The National Education Union (NEU) welcomes the opportunity to respond to this consultation.
The NEU is an independent, registered trade union and is the largest education union in the United Kingdom (UK) and Europe. We represent over 400,000 serving teachers, headteachers, lecturers and support staff in maintained schools, academies, maintained nurseries, sixth form, tertiary and further education colleges in the UK.
The NEU represents the largest number of staff working in the independent sector.
We recognise the link between education policy and members' conditions of service. The NEU exists to help members, as their careers develop, through first rate research, advice, information and legal counsel. Our evidence-based policy making enables us to campaign and negotiate locally and nationally.
The NEU is affiliated to the Trades Union Congress (TUC), European Trade Union Committee for Education (ETUCE) and Education International (EI). The NEU is not affiliated to any political party and seeks to work constructively with all the main political parties.
Executive Summary
It is welcome news that hourly rates are increasing, up to date data will be used in the future and no LA will see a reduction in real-terms funding. Unfortunately, it is simply not enough to avert more and more settings closing in the future. The NEU and other stakeholders have been calling for a review of the EYNFF since it was implemented in 2017 because it was widely acknowledged that it wasn’t fit for purpose, particularly in respect of Maintained Nursery Schools (MNS). Since then, the sector has faced a worsening financial crisis that has been exacerbated by the Covid-19 pandemic and now by runaway inflation. Simply put, it is too little too late. Despite these improvements, many settings, particularly MNS will be forced to closed due to insufficient funding.
Question 1: Do you agree with our proposal to update the underlying data in the additional needs factor in the EYNFF?
Yes. Currently, none of the underlying data used has been updated since 2017 or earlier. This means that funding allocations are based on incorrect datasets. The NEU is pleased that the DfE will be updating all the data used and will continue to do so annually. This will ensure funding is distributed more accurately. In a climate where the overall quantum of funding remains unchanged and insufficient, and school budgets are very tight, the DfE must ensure that Local Authorities (LAs) with higher levels of deprivation receive all the funding they are entitled to under the formula. This is particularly significant in the case of MNS which are mainly located in areas of deprivation and hardship.
The EAL factor weighting seems especially low given the significant costs of providing high quality provision to these groups of children and the substantial benefits to the life chances of children from these groups who receive high quality early education. NEU believes the EAL weighting should be increased to reflect the additional costs to settings with children in this category.
NEU believes that graduate led care is essential to enable all children to benefit from high quality provision. High quality provision improves outcomes for children, encourages social mobility and closes the gap between disadvantaged children and their peers.¹
In order to realise these aims, we would argue that a quality supplement should be implemented. Quite a few LAs use a quality supplement of some kind; the main reason being to promote graduate led care. Graduate led care is seen as essential in sustaining and improving quality. The government recognises the importance of graduate led care and between 2007 and 2011 provided national funding via the Graduate Leader Fund, which allowed LAs to work towards increasing the number of children cared for by qualified employees in Private, Voluntary and Independent (PVI) early years settings. The majority of LAs benefited from this specific funding and according to research by the Family and Childcare Trust, the average proportion of children accessing free early education in PVI settings, whose care is led by a graduate, rose by eight per cent between 2012 and 2016, from 42 per cent to 50 per cent.²
A quality supplement could work in a similar fashion to the Graduate Leader Fund and should target increasing the number of children undergraduate led care. This can be achieved either by employing staff with degrees/qualifications in early years childcare or by allowing providers to cover the cost of current non graduate staff to achieve a degree or appropriate qualification.
Question 2: Do you agree with our proposal to move to using the free school meals headline measure?
Yes. Please see our response above to question 1.
Question 3: Do you agree with our proposal to update the way in which the Disability Living Allowance data is used?
Yes. Please see our response above to question 1.
Question 4: Do you agree with our proposal to update the underlying data used in the area cost adjustment in the EYNFF, in particular the rateable values data and the GLM data, when available?
Yes, the NEU believes that using the most up to date data is appropriate to reflect the actual costs incurred by settings. This data should also be updated annually going forward.
It is regrettable that the most up to date General Labour Market (GLM) data is not going to be used in funding allocations for 2023/24 and the DfE will still therefore be relying on GLM data from 2013/14. The DfE have known that the data used in the EYNFF has been notably out of date for some time and should have acted more promptly to secure more up to date information in time for when the revised EYNFF is implanted in 2023/24. Staff costs are by far the largest area of expenditure in any early years setting, but particularly in the case of MNS, which are required by law to employ qualified teachers unlike private, voluntary or independent settings.
A survey of MNS by the NEU in May 2022 found that 44% of MNS could not set a balanced budget for 2022/23. By far the main factor impacting on respondents’ ability to set a balanced budget is staff costs. For some MNS the only way to balance budgets is to cut staffing and services to the extent that for some the only teacher on site will be the headteacher. This jeopardises the high quality of teaching which research has repeatedly shown makes a crucial difference to children’s outcomes in some of the most disadvantaged communities in the country.³
The NEU is pleased that for 2024/25 the DfE is planning to use more up to date GLM data, and we expect this data to be updated on an annual basis to ensure settings are receiving their full funding allocation.
Question 5: Do you agree with our proposed amendments to the proxy measure for premises related costs in the EYNFF, including introducing schools rateable values data?
Yes, proposals to smooth out the property values over 3 years and include an infant and primary (schools’) rate cost adjustment are welcomed.
Question 6: Do you agree with our proposed approach to mainstreaming the early years element of the teachers’ pay and pensions grants?
No. Unlike 5-16 mainstream schools and special schools, which are very similar in structure and composition, the early years sector is vastly different. The early years landscape contains MNS, private, voluntary and independent settings. Early years providers will have different wage rates, rents, proportion of qualified and unqualified staff and other costs. Ring fencing the teachers’ pay and pensions grants (TPPG) guarantees settings will continue to receive this specific funding for a specific need otherwise there is a risk it will be used to offset budget pressures elsewhere.
The NEU recognises the government’s position that this may help streamline funding allocations and potentially make it easier for settings to manage their finances. However, if the TPPG is rolled into the EYNFF, it will be harder to identify and likely to be obscured. The quantum of funding for Early Years remains the same despite settings facing rising costs and financial difficulties. It is extremely likely that once TPPG funding is rolled into the EYNFF, it may be diverted to pay for other essentials such as rising fuel costs rather than paying teachers’ salaries and pension contributions.
It is essential that this funding remains separate and ring fenced because it directly impacts on an early years settings ability to deliver high quality education. Having the TPPG means settings are more likely to employ qualified teaching staff, which supports the delivery of high-quality care, which in turn produces a positive experience and good outcomes for children. Good quality care in early years improves social mobility and reduces the gap between children from deprived backgrounds and their peers. Research has shown that while excellent provision can improve outcomes for children and lower the attainment gap in later years, average or poor care has no effect whatsoever and can potentially put at risk children’s development and welfare.
Question 7: Do you agree with our proposal to update the operational guide to encourage local authorities to take account of additional pressures that some providers might face using the existing quality supplement?
If the DfE decides to roll up the TPPG into the EYNFF, it will be essential to have an updated operational guide. Settings should not be using TPPG funding for any other purpose.
However, we do not agree with the DfE’s proposal to roll up the TPPG into the EYNFF and therefore do not feel it is necessary to update the operational guide. Please see our response to question 6 above.
Question 8: Do you agree with our proposal to update the underlying data in the area cost adjustment in the 2-year-old formula?
Yes. The NEU believes that using the most up to date data is appropriate to reflect the actual costs incurred by settings. This data should also be updated annually going forward.
Again, it is regrettable that the most up to date GLM data is not going to be used in funding allocations for 2023/24 and the DfE will still be relying on GLM data from 2011/12. Staff costs are by far the largest area of expenditure in any early years setting, but particularly in the case of MNS, which are required by law to employ qualified teachers unlike private, voluntary or independent settings.
The NEU is pleased that, for 2024/25, the DfE is planning to use more up to date GLM data, and we expect this data to be updated on an annually basis to ensure settings are receiving their full funding allocation.
Please also see our response to question 4.
Question 9: Do you agree with our proposal to introduce a proxy for premises related costs into the 2-year-old formula?
Yes.
Question 10: Do you agree with our proposed approach to protections in the EYNFF for 2023-24?
No. The NEU appreciates the DfE’s proposal guaranteeing at least a 1% increase in the hourly funding rate in 2023-24 for every LA, however the sector is facing a funding crisis and a 1% increase falls dangerously short of either addressing the crisis or turning it around.
Costs for providers are spiralling out of control. Increases to the national minimum wage, business rates, pay and new pension contributions have risen sharply in recent years, but funding has simply not kept pace. This is before the impact of Covid-19 and recent rise in inflation driven by increases in the cost of fuel is accounted for. It has been acknowledged in this consultation that current funding levels were set following a cost analysis in 2015 using data that was already old. Funding levels were then frozen by the government until 2020. As a result, many providers are already struggling to break even and some have been forced to close all together. Underfunding has meant children from disadvantaged backgrounds, children with additional needs and children with SEND are missing out on childcare and early education. Early years should be a crucial tool in narrowing the attainment gap and improving social mobility - but current policy and underfunding is failing to harness that potential.
The NEU is also concerned about the impact of rolling in the TPPG in relation to the minimum funding floor. The TPPG is not universal and applicable to every LA, so including it in the calculation of the minimum funding floor will disadvantage a number of LAs. The NEU again believes the cons of rolling the TPPG into the EYNFF far outweigh any gains and remains convinced it should remain separate.
Question 11: Do you agree with our proposed approach to protections in the 2-year-old formula for 2023-24?
No. Please see our response to question 10 above.
Question 12: Do you agree with our proposal to introduce a minimum hourly funding rate and a cap on the hourly funding rate for MNS supplementary funding?
Yes. The NEU welcomes the additional investment in MNS supplementary funding and confirmation that this will increase annually for the duration of the current government spending review period. To ensure this funding reaches MNS, the NEU requests that the government requires LAs to pass through their MNS supplementary funding similar to their EYNFF. Recent analysis by NEU confirmed that some LAs are not passing any of the supplementary funding they receive. Obviously, this places MNS in those regions in financial jeopardy.
In the aftermath of the pandemic, the financial situation of MNS has deteriorated markedly. They have limited scope for further cuts and efficiency savings, and MNS report that their services are being affected. Worryingly given their key role in supporting children with SEND whom other settings cannot or will not admit, three quarters expecting to have to less capacity to support children with SEND next year. Worse still, across the country, local authorities are reviewing whether their nursery schools have a viable future and puzzling how to put in place financial recovery plans for schools in deficit. Sufficient long- term certainty is urgently needed for them to achieve financial stability.
Question 13: Do you agree with our proposed approach to rolling the teachers’ pay and pensions grants into MNS supplementary funding?
No. LAs are required to pass through a minimum proportion of their EYNFF funding to providers, in order to ensure that the vast majority of government funding reaches providers. However, only funding allocated under the EYNFF is subject to the pass-through rule. It does not apply to other Early Years Block funding streams, including DfE supplementary funding for MNS. The NEU is concerned that unless LAs are required to pass this funding through, it will not reach MNS, placing them further at risk financially. The NEU believes the TPPG for MNS should not be rolled into MNS supplementary funding and remain a separate funding stream that is ring fenced, clearly identifiable and targeted for a specific purpose.
Question 14: Do you have any comments about the potential impact, both positive and negative, of our proposals on individuals on the basis of their protected characteristics? Where any negative impacts have been identified, do you know how these might be mitigated?
Currently, the NEU does not have any representation or evidence on the impact of the government’s proposals for the purposes of the Public Sector Equality Duty (Equality Act 2010). However, if these proposals go ahead and once implemented Equality issues come to light, the NEU reserves the right to bring this to the attention of the government and the DfE. We also call on the government to monitor the impact of these proposals in order to ensure issues are discovered as early as possible and dealt with promptly.
Question 15: Are there any other comments that you would like to make about our proposed reforms?
The NEU would like to once again draw your attention to the worsening funding crisis in the Early Years sector. While it is welcome news that hourly rates are increasing, up to date data will be used in the future and no LA will see a reduction in real-terms funding, it is simply not enough to avert more and more settings closing in the future.
Government underfunding is the main reason nurseries and MNS are closing. Every closure is devastating to local communities, parents and children. They must not lose out because the government has failed to invest in our early years workforce.
The suggestion by the government that nurseries in England could take in more pupils without employing extra staff is ludicrous and likely to lead to more experienced qualified staff leaving the sector. About 95% of nurseries say the government’s funding does not cover their costs and 85% are operating at a loss or breaking even, according to the National Day Nurseries Association (NDNA). The latest government figures show in England there was a decline of more than 300 nurseries between July 2020 and July 2021 and official data from Ofsted shows nurseries are closing at a higher rate in poor and disadvantaged neighbourhoods.⁴
The NEU is pleased MNS supplementary funding has been increased and confirmed for the duration of the spending review and will increase annually during that time. However, we are hearing reports that many MNS remain in a precarious position due to issues with the current funding system that require urgent review. MNS have not received the additional support with pandemic-related staffing costs that have been available to other schools, despite facing the same cost pressures of having to pay for supply staff. Many have gone over budget as a result, which will increase deficits. We ask that MNS have parity of treatment with other schools and are included in initiatives such as the Covid-19 Workforce Fund and the mental health training for school staff. The costs of doing so would be a tiny proportion of the budget of such initiatives, but would provide crucial extra support for a group of schools which are under huge financial and staffing pressures.
It remains an ongoing issue that MNS do not automatically get rates reimbursed on the same basis as other schools, that they do not qualify for the discounts for which non-profit providers in the voluntary sector are eligible, and they were not able to benefit from the rates holidays from which profit-making nurseries benefited during the pandemic. MNS therefore lose out on all fronts. Business rates for nursery schools can be over £100,000 in some areas, so this is a significant pressure on already overstretched budgets. We ask that the system of automatic business rates reimbursement is extended so that MNS can benefit similarly.
Following the additional cost pressures of the pandemic and recent energy cost rises, the situation is not sustainable and needs to be addressed urgently. It is not surprising that one in four MNS are reporting being in deficit at the end of 2020-21.
Effective early intervention has proven economic benefits5 as well as improving the life chances of those who benefit from it. England’s remaining 385 MNS provide the highest quality education and care to children in some of the most disadvantaged parts of England. They support high proportions of children with SEND who would otherwise have nowhere to go, and above average proportions of children on Early Years Pupil Premium. They have a vital role to play in supporting educational recovery and supporting the levelling up agenda.
We therefore call on you to take urgent action to address the points raised above and provide adequate funding for nurseries and MNS.
¹ Tackling disadvantage in the early years - Education Committee - House of Commons
² ³ Family and Childcare Trust: Putting quality at the heart of the early years
⁴ Main findings: childcare providers and inspections as at 31 March 2022
