of choice / flexibility for parents Essex not able to deliver statutory duties on access and flexibility

8888 Understanding Costs and Delivery Following DCSF good practice, extensive work undertaken to understand and profile the differences in costs and delivery of free entitlement between different setting types Why? To identify significant cost variations between settings To identify elements of quality provision To create a more transparent funding formula ensure any differences in future funding reflect actual differences in costs

9999 Current Funding in Essex Maintained funding only includes direct nursery funding or funding relating to nursery pupils (excludes school and site funding, plus other grants) Total funding is approximately £35million for 2009/10

10 Outcomes and Impact in Essex Essex has high proportions of good and outstanding settings in maintained and PVI sectors – quality of provision is high and continually improving Outcomes for children have been improving over the last five years Number of children in maintained settings has been decreasing – more parents are choosing PVI settings for the free entitlement

11 Current Funding: Maintained Sector 3,000 pupils Annual budget related to funded places/headcount (90:10) Pupil-led funding in schools formula for nursery places of £3,240 per FTE place in and increased to £3,395 in Rate is highest in East of England Not all settings actually receive the same amount per pupil due to impact of place-led funding and occupancy rates – actual per pupil hourly rate varies from £3.50 to £15 per hour Other funding in the schools formula covers AEN, premises costs, London allowances, lump sums covering management costs and small school protection – this increases the average hourly rate to approximately £4.76 Occupancy rates have fallen since introduction of free entitlement

12 Current Funding: Differences in Maintained Sector

13 Participation Rates in Maintained Sector Number of Funded Places Number of Schools Average Number of Pupils for Pupil-led Funding

14 Current Funding: PVI Sector PVI Sector 15,000 pupils Termly payments based on headcount Sessional rate of £9.02 (equivalent to hourly rate of £3.61) in 2008/09 Increased to £9.28 in 2009/10 (£3.71 per hour) Rate is highest in East of England Termly payments and adjustments calculated from termly census Settings can apply for additional funding related to EYPs, capital projects etc. All settings essentially receive an equivalent hourly rate for all children Some settings receive additional funding for other services they provide (e.g. full day care)

15 Main Differences in Delivery/Costs between Maintained and PVI settings Staffing ratios and impact of statutory minimum ratios Staff profile / qualifications Availability of wraparound provision Management costs Class size Age profile of children Number of sessions per week per child – fewer full-time children in PVI settings Occupancy levels

16 New Funding Formula: Design

17 Formula Content for Basic Hourly Rate Formula Element All Settings Direct Teaching Time All costs associated with the delivery of the free entitlement when the children are present at the setting and in their learning environment – this covers all staff involved and costs reflect teaching group size and staff to child ratios. Indirect Teaching Time All costs associated with the planning and preparation for the free entitlement, plus record keeping and parental contact. Management Time All costs associated with the management of the free entitlement for setting headteachers / deputy headteachers or managers / deputy managers. Administration Time All costs associated with administration of the free entitlement e.g. arranging parent/teacher meetings, completing statutory paperwork Supplies and Materials All costs incurred in providing supplies and materials to support the free entitlement e.g. art materials Building Resources Premises related costs e.g. outside space, utilities, cleaning supplies, maintenance

18 Basic Formula Content Until Schools Forum approves new formula and agrees how much funding can be allocated to it, final hourly rates have not be published beyond working group However, hourly rates: Reflect variations in occupancy across the year (based on average occupancy levels) and impact of occupancy on teaching group size Reflect higher costs in some settings (e.g. day nurseries compared to pre-schools for different building costs for example) Be supported by existing processes related to sustainability and sufficiency Not be lower than current levels on an average hourly rate basis (but may be lower for some settings overall) Be subject to growth in 2009/10 as per current process for calculating inflationary increases

19 Hourly Rates Estimates for 2010/11 Rates are based on 2009/10 prices at present Can be delivered within the current cost envelope Reflect statutory levels for staff to child ratios with additional time allocated for supernumerary management staff Staffing assumptions reflect training, annual leave and other employment requirements Salary rates reflect Essex standards or national rates where appropriate Range of rates (except for childminders) reflect variation in occupancy levels Lower occupancy level reflects quality aspiration (i.e. fewer children per staff) Occupancy at 90% reflects funding within current funding constraints and overall affordability

20 Hourly Rate Estimates Setting 1 (Nursery School) Setting 2 (Nursery Class) Setting 3 (Full Day Care) Setting 4 (Sessional Day Care) Setting 5 (Childminder) Teaching Group Staff Ratio1:13 1:8 1:3 Hourly Rate (80% Occupancy)£5.69£4.54£4.26£4.17£4.37 Hourly Rate (85% Occupancy)£5.36£4.28£4.01£3.93£4.37 Hourly Rate (90% Occupancy)£5.06£4.04£3.79£3.71£4.37 Hourly Rate (95% Occupancy)£4.79£3.83£3.59£3.51£4.37 Hourly Rate (100% Occupancy)£4.56£3.64£3.41£3.34£4.37

21 Supplements: Deprivation Purpose: additional funding to support settings working with disadvantaged children whose background might impact on outcomes and achievement Working Group and early consultation has discussed: How much funding should be allocated to deprivation? How should children be identified? How should funding be allocated to individual children? Which settings will benefit?

22 Deprivation Funding: Proposal Methodology should be consistent with schools formula Funding will be linked to home postcode of individual children (calculated through January Census) and mapped using IDACI Children in bottom 5 deciles will benefit (weighted so that children from most deprived areas will receive more funding) Approximately £900,000 (2.5%) to be allocated to deprivation funding in first year Settings will receive annual allocation (as lump sum) which reflects the total number of hours they provide to individual children from deprived area Allocation will be weighted to reflect different hourly rates for different sectors

23 Deprivation Funding: Application Settings with more children from deprived areas will receive more funding Settings can choose how to spend their allocation but will be accountable for choices Funding can be spent to benefit some or all children in a setting e.g. Additional staff hours to reduce class sizes New equipment or teaching materials Wraparound provision / lunch clubs Extra hours / sessions Specialist support e.g. English as additional language (EAL)

24 Deprivation Funding: Allocations 600+ settings would receive allocation in 09-10

25 Deprivation Funding: Examples Setting Type Number of ChildrenTotal Hours % of Deprivation Hours Deprivation Funding Full Day Care 14018,81018%£1,085 Full Day Care ,79051%£7,360 Full Day Care 3219,2157%£208 Sessional Care 1268,55046%£1,217 Sessional Care 24918,43099%£5,644 Sessional Care 373,04031%£293 Nursery Class 14621,85043%£3,466 Nursery Class 22913,775122%£6,152 Nursery Class 35224,70010%£867 Nursery School ,55044%£14,717 Independent 16128,9755%£446

26 Transitional Funding: Proposal Transitional arrangements should be as follows: They will be time-limited to minimise ongoing impact of transition Settings which lose funding will be protected against a proportion of the reduction in their funding e.g. up to 50% in the first year (based on replacing place-led funding) Some maintained settings may need special transitional support due to impact of changes Settings which have sustainability issues as a result of the new formula will be assessed according to the existing criteria and approaches for sustainability and sufficiency – additional funding from transitional arrangements may be required to support this All settings should move to the new funding arrangements within 2 years (rather than 3 years as originally suggested)

27 Overall Affordability: Risks Requirement: proposals are affordable within current funding constraints and should still be affordable beyond 2011 if additional funding is at lower levels than currently Proposal is affordable at 95% occupancy rate and has a shortfall at 90% (which closely reflects current practice) The proposal is affordable at 85% occupancy levels with the additional funding from the fully flexible offer Proposals therefore take account of three major risks in funding Formula changes could increase / change participation across sectors Size of allocation for to support increased flexibility has not been confirmed Potential limited increases in funding to all education elements from the next comprehensive spending review ( )

28 Overall Affordability

29 Overall Affordability – Fully Flexible Offer

30 Formula Development in 2010/11 There will need to be ongoing work on the formula beyond implementation to address: Impact of fully flexible offer on parental choice and take-up of free entitlement (reflecting how settings can deliver flexibility) Impact / outcomes of next comprehensive spending review and allocations for DCSF work on reflecting the cost of quality provision in funding formulae General review of places in maintained sector