Agenda item

Report of the Deputy Chief Executive and Director for Families and Communities, and the County Treasurer

[Matt  Biggs, Childcare and Sufficiency Manager, in attendance for this item.]

Philip Siddell, the PVI representative on the Forum, circulated graphs giving details on data on the early years funding shortfall, based on the minimum/living wage, funding and costs per hour.

Members were informed that Early Years had underspent in 2018/19 and the forecast was for an underspend in 2019/20.  Both years’ underspends had been driven by fewer hours claimed for three and four year olds, compared to hours funded from the January census.  There were difficulties in understanding why the January census point would be a high point in the census, there the was a need to review whether this was a trend.  As more time elapsed this would help identify whether a trend was emerging.  The Early Years funding rate for 2020/21 would be made in conjunction with an Early Years Working Group, taking trend analysis and affordability into account.  Discussions were ongoing as to how any unspent Early Years contingency could be given back to providers in the following year as a one-off lump sum.

In late 2016 the government had introduced the National Funding Formula (NFF) and Staffordshire were required to develop a local Early Years formula based on those national guidelines which would be implemented in 2017/18.  Consultation took place with the sector and following that consultation a number of changes were introduced, including moving from a variable rate to one universal rate for all providers, a reduction in the number of deprivation bandings for the PVI sector from 16 down to two to try and simplify locally the formula.   In addition the model with schools operated as Governor run provision was changed and that brought changes to the way the Local Authority transacted with schools in the way that budgets were set from schools’ census   This was important context because there was a significant amount of change which meant that when the extended entitlement was introduced in September 2017 it had proved challenging to set an accurate budget based on the funding received from government.  The January census was a snapshot and then the funding was paid out over the three terms.  It was known that January was a low point for two year olds but appeared to be a high point for three and four year olds, which was producing an overall underspend.  In recent years a contingency had been set up, which top-sliced off the rate from the 95% pass out required to providers.  From the emerging trend analysis, with two years of underspend, there was still a term for an assessment to be made.  Members were informed that a slight swing either way could potentially take the budget into an overspend, and it was difficult and volatile to forecast. 

The County Council had made a decision to give contingency back retrospectively for 2018/19 in a lump sum by the end of the financial year.  Funding Workshops had been set up at the end of January to look at the trend analysis which was now available, to see if further funding could be put into the rate for future years.  Members were informed that Staffordshire was a fiscally well-run authority and the rate set had always been at a level that could be sustained but look to increase that if possible.  There were some Local Authorities who over set the rate and then had to reduce it in the future.  On point of accuracy, businesses were required to pay 3% on top of salaries as a pension contribution, not 1% as stated in the report.  The Cabinet Member confirmed that it was the intention that as much funding as possible would be passed back to providers and that he had written to the Secretary of State to highlight the position in Staffordshire and how the rate is less than many adjoining authorities without there being any obvious reasons why this was the case, and offered to work with the DfE on how the rates were calculated.

A member commented that they did not remember a consultation taking place with every nursery provider on the rate.  Officers confirmed that every registered early education provider receiving funding was given the opportunity to comment, when the consultation was sent out in December 2016.  The response rate had been around 20%.  The member stated that providers were told what the rate was going to be and although comments had been made that the rate didn’t meet the requirement providers were told there was no point pursuing this as there was no option of additional funding.  For clarification, members were informed that the consultation had been based on the principles of a formula, which the authority was required to do, which was then used to set the rate which then had to be approved by the County Council.

In referring to the graphs circulated, these had been produced to demonstrate the level of the shortfall.  Since 2017 the funding rate per hour had remained static, whilst the minimum/living wage had increased quite significantly.  A second graph demonstrated how this contributed to an increasing shortfall from a nursery’s normal pricing structure.  Whilst the pass back of the contingency would be welcomed, it was queried what was happening with the two previous years’ underspends.  Members were informed that any underspend or overspend would be contributed to, or drawn down from, DSG balances.  The rate for 2020/21 from government represented the first increase since 2017/18, which supported the data outlined in the graphs demonstrating a growing shortfall.  It would remain important not to over set the rate, but for 2020/21 it would be helpful to be able to take past data into consideration in the Early Years Working Group.

RESOLVED – That the Early Years 2018/19 Underspend and 2019/20 Forecast be noted.