Nursery and pre-school managers are deciding over the next few weeks whether to stop offering places under the free entitlement to nursery education for threeand four-year-olds or stay in the scheme, which leaves some settings with losses of more than £25 per child a week.
In the run-up to the start of the summer term, early years providers will be weighing up the costs of pulling out or staying in the funded nursery education scheme when it is extended in September to 15 hours a week.
At this stage, it is unclear how many free entitlement places will be lost, but decisions to quit will be a blow to the sector on top of the recent announcement by Ofsted that the total number of childcare places in England dropped by 11,000 last autumn as the recession took its toll.
The forum of 12 pre-schools that formed recently in South Buckinghamshire to protest about nursery education funding has had new members join up within the county, with messages of support from around the country, according to its spokesman Tom Hackwood.
He says, 'I estimate now that about 1,500 places could be lost in this small part of Buckinghamshire alone. We have to make the decision to pull out as individuals. No-one is forcing anyone in the group.'
For him the choice is both simple and stark. 'If we pull out we will make less money, as there will inevitably be some parents who cannot afford to pay for the extra hours that would have been covered by the free entitlement. The other option is to go under. So we have no choice.
'Our parents have been almost 100 per cent supportive.'
The funding per child per hour in Buckinghamshire is set to rise in September to £3.75, but Mr Hackwood, who runs Stepping Stones Pre-School in Amersham, says his true costs are around £5.50.
There may be a small glimmer of hope. While the Government has repeatedly said that providers must not charge top-up fees to make up the deficit, an e-mail exchange that Mr Hackwood has had with the Department for Children, Schools and Families raises questions.
He e-mailed children's minister Dawn Primarolo, and in a reply from the Public Communications Unit of the DCSF was told, 'Funding for the free entitlement is for 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.'
Mr Hackwood is now asking whether early years settings will be able to charge parents for extras such as visits, music and cooking classes and for an element of the administrative costs in running the business.
UNAFFORDABLE
Providers are in a situation they can't win, according to Purnima Tanuku, chief executive of the National Day Nurseries Association. She says, 'A significant proportion of nurseries continue to face serious issues from the under-funding of the free entitlement. Many are doubly concerned with the move to a universal flexible 15-hour offer, as increased hours and flexibility leaves settings less room to recover the loss they make on the free entitlement from hours sold outside of this.
'However, the free entitlement represents a Catch-22 situation for many - they cannot afford to continue and sustain losses, yet equally they cannot afford the loss of business that would come if they pulled out of the scheme. Nurseries are committed to the free offer and do not want to disadvantage the children they provide for by removing their entitlement at their chosen setting.
'Current funding issues do call into question the sector's ability to offer a flexible and extended offer. Nurseries are willing and able to do this but can only do so when they receive a more sustainable rate. In addition, it should be recognised that their costs are only increasing with the move to graduate leadership, a well-qualified workforce and rises in utility costs and general running expenses.'
Steiner Waldorf kindergartens are worried that the extension to 15 hours will disrupt the way they work. Janni Nicol, early childhood representative for the Steiner Waldorf Schools Fellowship, says, 'We already have problems with parents choosing not to take the full morning so they do not have to pay extra, but this upsets the rhythm of the day on which we place so much emphasis. This problem will only increase.'
Some providers believe that their problems will be exacerbated by the Government's decision last week to extend the pathfinder schemes developing Early Years Single Funding Formulae to 56 more local authorities.
'We have made representations to Government and local authorities,' says John Theedom, director of business development at the Pre-School Learning Alliance. 'But this announcement seems to suggest that they are not listening.
'I find with so many of these things, it is not so much the initiative itself that is at fault, but the implementation. The combination of the 15 hours and the single funding formula will have a big impact.
'The PLA is completely in favour of the principle of providing free education to young children. That is what it was set up to do, because the state did not.
'But the cost analysis by local authorities for the single funding formula in general terms has been done very poorly. We do not think local authorities truly understand the costs.'
However, some observers say that may be the fault of providers who have sometimes been reluctant to be frank about their costs. Megan Pacey, chief executive of Early Education, says that while providers should have their costs met for providing the 15 hours free entitlement, 'that means PVIs need to be forthcoming to the local authorities about their costs. It is no good people saying that information about their costs is commercially sensitive. This is public money and there needs to be accountability.'
FAIR AND EQUITABLE
The effort of trying to devise fair and equitable funding formulae is raising stress levels in an already pressurised sector. Although Poole council did not get selected to be a pathfinder authority, the application process was exhausting, according to Linda Duly, proprietor of the Cuddles Nurseries in Poole.
'It has been a nightmare,' she says. 'We were at a meeting a couple of weeks ago and people were totally emotionally drained. We were fighting for the children, not for ourselves. They are worth more than £3.44 an hour. It is so de-motivating.'
She worried that the proposed funding would have severely restricted her ability to retain the Outstanding grade from Ofsted that she and her staff worked so hard to achieve.
'We would not have made the profit to afford so many outings or to do all the extras that helped us get our Outstanding. Some people would have their sustainability badly affected.'
The funding issue raises fundamental questions about the future of the early years sector to providers who are concerned about increasing Government control.
Anne-Marie True, who chairs the Save Our Nurseries campaign, says, 'We have been fighting this for four years and we have just gone round in circles. One size does not fit all. We are a diverse sector, which means there really is parental choice, but the Government's one-size-fits-all funding mechanism is going to make us into clones.
'I have informed parents that from September I am pulling out unless there is a complete Government U-turn on the implementation of the 15 hours. Parents have been very supportive. You cannot run a five-star hotel on two-star rates.'
Ms True says the imposition of 15 hours leaves her no scope to make up the shortfall between the grant and her true costs and she predicts that standards will drop as providers find ways to cut their costs.
'People are spending time, money and effort trying to come up with inventive ideas to try to make something work which clearly is not going to work.
'The Government has been nationalising nursery education for years and they are on their way to having complete control. The system that was working in the PVI sector is gradually eroding.'
Darrell King, who chairs the Association of PVI Providers in Kent, agrees. 'What they are trying to do is nationalise this sector by saying "this will be the going rate", when the PVI sector is actually privately owned. It comes down to parental choice. Parents would not expect to pay the same if they shopped at Lidl or shopped at Waitrose.'