Nursery Funding

(Limited Text - Ministerial Extracts only)

Tuesday 16th April 2013 Westminster Hall

[The Minister for Schools (Mr David Laws)]

It is a pleasure to serve under your chairmanship again, Mr Dobbin. I apologise for the fact that you have had to listen to me twice on different subjects this afternoon.

I congratulate my hon. Friend the Member for York Outer (Julian Sturdy) on securing a debate on such an important issue. It is of great relevance not only in his constituency, but, as he explained very clearly and ably, throughout the country. He explained concisely and effectively the concerns that providers, including those in his constituency, have about the funding of early education and their determination to ensure that we have a rational funding system that gets adequate amounts of money through to the front line to do the vital job that he referred to.

I apologise to my hon. Friend for the fact that the Under-Secretary of State for Education, my hon. Friend the Member for South West Norfolk (Elizabeth Truss), who leads on child care, is not able to be with us in the debate. She is abroad today. She passes on her apologies to my hon. Friend the Member for York Outer and has indicated to me that she would be happy to meet him to discuss these issues with him and anyone he wants to bring along from his constituency, so I hope he will take up that opportunity directly.

My hon. Friend has raised a number of important issues that I should like to deal with directly. Those issues are reflected in many of the recent debates on how to ensure high-quality and affordable child care throughout the country. I am therefore grateful for the opportunity to deal with the points that he has raised, which will be of concern to other hon. Members and to many people who rely on this industry and who work in it.

I should like also to outline some of the reforms that we have made and are in the process of making, and the further reforms that we plan for free early years education—some of the other reforms that my hon. Friend the Under-Secretary has announced recently. It is important to locate the reforms within the broader vision for child care and early years education as a whole, which was championed so effectively by her in the paper entitled “More great childcare”. As my hon. Friend the Member for York Outer mentioned, the Government published that document in January. It sets out an ambitious vision for child care and early education to ensure that we provide the best start for young children and help those parents who want to go into employment to have the child care that they need in a flexible and affordable way.

The vision is to create a dynamic and thriving child care sector in which the emphasis is firmly on quality and which draws upon international evidence of what works best. “More great childcare” is clear that, to achieve that vision, we need a child care profession that attracts the best possible staff to work in it and to lead it. Those people should have a passion for what they do, but, importantly, they must also be highly trained and highly qualified, which has not always been the case.

We need to give providers the flexibility that they need to deliver the best for children and, by doing so, create more affordable, better-quality early education and care, which will help children and ensure that parents can feel confident about returning to work. Alongside that, we are working with Ofsted, as my hon. Friend will know, to create a system of regulation and inspection that has high expectations of quality and that ensures that the quality improvements that the Government aspire to are delivered on the ground.

We need to free providers from unnecessary bureaucracy and give them more flexibility to focus on what makes a difference in improving the impact of early learning on children, not least those from disadvantaged backgrounds, for whom early intervention is particularly important. We need to improve the effectiveness of those who work every day with young children to build a stronger, more professional work force, giving providers greater flexibility to invest in high-calibre staff, as well as overhauling the existing early years qualifications.

“More great childcare” also explained how the Government propose to reform funding for early education. The high-level objectives are clear: simplification, greater transparency and ensuring that as much funding as possible reaches the front line. The responsibility for distributing early education funding rests, of course, with local authorities, which should know their local child care markets. Most visibly for nurseries, that role means setting hourly rates through the early years single funding formula.

My hon. Friend also highlighted a weakness in the early education funding system—the lack of transparency. Some providers have concerns that local authorities do not always pass on enough of the funding that they receive from Government, but, by extension, they find the funding system hard to understand. In too many cases, they do not know what funding decisions local authorities reach—I am talking about many of the people in their areas. Given how providers are affected by those decisions, that cannot be right, so the Government are changing it through the reforms that we have announced.

Working with a number of provider groups, the Department now publishes financial benchmarking data annually. Those data show simply and clearly the funding decisions taken by local authorities across the country. Importantly, too, the data enable providers to compare decisions across local areas. A system of effective local decision making relies on active local accountability, and we are giving providers the information that they need to exercise that accountability. However, we want to go further, and the recent two-year-olds early education funding allocation shows how that might be possible.

As my hon. Friend said, the Government are expanding early education to two-year-olds from lower-income households. That starts with the most disadvantaged 20% of two-year-olds, which is about 130,000 children—

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On resuming—

[Mr Laws]

The Government are expanding early education to two-year-olds, particularly focusing on lower-income households. That starts with the most disadvantaged 20% of two-year-olds—about 130,000 children—in September this year. From September 2014, it will be extended to 40% of children—260,000 in total. That ambition is matched by significant new investment. National funding to support the initiative will reach £760 million in 2014-15. The Government also allocated £100 million of capital funding to local authorities in November last year to support delivery of the new entitlement. That real opportunity for providers will inject a great deal more money into the child care system.

Funding for two-year-olds is not encumbered by the complexities and historical problems that affect schools more widely and early years funding. The new two-year-olds entitlement has enabled the Government to put into practice their ambitions for transparency and simplicity in early education funding. In November last year, the Government allocated the first £525 million to local authorities for two-year-olds early education in 2013-14. For the first time, the Department was able to publish details of how much every local authority is allocated. It could point to an average national hourly rate that underpinned the allocations. That hourly rate should translate into attractive rates for providers locally. The national average rate of £5.09 per hour compares favourably with the £4.13 that the Daycare Trust found in its 2012 child care costs survey, which providers are charging parents per hour. In fact, £5.09 still compares favourably to the £4.26 per hour in its recently published 2013 survey.

I was interested to hear my hon. Friend say that there was evidence that some local authorities might not be funding properly at the full rate. The Government were clear that they wanted local authorities to pass on the new two-year-olds funding in full at the hourly rate. The Department does not recognise the problem of local authorities not passing on the rate in full, but we will collect data on the hourly rates and publish them as soon as possible, and the point that he made today will reinforce that. It will enable providers and others to see exactly what rates local authorities are funding at and to challenge local authorities where there is a discrepancy between the rates that we are funding at nationally and the rates on the ground. If he has any further evidence on that from his area, we would be delighted to see it.

My hon. Friend explained with great clarity the concern of many nurseries that local authorities hold back too much of the funding allocated by Government. In 2012-13, the latest year for which we have data, local authorities retained centrally £160 million out of total dedicated schools grant spending of £2.1 billion. That masked great variations, however, with many retaining little or nothing. Let me be clear: some central spending by local authorities is important in, and indeed critical to, delivering the Government’s vision of early education transforming the life chances of many children. Central spending is often used to purchase, for example, specialist help for providers working with children with special educational needs or other additional educational needs to help them to access early education. Such spending is frequently welcomed by providers and must continue.

Equally, in the current economic climate, we must ensure that every penny is being used effectively. For 2013-14, we introduced, for the first time, the requirement that local authorities must secure schools forum approval for centrally retained early years spending. That gives power back to local providers, but we want to go further.

As my hon. Friend knows, the Government are consulting on reforming the local authority role in free early education. In that consultation, the Government propose two reforms to how local authorities retain funding. First, we propose a new definition specifying what authorities can and cannot retain funding for. In “More great childcare”, the Government were clear that the role of local authorities in early education should be refocused on tackling disadvantage to ensure that all children can experience high-quality early education. In other areas, the local authority role should be more limited. For example, the Government want Ofsted to be the sole arbiter of quality in early years, rather than replicating the job that local authorities have done in the past.

Secondly, we are seeking views on percentage limits on how much of their early years budget authorities may retain for those purposes. We will take into account fully the views of providers responding to the consultation.

The Government also want a simple and clear funding offer, so that nurseries know and understand the funding that they receive and bureaucracy is kept to an absolute minimum. We are consulting on proposals to simplify and rationalise the early years single funding formula. From that, I am confident that we will put in place changes to introduce a simpler and less burdensome system of funding. I have already touched on the complexities and historical problems of early education funding for three and four-year-olds. The changes will resolve those problems. I hope that my hon. Friend will take up the opportunity to meet my hon. Friend the Under-Secretary further to develop the points he made so powerfully today.

Question put and agreed to.