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Big drop in attendance adds to sector’s funding concerns

Analysis Policy & Politics Provision Families Business
The pandemic has led to fewer funded children on roll as well as a decline in registrations from fee-paying parents, putting some settings in financial peril. By Annette Rawstrone
Cotswold Montessori School had to close for two weeks
Cotswold Montessori School had to close for two weeks
  • Early years settings face shortfalls on free hours funding
  • Calls for funding to be at pre-Covid levels

Last-minute Government guidance clarifying the spring census to determine early years entitlement funding may have been a welcome reprieve for many in the early years sector, but concern remains because the number of registered children has plummeted due to the pandemic.

Providers, who had the security of autumn term funding being based on January 2020 attendance, had been informed by local authorities that children not currently attending due to coronavirus would not be allowed to be included in the headcount for the spring funding.

This has been rectified by Department for Education (DfE) guidance clarifying that ‘where a child is reasonably expected to attend Early Years provision and that provision is made available to them by the provider, their expected hours should be recorded in the Early Years Census’.

But it is cold comfort to nurseries that have significantly fewer funded children registered than normal, who can only hope that take-up of places rises and then funding will be increased – but only up to a maximum of 85 per cent of pre-pandemic attendance rates (see box).

Income fall

In the 2019 and 2020 spring terms, Little Ducklings Daycare in Newbury, Berkshire had 48 and 47 funded children respectively. This year it has 32, which equates to a loss of more than £13,000 in funding for the 12-week term.

Little Linguists Nursery in Streatham, London is also suffering a significant drop in income compared with previous years due to a decline in demand for places. Owner Daniella Goodman would expect to have 27 funded children registered, but at the moment has just seven.

‘We’d normally have a payment of £39,000 a term, and this term our payment was £10,000,’ she says. ‘Unfortunately we don’t have the funded children at the moment and a lot of nurseries in Wandsworth are in the same position.

‘Parents are just not registering because they are worried about sending their children to nursery and, because of the pandemic, we’ve not had the opportunity to have open days and market the nursery. It is difficult to attract private paying parents to make up for that gap.

‘I’ve been open for seven years and we even opened with more children than we have now. This is purely down to Covid and the fact that people are not able to take up the places.’

Statistics show that this is not an isolated problem. As of 7 January, the number of children taking up early years places in England was just 37 per cent of normal term-time attendance, according to the DfE. Research by the National Day Nurseries Association (NDNA) found that members are seeing occupancy levels at around two-thirds of what they would usually expect. This reduces income from both funding and parental fees.

Jonathan Broadbery, NDNA’s head of policy, says providers need more support. ‘The majority of providers are telling us they are concerned about their sustainability based on current funding,’ he says.

‘Councils should do all they can to support providers and we are seeing some providing financial and practical support to the vital PVI sector. The Government also needs to look at targeted support to the early years sector. The last thing they should be doing is reintroducing extra costs, like business rates, on a sector that is being asked to go above and beyond for our children during this very challenging lockdown.’

A Croydon Council spokesperson said, ‘We and other councils are having conversations with the DfE to find a fair way of ensuring that neither providers nor parents are financially penalised if fewer funded places are taken up because of Covid.’

Local authorities were interpreting the guidance in different ways, said Cary Rankin, chief executive of Bertram Nursery Group, with some saying they would withhold funding for children who are isolating, or claw it back if children are off. ‘Operating costs of childcare during the pandemic have not fallen, they have increased, with little or no financial support other than furlough for groups such as ours,’ he added.

Beatrice Merrick, chief executive of Early Education, is calling on the Government to urgently restore spring term funding to pre-Covid levels, to provide emergency funding to support the additional costs of opening during the pandemic and to offer emergency funding in cases where Coronavirus Job Retention Scheme funding does not offset the loss of parent-paid fees.

‘Our members are working flat out to continue supporting children and families, but some are wondering if they will be able to pay staff salaries next month, and many are facing financial losses that, if not addressed, will lead to mass closures of nursery schools in some of the most disadvantaged areas of the country,’ she warns.

Extra pressure

Sian McDermott, head teacher of Rowland Hill Nursery School in Tottenham, north London, says the uncertainty around the spring census put ‘undue and unnecessary stress’ on the early years sector. Her school, based in an area with a very high R rate and large BEM community, is currently only open to 45 per cent of children on roll – those who are vulnerable, keyworker children or families in urgent need of care – because of high staff absences due to illness, isolation and immediate family members being in intensive care. Children not attending are receiving daily online learning to continue the provision of their early years entitlement.

‘I have lost faith with this Government,’ she says. ‘There have been so many U-turns in such a short period of time. I stay awake at night thinking “are they going to U-turn and only fund the children who are here?”.’

Ms McDermott says she was worried about nursery school funding before the pandemic and is more so now. The school has lost around £3,500 a week during lockdown periods from not being able to offer wraparound care and holiday clubs. This is exacerbated by being unable to furlough staff whose salaries come from the education entitlement grant and fees.

‘The Government should have funded on pre-Covid levels for this term and the summer term because it would reassure leaders in schools and PVI settings and families that their places are secure for their children,’ she says.

‘If the economy is going to regenerate, it will need childcare so people can get back to work. If that childcare isn’t there then how will that happen?’

Support needed

‘While the decision to base funding for the spring term on children on roll rather than children attending is positive, the support this offers still falls significant short of simply funding providers at pre-Covid levels,’ says chief executive of the Early Years Alliance Neil Leitch.

‘With demand for places well below even autumn 2020 levels, it is clear that the Government must provide this additional support, or risk the needless closure of providers who otherwise could have remained viable.’

Mr Leitch also raises concern that providers who do not feel that it is safe to fully open now risk being financially penalised for doing so. ‘At a time when many are facing high Covid rates in the local communities – or, for some, within their own settings – providers should not lose out financially for taking what they feel is the safest approach,’ he says.

‘We know that even with the ongoing vaccination roll-out, the impact of the pandemic is likely to continue for many months to come. It’s vital, therefore, that the Government takes urgent action and provides the support that the sector needs to remain sustainable throughout this crisis and beyond.’

Vital U-turn

‘We’re going to get through this, but if the DfE had not made this U-turn [on the spring census], it would have put us into some peril and we would have had to consider redundancies,’ says Ailsa Monk, owner and principal of Cotswold Montessori School.

Ms Monks reports that it will now be able to pay wages, but it will be ‘tight’ despite numbers of registered children remaining level.

Her nursery had to close for two weeks after a staff member tested positive for Covid, leading to a large loss of income.

‘Yes, we have furloughed our staff for these two weeks, but we still have to pay their national insurance and pension contributions as well as all our ongoing costs – rent, utilities, professional services. I personally cannot pay myself,’ says Ms Monks.

‘Our bank account is on zero – actually £328 – after December payroll, as is probably true for most community-minded, ethical settings in the UK. This is because the last time we received a large chunk of Government funding was in October 2020, and the last time we invoiced was early November for term two.’

She adds, ‘I am grateful that the Government has seen sense, but that does not detract from the fact that, once again, it is clear that the Government has no sense or idea of the impact their policies and decisions have on our industry. We remain chronically underfunded, as well as our qualifications and skills being undervalued to the point of being dismissed.’

Institute for Fiscal Studies’ analysis

Analysing the implications of the spring funding, the Institute for Fiscal Studies (IFS) flags up that the DfE may potentially be saving money by putting a cap on how much it will fund additional places after the census.

Claire Crawford, research fellow of the IFS and assistant professor of economics at the University of Birmingham, says, ‘The department has also suggested that it will fund additional places over and above current registration levels if usage rises, but – with no explanation – has taken the rather puzzling decision to cap this protection if take-up rises above 85 per cent of pre-pandemic figures,’ she says.

‘This means areas in which registrations are currently below 85 per cent of pre-pandemic levels but rise quickly back to where they were before the pandemic would see a 15 per cent cut in central government funding. It is not clear why the funding of these “free” places should be capped, nor why this would be the right cap to impose.’

Christine Farquharson, senior research economist at the IFS, warns that it may be up to local authorities to pick up the Government’s ‘tab’ in areas where take-up grows quickly. She adds, ‘This comes at a time when many local authorities are experiencing a great deal of financial pressure and many parents are reliant on childcare to enable them to continue or return to work.’

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