Spotlight on childcare funding policies
Fiona Simpson
Tuesday, February 23, 2021
Councils urged to check on nursery providers’ "free" childcare charging practices after ombudsman ruling in Leicestershire case.
“Free must mean free” when it comes to local authority funded childcare, the local government and social care ombudsman (LGO) says in a rebuke to Leicestershire County Council after it emerged a nursery chain was charging a “top-up” fee to parents eligible for free childcare.
The report comes despite data from the National Day Nurseries Association (NDNA) showing a combined £55m underspend on such childcare entitlement across all councils in England.
As the early years sector faces a huge funding crisis exacerbated by the coronavirus pandemic, experts lament a lack of government funding and put forward solutions to prevent mass closures in the coming 12 months.
Top-up fees
In his report on Leicestershire Council, ombudsman Michael King reveals that the Kiddi Caru nursery chain, which runs nine nurseries in Leicestershire and others in southern and central England, has been charging parents a top-up fee for each “free” hour.
In the case of the father who brought the complaint against the council, he was being charged an extra £1.08 per “free” hour for his daughter who was entitled to 30 hours of council-subsidised care. This amounted to £900 more than the father should have paid, King says.
King concludes that a lack of itemised receipts offered to parents meant they may be unaware of the top-up fee. He criticises the council over its failure to “ensure the free early education entitlement is delivered completely free of charge and ensure nurseries are clear and transparent about their charges”.
While acknowledging that local authorities – and the early years sector – are struggling financially, he says the government’s intentions have always been that these places are provided free of charge, “and it is up to local authorities to administer them accordingly”.
“Free must mean free, but in this case it was not possible for the man to see how the invoice was calculated.
“I would urge other councils across the country to check their processes to ensure providers in their area are not making the same errors,” King adds.
According to early years providers, while such top-up fees are not “widespread”, underfunding for “free” childcare is putting many early years providers in an “impossible position”.
“Parents rightly do not expect to pay for something they have been told is free, but equally, it cannot be right that nurseries, pre-schools and childminders are expected to deliver these places at an often substantial loss, simply because government refuses to fund its flagship childcare policy adequately,” says Neil Leitch, chief executive of the Early Years Alliance (EYA).
Providers, including the EYA, echo a point made in King’s report that highlights providers’ ability to charge “for meals and snacks, and consumables such as nappies or sun cream, as part of a free entitlement place, although these charges must be voluntary”.
Purnima Tanuku, chief executive of the NDNA, explains undertaking such practices is often “the only way they can remain sustainable”.
“Providers within the same local authority or even neighbouring settings can have completely different offers,” she says.
“Nurseries are in an impossible position: they are allowed to charge parents for extras but have to offer places with no additional charges if parents are unable to pay,” she says.
Council underspends
However, a Freedom of Information request carried out by the NDNA finds that collectively councils underspent on free childcare places by £55m in 2019/20.
Of 94 local authorities that responded to the NDNA, 17 reported an underspend of more than £1m. The highest reported overspends stand at around £3.3m in both Greenwich and Hampshire.
Despite three quarters of councils which responded reporting underspends, just 21 per cent gave any of these underspent funds to providers totalling £11.7m (see graphic).
A further 24 local authorities overspent to the tune of £9.2m. Both Barking and Dagenham and Central Bedfordshire councils overspent budgets by more than £1m, the NDNA research shows.
Tanuku says the research shows that “local authorities must be transparent and open about their dealings”.
“Any money left over must be distributed among providers for delivering these funded places,” she adds.
The NDNA has called for the government to “simplify the way it funds early education” and has put forward plans for a “Childcare Passport approach” which would see parents use an online account for each child that parents can use to pay the provider of their choice directly.
EXPERT VIEW
GREATER TRANSPARENCY NEEDED OVER HOW COUNCILS USE UNDERSPENT FUNDS
By James Hempsall, director, Hempsalls consultancy
I wonder if the root of the problem is a misunderstanding of how local authorities are required to receive, manage and allocate their early years funding. It is a complex situation.
There should be full parity with school funding arrangements, but to achieve that the sector must work like schools in terms of budgetary functioning. We are some way from that. I always say the more you fund early years, the more we will deliver.
Because early years and childcare is an optional offer, the actual use of early years places is subject to the forces of supply and demand. That means demand can be lower or higher than estimated. It can be unpredictable, and this year has proven the point. Any local authority budget holder worth their salt should build in some flexibility to protect the public purse and the sustainability of the sector. Contingency funds are vital to manage the unexpected, as overspends are equally probable.
We encourage early years setting to have reserves and contingencies, to the tune of three months’ operating costs.
What’s important is how unallocated funds are used at the end of the year, if there are any. I know that local authorities use this in a variety of ways: they temporarily uplift the hourly rate, give providers one-off lump sums, use it to cover deficits in overspent budgets, such as in special needs, and this year many have used it to provide additional Covid-19 support.
The research should have asked how, in the event of underspent budgets, these funds have been passported to providers, retained in early years functions, and used for the benefit of children in the early years and childcare provision. That would be much more useful for providers and local authority colleagues in areas where that might be a challenge.