Steve Alexander
Steve Alexander, Chief Executive of the Pre-school Learning Alliance
On behalf of the Alliance I would like to thank formally the Children’s Minister for her attendance here today and indeed her part in the increasingly positive working relationship between the government and ourselves. The relationship is productive but best described as that of a critical friend to government, as really good friends from time to time may tell you things you don’t like to hear but are motivated to speak out by wanting to see improvements.
However, I want to pay testimony to the government and indeed the Blair legacy – whilst the press may focus on the Iraq war we should remind ourselves that it was this government that launched the 10-Year Strategy for Children and Families some three years ago. So with a new incoming prime minister and some experience of the strategy’s implementation, now is the time to review progress and reflect views across the sector.
Government achievements
The government facts are impressive. Annual spending has increased from just over £1 billion in 1996/7 to £5.5 billion in 2007/08. To date we have over 600,000 free childcare and early education places, over 1200 Sure Start Children’s Centres. A £250 million Transformation Fund has also been put into place to support training and development across the sector. I could go on as the achievements are significant and let’s welcome them.
But I cannot stand here and not reflect the concerns of our members and indeed the whole sector. There are some serious problems with the implementation of the 10-Year Strategy and I call on government to intervene now. I will start with the vexed question of sustainability.
Sustainability
The Department’s own figures show that only 27% of all full daycare providers have reported profits. Laing and Buisson showed in a study of the childcare and day nursery market that nurseries had a 22.5 % vacancy rate at the start of 2007. This equates to 160,000 empty places.
Unfortunately the gloom continues with the ending of funding schemes such as the Neighbourhood Nurseries Initiative which supported costs in centres located in our most disadvantaged areas. As you know, the Alliance led the way in opening neighbourhood nurseries because we believe in supporting our most disadvantaged communities. When we talk about supporting parents (the theme of today’s conference) the Alliance has demonstrated its commitment in this programme and others by putting its money where its mouth is. Well, this year, we lost £1.4 million of much needed subsidy. Despite our strenuous efforts to increase occupancy (now at 53%), maximise income and reduce costs, these services struggle to pay their way.
Numerous government reports such as PriceWaterhouseCoopers and the National Audit Office argue that some services will never be able to operate without ongoing government subsidy because they are in locations where there isn’t the fee-paying demand to make them viable. The Alliance knows this reality only too well and approached the Department for financial help only to be told to speak to Local Authorities. We diligently contacted each of the 22 commissioning authorities involved and few have offered any financial support.
So what do we do? Turn our back on some of the most disadvantaged families or subsidise their running costs as inch by inch we try to make them viable? I want to pay tribute here to our Trustees who have supported this programme unstintingly over the last three years to keep them going. In addition I want to recognise the fantastic help from our staff in direct service provision to drive up occupancy and seek business viability where plainly services cannot operate without subsidy. The Department cannot abdicate its responsibilities to fund these much needed services by applying a business model that does not fit, or hide behind a contract that was never fair or accurate.
Sector feels the strain
Surely we must consolidate new nurseries before developing more and acknowledge that many parents want sessional care not full daycare? Phillip Blackburn an economist with Laing and Buisson thinks more growth in the sector could lead to collapse. In 2004 the day nursery market grew by 17%, in 2007 it has grown by only 1%. He went on to say that “all providers and particularly capacity planners at local and central government must listen to the market”.
The Alliance is not the only organisation or group to take the strain. Indeed the whole of the sector is reeling because of these issues of sustainability. Parents are feeling the pinch with the cost of childcare increasing by 30% over the last six years. This has made the UK the most expensive childcare structure in the EU with parents paying approximately 70% of the full costs of childcare whilst the EU average is 30%.
Staff are not getting fair wages either. The average wage for a childcare worker is just £6.40 per hour whilst the national average is £10.63. The Alliance has campaigned vigorously on all of these issues and I am pleased to say that this has been noticed by the Children’s Minister and the trade press. Children Now recently described me as “one of the most vocal advocates of sustained funding for the childcare sector.” Specifically around the withdrawal of NNI Subsidy, Children Now recognised we were one of the first to call for the funding to be extended.
Asking for more money is never going to be an acceptable solution to government. There are many competing and deserving alternative priorities. However, if early years are really going to be the foundation for life, government must act upon its own independent report recommendations and the advice of providers such as the Alliance to invest what is needed. It is all very well to have champagne ideas but it is not acceptable to the Alliance if you only have beer money to fund the implementation.
The Alliance has offered other solutions to the Treasury and the Children’s Minister. This year we helped to convene the Major Provider Group which is made up of the country’s top 14 childcare chains and providers. The Alliance sits at number 8, but is moving up the league table. The Major Providers have asked us to chair meetings and coordinate their work programme for the year ahead. We have presented to the Treasury and Beverley Hughes proposals to utilise existing universal capacity in the sector as children’s centre designated services. We believe this could save millions in saving revenue and capital in the roll out of the children’s centre target of 3,500 by 2010 and at the same time help government achieve its ambitious aims. We have the backing of Beverley Hughes and will move to a pilot project to demonstrate the benefits before moving we hope to a general approach across the country.
Now I want to be clear. The Alliance wholeheartedly (and financially) supports the vision and intent of the 10-Year Strategy. But this support for the vision and intent must not be confused with support for all aspects of the implementation. We will always take a vigorous stand when implementation isn’t working. Our comments are always evidenced and, I hope, constructive, but we will not be quiet if something needs to be improved.
A case in point is the concern over the free entitlement and the forthcoming introduction of the flexible offer. Many of our members would like to expand their service but are unable to do so because of the limitation of premises they occupy. Where possible, government should offer both revenue and capital support to help member group expansion. In principle the free entitlement is an approach that the Alliance, with others, had lobbied for and wants to see. Government extension to the free entitlement is also much appreciated. However, the resulting levels of Nursery Education funding has been a concern for the sector and our members. That is why we surveyed our membership in January this year to see what views you had. In short, the outcomes of the research to nearly 15,000 settings was clear.
The majority of providers, some 62%, are coping with current levels of Nursery Education Funding. However, rising annual costs, the drive to improve quality and forthcoming initiatives such as the implementation of the Early Years Foundation Stage are likely to create additional costs for providers further threatening their long term sustainability. We have called for a new funding formula that seeks to make NEF applied much more consistently across the country but flexible enough to reflect regional weighting and better represent the true costs to providers. We support the notion of free entitlement but cannot support the policy implementation if some providers just do not get their true costs reimbursed.
Full cost recovery
Now I want to turn to another difficult question for the government. This relates to the autonomy of Local Authorities to commission and the failure of contracts to offer full cost recovery. The Charity Commission report “Stand and Deliver” demonstrated in its research that 89% of charities fail to receive full cost recovery. The Alliance endeavours to receive FCR but our own audit work towards the end of last year revealed we receive only 1.9% on average towards our running costs. You don’t have to be an accountant to appreciate that this is not viable or indeed fair. In effect the voluntary sector is being forced to subsidise the State. This is not acceptable or sustainable. What is happening, is local contracts are being continued in order to keep a foothold in Authorities even though these contracts do not provide adequate funding. The accumulative position costs us over £800,000 per annum as the difference between what we receive and what we should get. As you would expect, the Alliance will only take on new contracts which cover their costs. For ones in existence we are in negotiations to uplift the funding but this cannot be delivered overnight. In the interim, we are faced with little alternative but to make do with inadequate support. This is grossly unfair and outside of the spirit of Charity Law.
Local commissioning is a very demanding task and the Alliance working with the country’s 150 Local Authorities knows better than most that we are still in a period of massive commissioning change and ever expanding expectation. In terms of process, it is probably the most critical element for government to get right in order to deliver the promise of universal and affordable childcare. Does government not see the wide variation in commissioning performance and interpretation across the country with some Local Authorities acting quite outside of the guidance but seemingly without sanction being applied? Our members are at the sharp end of this variable commissioning performance. Contracts have been lost, not through fair competitors or indeed quality shortfalls on behalf of the Charity. In some areas, providers have been chosen because they have offered to fulfil the contract for 50% less cost – only to withdraw within the year because they could not afford to complete the work or understand their obligations regarding TUPE. Our staff have been head hunted to work for the Local Authority and indeed local committees have had to grapple with changing contracts for many years. We are not change averse but want to see fair competition on the “level playing field” so often quoted by government.
Sufficiency duty
Let’s start with simpler solutions. Could we not have more standardised contracts across England rather than the myriad of types we are asked to sign? There must be a sensible argument for efficiency and therefore effectiveness of approach. Is it too complex for government to challenge and potentially penalise financially Local Authorities who just want to take services in-house despite the government’s guidance. To remind ourselves “Local Authorities should only provide new childcare themselves when there is no other person or provider willing to provide it. If another provider is prepared to make provision, the authority may only make the provision itself if there is good reason for it to so”. Sufficiency Duty Section 8 (3).
Now I accept that there will be situations when contracts will be lost through competition or local mapping that determines a contract is no longer relevant. But a desire for control and to add money to the maintained sector coffers cannot be legitimate motivation for taking contracts from the PVI sector. Goodness knows there are already too many competitive advantages over the independent sector in being in the maintained sector such as zero rated VAT, subsidised and higher salaries, and preferential ways to receive higher levels of Nursery Education Funding.
Why does government find it unpalatable to intervene in some Local Authorities who patently have no regard for partnership working? The majority of Local Authorities do and therefore there are many to learn from and lead the minority to improve. Current initiatives to do this are voluntary so don’t be surprised if the hard core recalcitrant Authorities do not sign up.
The Department has not really led by example. The Alliance is a strategic partner to the DfES and I think the evidence shows we have made a massive contribution in the last three years to help them meet some of their outcomes. We now get along very well (let’s see how things are after this speech!) but why is it that the Alliance has had its core grant funding reduced from £2.1 million in 2000 to just 1.3 this year? Justification from the Department suggests that this shortfall would be more than compensated for by the increased contracts with Local Authorities. Yes we have seen some growth in our new work but not at this level of difference.
Modern alliance
The Alliance is not whingeing. We do not live in a 70’s time bubble (said by some!). Far from it, we have shown time and time again that we can modernise and today’s Alliance is delivering more than ever before. We will manage our future, even though that means making some tough decisions. However, I am not prepared to ignore the inadequate funding levels, the incompetent commissioning and civil servants playing at free market enterprise which are the causes of the financial challenges that organisations like the Alliance are facing. This government has spent more money then any previous one on childcare but it must dig deep to find what is really needed and not rely on the goodwill (and money) of the Alliance to pick up the tab.