The publication of the new Code of Practice last week appears to have confirmed many private and voluntary providers' worst nightmares. It has clearly aroused anger among many nurseries, particularly pre-schools and small operators, who do not have the buffer of being part of a large nursery chain.
While the DCSF continues to insist that there should be enough money in the system for private and voluntary settings to offer the free funded places for three-and four-year-olds and cover their costs, many providers say they have been losing money on the free places for years.
The latest version of the Code has infuriated those settings who fear that with the extension of the entitlement to a flexible 15 hours, the rules are now so restrictive that there is no longer any room to make up any funding shortfalls.
With great reluctance, many settings now feel they are left with no choice but to pull out of offering funded places when the new Code comes into force in September.
Although there was plenty of opposition from providers over the publication of the 2006 Code of Practice - with many settings threatening to pull out then - this time round, there seems to be more likelihood that these are not just empty threats. There is a very real prospect that thousands of free places for three-and four-year-olds could be lost.
Leading from the front is a growing group of 12 nurseries and pre-schools in Buckinghamshire.But they are not alone in their fury. Nursery World has received angry e-mails from nurseries around the country. Many of them have written to the children's minister, Dawn Primarolo, and the DCSF about their concerns, but feel that no-one is listening and that no-one cares whether their businesses go under.
In bending over backwards to make the free entitlement seem as flexible as possible for parents, providers say, the Government seems to have forgotten the very nurseries that are providing the free places and the costs they face in keeping their businesses afloat.
Many of those considering withdrawing from the scheme are good or outstanding providers, who employ well-qualified staff with high adult:child ratios, over and above the minimum requirements. Typically, they are experienced nursery operators of many years standing.
Nursery owners we have spoken to are continuing to seek clarification over some points in the Code that they believe are ambiguous and unclear, clinging to the hope there may be some room for manoeuvre.
For example, writing in response to one nursery provider's query in a letter Nursery World has seen, the children's minister said, 'Funding for the free entitlement is for the delivery of the Early Years Foundation Stage (Learning and Development and Welfare requirements) and is not intended to provide for additional provision, such as extra lessons or visits.'
But where should the line be drawn - how do you decide which elements of your practice fall within the EYFS? What about a trip to the Science Museum? It could be argued that the 'extras' that many excellent nurseries provide are part of what makes them good and outstanding providers in the first place.
What is clear is that, if substantial numbers pull out, the Government's laudable aim of universal early years provision for all three- and four-year-olds, with choice and flexibility for all parents, regardless of their background, will be hard to achieve.
As one nursery owner put it, 'There are three options available: withdraw from the scheme, be withdrawn from the scheme by the local authority, go bust.'
Small Montessori nursery in an Essex village
'It will certainly affect me. From September I stand to lose more than £30,000 a year. I just can't see how I can possibly run my business. Since April 2009 I've been receiving £3.71 an hour per child, and it's not going up in September. To cover my costs I have to charge £6.60 an hour. Most of my staff are qualified to a minimum of level 4. My deputy has an early years foundation degree and is aiming for Early Years Professional Status, which I already have. Essex early years is being quite understanding and has been trying to help me find ways to work with the new Code. They have suggested I register as a community interest company. But my accountant says that to do this I would have to have my accounts audited, which would cost me £3,000 to £4,000. Why should I have to do that? It's more paperwork and stress.
'I'm open 41 or 42 weeks a year, so I have three or four weeks when I'm not funded. I open 9.15-1.15 and twice a week I offer one-and a-half hours from 1.30 to 3pm. If someone wants five hours in a day I could charge for the extra half hour - but to make up my losses it would look like I was charging £19 an hour!
The Code says bills have got to be transparent, but this would look ridiculous. I'm making it clear in my prospectus that priority will be given to parents who want the four-hour session. I don't want the disruption of children leaving in the middle or coming in late, because it affects their learning and development. I will make a decision about whether to stay in the scheme when I see the new contract from the council. I don't believe it's fair to deprive parents of this funding, but my only option could be to go completely private. Parents are being very supportive - they think the Code is ridiculous.'
South Buckinghamshire Nursery Forum
A group of pre-schools and nurseries in South Buckinghamshire have been waging a campaign since February in protest at the funding. They set up the South Bucks Nursery Forum and wrote to Buckinghamshire County Council to warn them of their intention to withdraw from the scheme because they could not remain sustainable without more funding when the free offer is extended to 15 hours.
They have been in discussions with the council and are backed by more than 300 parents who sent declarations of support. Now that they have seen the new Code, many of the group feel they have been left with no choice. The forum's spokesperson, Tom Hackwood, who runs Stepping Stones Pre-School in Amersham, says, 'The majority of the group have confirmed they are pulling out. There were ten nurseries at the meeting and seven said they would definitely be pulling out of the scheme.'
'Some said they might give voluntary contributions a go, to buy some time for the next term, but the majority of people feel this is not a solution. Parents may be happy for us to do this for the first term, but new parents may not be quite so keen. And if we want to develop our businesses it would be difficult to get finance from banks on the basis of voluntary contributions. We shouldn't be forced into this corner.'
He added that the council has said it cannot guarantee that settings who pull out of the funding would be let back in. Nurseries who choose to withdraw must give the council a term's notice, which means they need to make a final decision by 19 April. The council has yet to set the rate for the free entitlement for September, but has indicated that it will be more than £4 but less than £5 an hour an hour per child. 'Based on what they've said - and we need a minimum of £5.50 an hour, and in some cases more - they are basically saying that we are going to have to make a loss.'
The group includes small pre-schools, many of them, like Tom Hackwood's own setting, that open for 34 weeks a year. Most of the parents at Stepping Stones send their children on average for 15 hours a week, which means there is no leeway to charge for additional hours. Under the Code's new rules, settings are expected to open for 38 weeks a year. But Mr Hackwood says the demand is simply not there, either to open for longer hours or extend to 38 weeks.
'The point is, we are providing a service based on what parents demand,' says Mr Hackwood. 'Most parents would prefer the system to carry on as it is, paying an additional fee and treating the grant as a subsidy.
'Of course we're worried we may lose parents by opting out, but our only real option for survival is to withdraw from funding and go completely private. The Government says that charging 'a top-up' is a two-tier system, but they seem unable to comprehend that they are actually creating a two-tier system by forcing many providers to withdraw from funding and increase their fees. That will, of course, force some parents to leave the nursery that their children currently attend, which in itself puts a big restriction on parents' choice of early years education for their children.'
Day nursery owner for more than 30 years, London
'The element of flexibility means that parents can access three, five-hour hour sessions at no charge at all. Many spare hours would be left in the wind, which we would not be able to offer as a full day or half-day, as they would have already been partly taken up with this "free" session.
'Our businesses are also our living and we are not a charity that gives food and services and childcare hours away for free. Many private nursery businesses have found ways around this previously, like I have - charging for meals, the extra hours outside of term time and additional specialised services like French or drama. Under the new code, we will be threatened with being withdrawn from the scheme if we do not offer the "free" place totally free. However, at the moment I will continue to charge for meals and specialised activities - the Code does seem a bit flaky on this.
'All private providers that do not follow the rules will be threatened with withdrawal from the scheme.
This would impact greatly on the parents in each individual setting, not having their rightful access to this "free" entitlement.
'We are seriously underfunded as it is. We receive £3.63 per hour per child. Our true running costs are over £6 per hour. Even if the local authority did provide the true running cost funding, we would still lose out to those parents only wanting to take up the 570 hours flexibly across the whole year, as we would not be able to offer the remainder of sessions to parents who would prefer fullor part-time. We would effectively lose the hours of the day that have been partly taken with the "free" entitlement.
'I agree with the free entitlement in principle, but it should be exactly that - free to parent and free to provider. I was hoping the new code would be more flexible and make it clear where provider charges could be made without the threat of being withdrawn. But unfortunately, it makes for difficult and depressing reading if you are a private nursery provider.
'It is such a shame for our parents that the Government is just not listening to the nurseries, as many will be forced to withdraw.
Dawn Nasser, Rose House Montessori, south-east London
'I was forced to close my nursery in Croydon last year for no other reason than because they were one of the pilots for the flexible 15 hours. They were extremely prescriptive and there was no way I could do it. I lost about £10,000.
'The borough of Lewisham is very supportive and I have been working very closely with them but I have asked for more clarification, because I don't know if they will be able to allow my new admissions policy, which from September is a minimum of 20 hours a week for threeand four-year-olds. If parents choose to come to me, then they choose to accept my admissions policy.
'My rent is £15,000 a year and I have ten members of staff. From April we will get £3.55 an hour per child and I get the quality premium, which makes it £4.37. But that's still not enough. I need at least £6 an hour. I am full with 55 children on roll and I have a full waiting list of 30 children for September. I have told parents I may have to opt out of the funding. Around a quarter of them would find this financially challenging.
'What happens when the offer is extended to deprived two-year-olds, and 'stretched', and when parents are allowed to bank their hours? There is no way I will be able to operate within the Code. I'm a business and I have to think five years ahead and make a stand now.'