PROVIDER CONSULTATION Changes to the early years funding formula Launch date: 27 th January 2017 Respond by: 17 th February 2017

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1 PROVIDER CONSULTATION Changes to the early years funding formula Launch date: 27 th January 2017 Respond by: 17 th February National Context Early Years Funding Formula 1.1 Introduction The Government consultation regarding the Early Years National Funding Formula (EYNFF) ended in September and the results were released on 1st December The consultation applies to funding arrangements for all Newham early years provision in maintained, primary schools and academies, private, voluntary and independent (PVI) settings (nurseries, pre schools and independent schools) and childminders. The Government consultation response can be accessed on using the following link: Summary The key points from the consultation are summarised below: The funding to local authorities is calculated on the basis of a universal base rate for all providers plus factors for additional needs, based on measures of free school meals, disability living allowance and English as an additional language. These amounts are added together and multiplied by an area cost adjustment to reflect variations in local costs. All providers will be paid a local universal base rate of funding (i.e. no differential rates for settings of different types). This will go across both the universal 15 hour offer and the new 30 offer for working parents when this is introduced in September Supplementary funding will be provided to maintained nursery schools for the duration of this parliament. This is designed to maintain their funding at existing rates. The Deprivation supplement will be the only mandatory supplement within the formula. 1 P a g e

2 The only other additional supplements that will be allowed (but not required) are related to rurality / sparsity, flexibility, quality and English as an additional language. Funding supplements will be capped at a maximum value of 10% of overall funding. Local authorities will be required to pass on a minimum of 93% of funding to providers in 2017/18 and then 95% in each year thereafter. There are also two changes concerning Special Educational Needs which are explained in detail below: Disability Access Funding An additional Disability Access Fund has been created by the government. The documentation explains that the fund is to aid access to early years places by, for example, supporting providers in making reasonable adjustments to their settings and/or helping with building capacity (be that for the child in question or for the benefit of children as a whole attending the setting.) Eligibility: Three and four-year olds will be eligible for Disability Access Funding if they are in receipt of child disability living allowance and if they also receive free early education. Four-year olds in reception class will not be eligible for this funding. Entitlement: The settings of eligible children will receive a one-off payment of 615 per year and children will not need to take up the full 570 hours of early education to receive the Disability Access Funding. Identifying eligible children: Early Years providers will be responsible for identifying eligible children and will be able to use the parent declaration form template that is due to be published alongside the model agreement in early 2017 to identify these children. Funding: Funding will be provided to Local Authorities to pass onto settings in a lump sums. Where the free entitlement is split across multiple providers, the parents will be asked to nominate the main setting who will receive the full funding. SEN Inclusion Fund Local authorities will be required to establish an inclusion fund for 3 and 4 year olds with Special Educational Needs taking the free entitlement. Eligibility: The requirement for an inclusion fund is specifically for 3 and 4 year olds although a similar approach can also be taken for 2 year-olds and is intended to be targeted at those children with lower level or emerging SEN. To create the SEN Inclusion Fund, local authorities will combine funding from either one or both of their early years block and high needs block of the Dedicated Schools Grant. Local authorities should pass the majority of their SEN Inclusion Fund to providers in the form of top-up grants on a case by case basis. All early years providers with funded 3 and 4 year olds will be eligible to receive support from the SEN inclusion fund. 2 P a g e

3 2 The Newham Context 2.1 Funding Rates applied in Newham in 2016/17 The existing funding rates children aged 3 and 4 in Newham are as follows: Base Rates Child minder 4.00 Nursery unit 3.51 Nursery school 7.23 Pre-school 4.34 PVI small 4.34 PVI large 4.01 Providers offering additional 15+ hours receive a payment rate of 5.17 for hours 16 to 30 during Newham s 30 hour trial (this will remain in place until the end of the trial in August 2017) Supplements Supplements are in place for the first 15 hours for deprivation, quality and flexibility as below: Deprivation supplement (mandatory) Child participation x Index of Deprivation Affecting Children (IDACI) weighting for each child using postcode (variable between 0 and 1.6) x average funding unit Quality supplement For group care providers annual lump sum 2,000 for provision with qualified Early years practitioner/early years teachers in setting. For child minders annual lump sum of 165. Flexibility supplement available to providers promoting, offering and delivering at least 2 different offers including both 3 hours x 5 days and 5 hours x 3 days. Funding is 0.40 per hour per flexible place The 2016/17 funding rate for eligible children aged 2 in Newham is a flat rate across all providers of 5.70 per child hour. 3 P a g e

4 3 Proposed Newham Early Years Funding Formula 3.1 Local Consultation Newham is consulting with early years providers about plans to change local funding arrangements to comply with the EYNFF, prior to finalisation of the proposals. 3.2 Timetable. The timetable for local implementation is Consult representative providers reference group 25 Jan Issue EYNFF provider consultation document 27th Jan, return by 17th Feb Confirm EYNFF proposals 24 th Feb Consultation with Schools Forum 6 th March Confirm EYNFF funding rates with providers 10 th March Issue detailed guidance re SEN inclusion Fund April Overview. When formulating the proposed formula we have considered the views of providers via meetings with the Early Years Provider Reference Group. The sections below details our proposed local formula in which we have sought to keep funding within the base rate where possible to give providers maximum flexibility to determine operating models whilst providing sufficient funding for the SEN inclusion fund and deprivation supplement. As referenced in section 1, the funding to local authorities is calculated on the basis of 3 factors; a universal base rate of funding, plus additional needs factors and then multiplied by an area cost adjustment. For Newham this results in overall funding of 5.57 per hour. This headline funding must be shared between the different elements below: Mandatory universal base rate for all providers Mandatory deprivation supplement Discretionary supplements for flexibility, quality, rurality and English as an additional language Mandatory SEN inclusion fund Local Authority centrally retained funding Contingencies 3.4 Supplements To keep the formula as simple as possible and to keep funding within the base rate we are proposing to keep Deprivation as the only supplement within the formula. This would be allocated in the same way as at present, with the following amendment to the IDACI banding, as recommended by the DfE. 4 P a g e

5 IDACI is measured through a national index of deprivation, which takes into account in a local area the proportion of children under the age of 16 that live in low income households, and produces a score for each postcode. Each IDACI score is ranked and placed in a band (set by the DfE). Each band subsequently provides a level of funding, and the level of funding is determined locally. The index is updated nationally every five years, and the last update occurred in September This update caused an impact on the 2016/17 level of funding paid to providers. The DfE have subsequently recognised the impact which was caused by the 2015 update to the index. As a result, they have changed the IDACI bands and ranges for 2017/18 in an attempt to reduce turbulence. Instead of IDACI bands 0 6 (band 6 being the most deprived), IDACI will be bands A G (with band A being the most deprived). Please see table below which shows the impact of DfE changes to IDACI bandings: 2016/17 Current IDACI Bandings 2017/18 Revised IDACI Bandings IDACI Bandings From To Rate % of Total IDACI Bandings From To Rate % of Total G F E D C B A % 100% The changes mean that children in bands G to E will remain in the same bands, however the revised bandings for 2017/18 show children in more deprived areas (bands D A) will attract more funding per hour than in 2016/17. 5 P a g e

6 Funding for early years providers for deprivation in 2016/17 currently makes up less than 1% of funding. The change in bandings will mean that the overall allocation of deprivation funding will increase, however In relation to the whole budget size, this increase is very small and we have therefore decided not to adjust IDACI values downwards. Instead, the additional IDACI will be met by reductions to other supplements. Newham is proposing that current supplements for flexibility and quality would be removed and funding reallocated to the base rate. This change is intended to allow providers greater certainty in their financial planning and reduce the administrative burden. 3.5 SEN Inclusion Fund It is proposed that funding of 0.7m per year is allocated to create an SEN inclusion fund for early years providers. The SEN inclusion fund will be available from April 17 in the form of top-ups or lump sums for providers to support practice and meet the needs of individual pupils. Work is ongoing to look at how the inclusion fund will work in practice including the thresholds for support, the funding amounts and the process for accessing the funding. Further information will be provided in due course about this. 3.6 Early Years Centrally Retained Funding Funding retained centrally by the Local Authority to fund our statutory duties will account for approximately 5.4% of the funding provided (dependent on pupil numbers) which is below the maximum limit set by government of 7% for 2017/ Provider Base Rate Given the proposed allocations that have been detailed for supplements, SEN inclusion fund, local authority central costs and a small contingency a base rate can be proposed for all providers of 5.00 per child hour. 6 P a g e

7 3.8 Summary of Proposed Budget Allocations % PTE pupils Unit rate Funding element ,243, Overall funding , Mandatory deprivation supplement (remove other discretionary supplements) , Mandatory SEN inclusion fund 5.4 1,200, Locally Authority centrally retained , Contingency allocation ,971, Provider Base Rate across both 15 hours and 30 hours (30 hours from Sept 2017) ,243, Funding in addition to the hourly base rate Deprivation Supplement: Will continue at the rates outlined earlier in this document. Early Years Pupil Premium: Will continue to be paid at a rate of 0.53 per hour for eligible children. Disability Access Funding: 615 lump sum paid to settings for eligible children. Top-up funding from SEN Inclusion fund: Funding rates from the SEN inclusion fund for eligible children will be confirmed in due course. Funding to Nursery Schools The move to a universal base rate of funding for all providers would have the biggest impact on maintained nursery schools. The government have therefore provided additional allocation to enable funding levels to nursery schools to be stable for the duration of this parliament. It is our intention to pass on the additional funding to maintained nursery schools as an additional hourly supplement separate to the base rate of Total funding allocated to Newham for this purpose is 1.76m in 2017/18. 7 P a g e

8 4. Two Year-old funding In March 2015 Schools Forum agreed that an estimated underspend of 3.5m from two year old funding should be used to uplift the funding rate from 5.28 per hour to 5.70 per hour in and that it is intended that this rate be maintained in future years. This would be subject to annual review but Officers and the Sub Group recommended a rate they felt confident could be sustained for a number of years if the underspend was utilised in this way. In 2016/17 Newham continued to receive funding at 5.28 per hour and paid providers at an enhanced rate of A total of 2.6m of the identified underspend remains. The DfE has confirmed that it will now pay Newham at 5.66 per child hour for 2 year old take up in 2017/18. It is proposed that for 2017/18 the 2 year old rate in Newham is uplifted from the current 5.70 to 5.80 per hour, with the gap between what we receive and what is paid out covered through use of the underspend. This would use up an estimated further 165K of the remaining underspend in 2017/18. In order to maintain an uplifted rate in future years it is likely that further calls on the remaining underspend would be required. The uplift is intended to ensure that there remains a healthy incentive to deliver free entitlement places across both the two and three and four year old free entitlement offers. 8 P a g e

9 CONSULTATION: Changes to the early years funding formula Response Form Setting name Setting postcode Name of person completing form Contact telephone number Contact address Which early years sector do you represent? What care do you offer? (Full/ sessional) Proposal 1: Do you agree that the Newham EYSFF should consist of the factors shown, excluding the optional factors? Universal base rate Deprivation supplement Agree Please provide any further comments Proposal 2: Do you agree with the proportions of funding shown against the formula elements shown in the Table at 3.8 Agree Please provide any further comments Proposal 3: Do you have any comments on the SEN Inclusion Fund proposals? Comment Please provide any further comments 9 P a g e

10 Proposal 4: Do you agree that deprivation funding is allocated to providers based on the bandings and weightings outlined in Table at 3.4 showing Revised IDACI Bandings 2017/18 Agree Please provide any further comments Proposal 5: Do you agree with the proposal to uplift the 2 year old hourly rate to 5.80 per hour? Comment Please provide comments Proposal 6: What impact do you think the proposed funding rates will have on your plans to deliver free places across 2 year olds and 3 and 4 year olds (both 15 hours and 30 hours) General comments: Do you have any general comments about the proposed early years funding arrangements? Comment Comments Please provide comments Please provide comments Thank you Please return by Friday 17 th February P a g e