The early years sector is drawing comfort from the findings of two influential Parliamentary reports which highlight flaws in the Government's funding of the free entitlement for threeand four-year-olds.
For years, providers have argued that they are out of pocket because of the gap between the funding allocated for the delivery of nursery education and their actual costs.
Their concerns have been mounting with the Government's new policy to extend the scheme to cover the country's most disadvantaged two-year-olds. Although funding is increased for these children, so are the costs because of higher staff ratios and because the families frequently need more support from settings.
Until now many providers felt that their complaints were falling on deaf ears in Whitehall. However, the finding by the Public Accounts Committee (PAC) that the Department for Education had 'a limited understanding of how the funding it provides for early education is spent', has given some cause for hope that their message might now be heard.
'I was surprised that MPs seemed shocked about this awful admission from the DfE,' says Neil Leitch, chief executive of the Pre-School Learning Alliance. 'Anybody who has been working in the sector has been saying these things from the outset.
Did they miss the Save our Nurseries campaign?
'It was manna from heaven to hear 10 per cent of local authorities saying they do not think they pay enough. I don't think until now it has been taken on board that we need more funding. There has been a view that we would say that, wouldn't we. I am glad that the National Audit Office (NAO) and PAC reports have elevated the debate and raised these questions.'
Deputy Prime Minister Nick Clegg and his Lib Dem colleague children's minister Sarah Teather were left in no doubt about the scale and depth of the funding problems faced by settings when they hosted a summit of the country's biggest childcare providers on the eve of the Jubilee holiday weekend.
The roundtable session was billed as a discussion on how best to deliver the extension this September of free nursery places to just under 1,000 of the most disadvantaged two-year-olds, announced by the ministers earlier that day.
However, much of the session was taken up with leading figures from the sector explaining their grievances about the inadequate funding for the existing provision of the free entitlement, let alone what will happen when the two-year-olds are included.
Need to address variations
The PAC, the country's most powerful public spending watchdog, is chaired by Margaret Hodge, the first ever children's minister. Its inquiry was based on a report by the NAO, the body which audits Government departments for Parliament.
The scrutiny says that while the entitlement has been extended, overall take-up levels sustained and children's development, as measured at age five, has improved, 'the Department and its partners do not sufficiently understand the relationship between local performance and funding, including how far variations in rates paid to providers reflect legitimate local factors, to be confident that funding arrangements are efficient.
'The Department needs to address variations in take-up, in access to high-quality provision and the impact on attainment in later years if it is to achieve value for money and get the best possible return for children from its annual investment of some £1.9 billion.'
The audit confirms what many providers have long argued: 'Funding formulae are complex, vary across authorities and at least a third are based on a limited understanding of provider costs.' It says average funding per hour in 2010-11 ranged from £2.78 to £5.18.
While 72 per cent of local authorities estimated their funding formula was sufficient to cover costs for all or most providers, around one in ten admitted their funding was insufficient. The analysis found that local authorities 'direct different proportions' of their government funding - their Dedicated Schools Grant - towards the entitlement, ranging from 3.5 per cent to 9.8 per cent. The funding provides limited incentives for providers to improve quality, although all the research shows children derive the most benefit from experiencing quality provision.
The PAC report added that, 'Until 2010-11 the Department did not have sufficient data to estimate spending on early years education and even now the data contains errors. The Department also has very little knowledge of how funding for specific purposes has been spent. The Department must collect and publish further information on spending and outcomes. This should include the results from funding supplied for specific purposes, such as increasing capacity and participation.'
The DfE will now publish details of what authorities spend on the entitlement, but Mr Leitch says that the figures must be presented so the sector can see exactly what the Government allocates to each authority and how they in turn distribute it.
'We need transparency,' said Mr Leitch. 'We need to know what has been allocated to the local authority. I am a believer that transparency is the panacea of all ills. If there is openness and transparency we can move forward to meet the challenge.'
Top-up fees
Mrs Hodge said that it was unacceptable that some parents were not able to take up the offer unless they agreed to pay 'top-up' fees for extra hours and that the Department must act to prevent this.
In response, at the launch of the roll-out, a year earlier than originally envisaged, of the entitlement for two-year-olds, Mr Clegg said that the statutory guidance will be strengthened to make it clear that parents do not have to pay top-up fees to access their entitlement.
But while top-up fees discriminate against poorer families, it is unfair to load the funding burden on to fee paying parents. Purnima Tanuku, chief executive of National Day Nurseries Association, says, 'The funding allocated to early years provision must cover costs, otherwise it is not sustainable for many nurseries to participate in the free entitlement, without pushing up the price of paid-for care for other parents.'
Passing on the shortfall to the fee payers is not a long-term solution, as pressures on family budgets mean that parents are already struggling to pay their childcare fees.
A recent survey of 400 childcare providers in London by the Daycare Trust found that, for half of them, parents not being able to afford fees was a key issue, followed by local authority cuts (41 per cent).
The charity is calling on London's re-elected mayor, Boris Johnson, to tackle the crisis by lobbying for a reversal of cuts to tax credits and promoting family-friendly practices and childcare vouchers, among other policy recommendations.
Providers insist that they only charge top-up fees to recoup their costs and remain viable. The unanswered question is, how will they manage if they can not charge and the funding is still inadequate?
Another question puzzling the sector is why, with the existing funding problems, is the Government pressing ahead with the free entitlement to disadvantaged two-year-olds and launching yet more pilots across ten areas of the country?
The evidence of its last raft of pilots was that local authorities in deprived areas have grave misgivings about their ability to meet the Government's timetable and provide the quality of care to make a difference for these children because there are not enough qualified staff or places available.
Although the team running the pilot in Tower Hamlets to April this year reported that they had achieved a major boost to quality, with positive outcomes for the children involved likely to exceed the national average, they were adamant that the target of creating about 1,300 new places in just over 18 months can not be achieved and the funding at £6 an hour is far too low to support development of high quality provision. In an interim report, they warned, 'Too-rapid expansion risks a poor or even negative return on public money invested.'
Yet in the current climate of economic austerity, when an audit and Commons committee report have already found the DfE wanting in its ability to vouch for its spending on the free entitlement, the Government is rushing ahead with this expansion. Why?
Well, the next election is at most 35 months away. The Liberal Democrats need to build a life raft of social policy achievements to persuade voters that sharing responsibility with the Tories for tough economic policies was worth it.
Given the political will from Mr Clegg and Ms Teather to make the free entitlement work, it is up to the sector to maintain the pressure on them for it to be properly funded and supported so it can make a difference to these children's lives.
For their sake, it must not become a cynical electioneering exercise akin to the posturing of politicians of yesteryear who demonstrated their caring credentials by being photographed kissing babies.