CEY1357

Written evidence submitted by Tops Day Nurseries and Aspire Training Team

Childcare Entitlements

Parents are often not able to understand current funding for childcare for their child and ask for help from our nurseries.  Our nursery staff do not have the time, training, nor any funding to facilitate supporting parents 1:1 with this task.  Even so they often try to, and as group of day nurseries we provide links to all the relevant government websites, but there is no facility to put an example into the software, actual data has to be used, which parents often do not have to hand, or have not yet decided what to do and want to know their options, eg return to work full time, part time or not at all.  This means that making a decision is all but  impossible, particularly for lower earners where it is touch and go whether their family will benefit financially, or not, by them going to work, even if they want to or need to from a mental health or career point of view, or if their employer, which could be the NHS, is desperate for them to return or not.   It would be much easier for everyone if the funding rate paid directly to providers was increased significantly to cover these overheads and stop the overlapping systems causing confusion and preventing parents going to work due solely to the financial impact of paying for childcare & education.  Also all the unused funding is going back into the Treasury and not being used for childcare at all, when it is much needed.

Early Years provision.

Our 33 day nurseries are seriously understaffed, resulting in daily refusals to take children due to insufficient staff; lack of continuity in care because agency and casual staff, if they can be sourced, do not know the children and cannot be used as key workers which is non compliant in terms of the EYFS and also puts enormous pressure on senior staff and nursery managers who have to compensate by having far too many key children themselves, which in turn means our staff turnover figures have doubled to 35%; whole room closures, nursery closures and deteriorating Ofsted inspection results.  Why are we understaffed?  Predominantly because under funding (both in the rate and support for parents) means we cannot compete with pay rates from schools, hospitals, local authorities, DfE, Ofsted, retail, hospitality, cleaning, etc. (see below).  We recognise a need for one graduate per nursery setting, and ideally one in each room – but this is absolutely unaffordable unless the nursery is in a highly affluent area where additional charges can be made to parents across all age groups, or if people are prepared to work for the pay that we can offer despite their superior qualifications and/or experience.   Nursery staff, 97% female, are being taken advantage of by society in this country, and staff know this, morale has never been so low.  During Covid our nurseries remained open, with negligible support compared even to the schools. Covid did highlight how childcare is an essential service, if we want the NHS, ambulances, etc. staffed but appreciation has been limited to words. Provision for SEND children is inadequate in terms of funding and peripatetic support which seems to have all but dried up, with nursery staff expected to do the work instead, eg speech therapy, behaviour, as well as identification of children with delayed development, the training for which is all but impossible to release them for, because of being short staffed. Our nurseries are having to filter out SEND children, if possible, before they start because we cannot fulfil their needs without more staff.  SEND children with delayed development would often be better served in younger age groups, where there is a higher staff ratio and more appropriate resources, but these higher costs are not being met by the state, local authorities being a postcode lottery of support.  If SEND children, and the needs of the children around them are better met in the older age groups they are likely to need 1:1 support, but only a fraction of the hours needed are funded leaving them and the children in their rooms with less support, risking parents moving their children to settings were there aren’t SEND children taking the lions share of the attention.   The pressure on the nursery management is intolerable, and further increased by Ofsted inspecting nurseries on whether the local authority is performing their duty to the SEND children or not, and if the LA is found wanting the nursery can  be penalised, totally unfair. The recent DfE funding for mentoring and coaching would have been much better placed in increasing the funding per child as low pay and high turnover is the first problem to sort or training is wasted. Plus they recruited from our staff for these posts actually worsening the situation not improving it. Had we been consulted on this project we would have vetoed it at this time. The apprenticeship scheme works very well in our day nurseries, enabling work and training simultaneously, but T-levels are fundamentally flawed from our perspective as young people achieving a T level are not competent to work from day 1 and we have no funding to pay them and carry them while they train to be able to be a key person, which takes at least 3 months.  We do have a licence to employ staff from abroad, but the visa process has proved incredibly slow and the qualification list maintained by the DfE is not maintained so every qualification has to be checked for each person, such a waste of time and effort.  Nursery staff are not on the shortage list currently, and the process for having them put on the list also seems very difficult given that the sector has no single representative trade body – and needs one.

Preparation for School

Day nurseries are excellent at preparing children for school, if children attend, although we would argue that schools should be fit for all children, not the other way around.  However, if children from deprived backgrounds are only attending for 11-15 hours per week instead of 22-30 and do not have parents able to read to them etc. at home, then the gap is likely to widen not close.   Children should be able to attend nursery, funded, from when maternity/paternity leave stops, not just at 3, and to match their parents working hours, not school terms/part time hours, and then children and their parents will truly be prepared for children going to school.  We think the school age is too young at 4, should be 5 or even 6.  This would currently even save money as children at school, even those in their early years, have far more funding per child, than nursery children receive.

Children in nurseries from deprived backgrounds get no meals provided, and hungry children cannot learn as effectively as fed children.  Utility bills are now so high that heating is having to be turned down or off as parents cannot afford to pay more in deprived areas so children are hungry AND cold, further impacting their ability to learn.  Nurseries are not being supported by health visitors with potty training.  Potty training needs to be adult led when children are 1-3 year old, and if this doesn’t happen more children will go to school in nappies.  Plastic one-use nappies are very cheap to purchase, compared to investing in washable nappies and laundering them, but local authorities add 4% to the domestic rates bill to pay for their disposal.  A coordinated response is needed to divert this waste bill into a saving that is used to support parents to launder most nappies rather than use one-use plastic all the time, a token £25 or £50 towards purchase only with receipt is insufficient to drive this change.

Sure Start Centres

Families need access to information, advice and guidance.  When the Sure Start Centres started they attracted some of our staff with higher pay rates, terms and conditions, and eventually most went bust because their costs were higher than their income, simple.  All of our nurseries are already hubs of information, but could be so much more.  All that is needed is more funding to pay or subsidise parent training courses (desperately needed) and for our administrators to be trained and paid to advise and signpost.  We work with our sister company, Aspire Training Team, who train adults from entry level 1s up to level 5, so arranging short courses on site for parents from child behaviour to potty training, language and literacy to all EYFS areas, and even supporting breast feeding mums, would make enormous sense.  Children do best when parents are involved in their development, why not offer this support at each early years setting that would like to engage?  Quite a few of our nurseries were sure start centres anyway and all offer free book libraries, toy swops, free coats and clothes swopping,  some food banks, intergenerational opportunities, and many other services, certainly the education side of sure starts could be enabled at day nurseries, whereas the health activities such as baby weighing and innoculations might be better accommodated in a surgery or pharmacy.

Affordability and funding.

As demonstrated in the background evidence below, the current funding levels results in nurseries having to accept unsustainable losses or have private paying parents subsidising funded places.  In 2023/2024 the funding increase for Plymouth Local Authority, which is one of the most deprived areas, does not cover the national minimum wage increase for an early year’s teacher in full ratio.  2Yo funding in 7 out of 9 of our local authorities in our area, does not cover the increase in staff cost at minimum wage even when that member of staff has the full complement of 4 children, this means we are going to have to stop taking some funded only 2 year olds as this is simply unaffordable.

Every year the lack of cost reflective funding rate increases (plus historical shortfalls) further pushes up the cost for private fees to subsidised funded places, or a migration away from offering funded places and moving out of deprived areas.

Energy bills have gone up 100% with the cap, and are expected to be up as high as 300% from April.  New higher business rates expected from 2023 and inflation is over 10%.  None of these can be recovered with the rates published for April, again putting more pressure on private fees.  A recent funding formula proposal  the DFE funding consultation earlier this year suggested cost ‘smoothing the data–average the previous 3 years data to reduce volatility.’ This does not reflect the sharp cost increase now.

The lack of appropriate funding, lack of relief in VAT and business rates does not support the ability of the sector to pay the workforce rates the values them reflective of the impact on society and the economy.

To improve the situation, whilst ‘means tested funding’ would better support more deprived areas/families, fundamentally the funded rates needs to be higher.

If continuing to underfund, then it is critical to remove the term ‘free place/hours entitlement’ to ‘contribution’ knowing that operating costs above the funded rate will have to be recovered by private fees although this does not help deprived areas.

To keep the overall operating costs down, Nurseries should be treated in the same way as other ‘Funded Free schools, Charity Private schools’ whereby VAT incurred on the school’s “non-business activities” can be reclaimed.  This would also enable more capital spend on sustainable equipment such as insulation, solar panels, heat exchangers, electric vehicles, efficient kitchen equipment etc. for which there is also no capital fund, no interest free loan fund, not even a loan fund with interest, for nurseries (there £5m has just been announced for the rest of the education sector).

Scotland and Wales extended Business rates relief further than in England.  Business rates are a significant cost factor for nurseries and should be given full relief even if funding were at an appropriate level.

Background:  Who and why

Tops Day Nurseries is a privately family owned group of 32 nurseries across the south of England with a capacity of registered child care places of 2,426 children spread across all deprived area.

We feel the need to provide evidence as we are passionate about the success in giving all children, irrelevant of background and needs, the best quality care and teaching to provide the right start in life.  The benefits to the society, economy and environment is clear from many studies.  But the chronic under funding, undervalued provision (compared with other educational institutions’) and staffing crisis, puts the whole sector at risk, not just our business.

For the year ending March 2022 Turnover was £14.8m returning an operating loss of £-32k and loss before Tax of £-51k. 

We also run a sister company which is an Independent Training Provider for early years, which gives us further insight into the early years workforce issues.

Wages and Staffing

The gap between early years teachers, especially at the entry level is well below other sectors, reflecting not just the underfunding and affordability, but also the perceived low value of our colleagues by the Government, despite the significant impact the service provides for the economy, society and environment.  This is the key factor behind a reduce workforce in qualified teachers and unattractiveness for entry level, creating the staffing crisis in the sector, forcing many nurseries to reduce capacity or close completely.

Pay ranges between sectors:

Nursery staff pay rates:                             £18,000 - £32,000  (this includes managers and graduates)

School teachers:                             £28,000 - £43,000

Nurses:                                           £20,270 - £109,000

Retail:                                                        £26,677 - £32,464

National Average Wage 2022:               £31,252

AS A RESULT STAFF SHORTAGES IS REFLECTING IN CLOSURES OR REDUCED CAPACITY, LOW MORALE IN SECTOR, AND QUALIFIED STAFF CAREER CHANGES AWAY FROM EARLY YEARS.

The sector is not recognised as being a shortage sector by the government, so visas for bringing in foreign workers are not being expedited, and are expensive, this simple change would enable us to bring in more staff from countries like South Africa, that suffer from 30%+ unemployment and have unemployed, graduate teachers looking for work.  We are bringing them in but the process is very slow and very expensive, it could easily be speeded up for us, for example the DfE should maintain an up to date qualification list for comparison purposes rather than check each individual qualification.  As the sector does not have a sector skills council or equivalent, like it used to have, and like the care sector has currently, and unions are not popular as strikes would simply mean more closures, I feel that the sector’s representation is not effective as it could be, and the government is being given divided responses from different, often competitive organisations (NDNA, EYA, PACEY, Montessori) and various large private investor funded organisations all lobby apparently independently of each other.  This must make it very hard for the government.

Funding rate change

Impact of Minimum wage based on being paid 1p above NMW.  Based on the table and assumptions below, the recovery cost rate impact of the NMW increase is £1.24 ( 10.2%) per hour for a low paid worker which makes up the majority of the nursery workforce.

The tables below shows the rate increases expected next year as published  ( https://www.gov.uk/government/publications/early-years-funding-2023-to-2024 ), is not required to all be passed onto nurseries.

2YO funding

Using the calculated NMW recovery cost rate increase of £1.24 per hour and 2 year old room ratio’s is 1:4. The increase in funding rates in 7 out of 9 authorities will result in losses just on wages, before overhead costs which are currently soaring in the high inflation economy.  The other 2 need a minimum 50% occupancy to breakeven, before trying to recover any of the soaring overhead costs.

3-4YO funding

As with the 2YO table, Plymouth – which is a very deprived area – funding increase is also not sustainable.  The others need a minimum 62.5% occupancy to breakeven, before trying to recover any of the soaring overhead costs.

Energy bills have gone up £500k (300%) , New higher business rates expected from 2023 and inflation over 10% can not be recovered with these rates, again putting more pressure on private fees.  A recent funding formula proposal   The DFE funding consultation earlier this year suggested cost ‘smoothing the data–average the previous 3 years data to reduce volatility.’ Does not reflect the sharp cost increase now.

Due to our mix of nurseries the least deprived areas are subsidising losses in the most deprived areas.  If not for desire to support these areas we would otherwise not operate in most deprived areas.

Before this year Funding from has gone up by circa 3.5% last year, 6.8% in the last 3 years, whilst CPI has increased by 9.3% (Nov 22), 17.5% in last 3 years

Wages up 21% in 3 years just to keep pace with market forces in a decreasing pool of resources.

AS A RESULT NURSERIES LOSSES WILL INCREASE WITHOUT BEING SUBSIDISED BY PRIVATE PAYING PARENTS AND NURSERIES IN DEPRIVED AREAS WILL HAVE TO BE CLOSED.  FEES WILL GO UP IN WEATHIER AREAS – WHICH IN OUR CASE WILL IMPACT ON NHS AND OTHER STAFF, WHO MAY NOT RETURN TO WORK AFTER MATERNITY AS A RESULT.

Other reliefs

At the end of 2022 the Prime Minister defended a £1.7billion VAT tax break for private schools stating that they support aspiration. This truly reflects the attitude and undervalued sector that early years is.  Our VAT cost is circa up to £400k unrecoverable.  Either full relief or at least partial exemption based on funded income should be considered.  Full relief would help support paying staff circa up to 5% to help reduce the staffing crisis or offset losses.

Scotland and Wales extended Business rates relief further than in England.  Business rates are a significant cost factor for nurseries and should be given full relief in absence of appropriate funding. For 2022/23 our direct business rates are expected to be circa £440k.  Again this equates to support paying staff circa up to 5% to help reduce the staffing or offset losses.

Local authorities top slicing funding, retaining funds for contingencies, and diverting funding to SEND have all been detrimental to early years funding, and needs to be stopped.  And we would also recommend direct funding using one software system, rather than one per local authority.  Some local authorities still want wet signatures on parents forms, causing a lot of paper usage, printing, and time wasting – none of which early years providers are funded to do for them.

SEND funding is woefully inadequate, with children needing 1:1 support now having to be turned away unless they are limited to about 20% of the attendance that other children can attend, this is enforced discrimination.

January 2023