South Tyneside Council: Review of children’s services in the Borough

In October 2018, South Tyneside Council participated in the Productivity Experts Programme to review their directly provided childcare service. This report outlines the project and considers the conclusions of the final report and identifies the way forward. This case study forms part of our productivity experts resource.

Efficiency and income generation

The review noted that there is potential to create £327,890 of additional income on an enduring basis if all spare capacity is taken up, however the review also highlighted a range of areas for further detailed work which offers the potential to reduce the cost of delivering the service.

The challenge

Since 2010, South Tyneside Council has lost 60% of central government funding support. It has been successful in dealing with this financial challenge and achieving savings of over £150 million through implementing new delivery models, realising greater value from assets, integrating internal and external services and generating additional income. At the same time, the council is implementing an ambitious regeneration programme to support new businesses and jobs. However, it is forecast that over the next five years a further £44 million of revenue savings will be required, necessitating a more innovative approach to service delivery. The provision of impartial external scrutiny to guide the development of proposals and inform decision making is crucial. This has been provided through the LGA’s Productivity Expert Programme.

It is accepted that the experiences children have in their early years will impact upon educational achievement, health and wellbeing and a range of other outcomes in later life. Through the 'Best Start in Life' campaign, South Tyneside Council wants the children and families of South Tyneside to aspire to a bright and prosperous future and reach their full potential. This includes providing a choice of high quality early years and childcare settings. Whether an element of this should be directly provided, cognisant of the council’s financial position, is a crucial consideration.

In September 2017, the government doubled the universal entitlement of 15 hours free childcare available for all three and four year olds to 30 hours for working parents of three and four year olds in England. It is funded during term time only (38 weeks).  Parents can choose to use their entitlement as 30 hours per week during term time or 22.8 hours per week across 50 weeks of the year in a range of early years Ofsted-approved providers.

Extensive work was undertaken, prior to the introduction of the programme in September 2017, to ensure that parents could access sufficient good and outstanding early year’s provision across the borough. Existing providers in the sector were encouraged to extend provision within their own settings to meet additional demand.  However, the last childcare sufficiency assessment was conducted in 2014 and there had been no review of the situation since the changes took effect.

The 30 hour entitlement for eligible families can be accessed across a range of flexible provisions. The vast majority of places have been provided through existing settings, with a successful application to the DfE funding the build for a new provision at one primary school, enabling up to 40 placements to be created.

As at the end of July 2018, 740 children had accessed the 30 hours entitlement across South Tyneside. Between September 2017 to July 2018, 768 two year olds have accessed provision, which is 92per cent of all eligible two year olds and well above the national figure of 72 per cent.

In summer 2018, South Tyneside was recognised as one of only 14 per cent of councils to get the full 4 star rating for the latest SOCITM online assessment for our ability to identify and secure childcare for families. The Early Years and Childcare Service is also an integral part of the early help response in South Tyneside offering targeted support and casework for families with children aged 0-5. The targeted early help work undertaken by the team was also viewed very positively by Ofsted in the Children’s Services Inspection in 2017. The service works closely with partners in schools and health to deliver integrated support to children and families.

The team works closely with the school improvement service to ensure all children have access to interventions so they are enabled and encouraged to achieve to the best of their abilities.  A key aim has been to support settings and early year’s practitioners to focus on improving outcomes for all children at the end of the early years foundation stage and to narrow the gap for disadvantaged children. Working closely with nurseries, child minders, private, independent and voluntary day-care settings and parent/carers this ensures that the youngest and most vulnerable members of our community are given the skills they need to move into formal education settings. Significant improvements in the numbers of children achieving a good level of development at the end of the Early Years Foundation Stage has been seen, rising from 67.9 per cent against a national average of 69.3 per cent in 2016 to 72.7 per cent against a national average of 71.7 per cent in 2018, illustrating how quickly South Tyneside has closed the gap.

The quality of childcare settings is measured through Ofsted Inspection and via internal quality assurance arrangements. As at July 2018, 97.46 per cent of settings were rated good or outstanding, above both regional and national averages.  These settings include schools, nurseries, children centre STANLEY’s day-care provision, private, independent and voluntary day-care settings and childminders.

Description of assignment

The Council’s STANLEY’s (South Tyneside Accredited Network for Learning in the Early Years) are childcare settings that are co-located with other children’s services in twelve different locations throughout the borough. This integrated approach provides wraparound support through access to children’s centres and early outreach support, as well as engaging parents in parenting classes and providing access to employment opportunities.

STANLEY's are committed to providing high quality childcare to improve outcomes for young children and their families, and reduce inequalities. Specifically, STANLEY’s support revolves around:

  • Child development and school readiness – Supporting personal, social and emotional development, physical development and communication and language from pre-birth to age 5, so that children develop as confident and curious learners and are able to take full advantage of the learning opportunities presented to them in school.
  • Parenting aspirations and parenting skills – Building on strengths and supporting aspirations, so that parents and carers are able to give their child the best start in life.
  • Child and family health and life chances – Promoting good physical and mental health for children and their families, safeguarding, supporting parents to improve the skills that enable them to access education, training and employment, and addressing risk factors so that children and their families are safe, free from poverty and able to improve both their wellbeing and their future life chances.

The STANLEY’s operate at an annual net cost to the Council of c.£1 million. The council is proactive in getting identified vulnerable two year olds into provision and ensuring that 15 hours for three year olds is accessed, however the impartiality required in signposting parents to the range of provision in the borough means that whilst this approach can offset some of the cost of the council-delivered childcare settings, it is not a reliable model. The aim of the review was to look at the children’s services market and the council-run settings to identify whether the current charges for Council-delivered services are appropriate and whether the current model can be optimised. 

The solution

Isabelle Gregory and Joe Badman of Basis Ltd were contracted in December 2018 to conduct the review over twelve days of consultancy. In order to minimise expenses, the plan had been for the majority of the work to be conducted remotely, with a workshop in South Shields being the sole face to face element.  As a result of the requirement for clarification concerning the accounts for individual settings, it was felt essential to the progression of the review that an additional face to face day be conducted and after a snap OFSTED inspection necessitated short notice rescheduling, this was conducted. As a result of these unforeseen complications in establishing the financial baseline there was a requirement to focus the scope of the review more narrowly to look at the core objectives of identifying income generation and service efficiencies as a result of the available time.  It was understood that the twelve settings currently operate at an annual net cost to the council of around £1 million. As the contextual reports, source data and internal financial spreadsheets did not provide a full enough picture of the existing financial position, two setting-specific templates were developed to gain further finance-related intelligence from the twelve settings. The completion of these 24 templates provided a sound basis for a set of detailed financial models, at setting, locality and service level. The top line analysis from the financial models informed the financial workshop which followed from the interactive workshop with staff from the settings and led to the collaborative development of provisional recommendations and resulted in a set of agreed next steps.

The impact         

Estimated Financial Savings/Income

After further research, the overall net cost of running all twelve settings was calculated as £655,853 for 540 children, with an average subsidy of £1,215 per child.  Costs for occupancy were not included nor able to be accurately determined, however using the average cost this would include an additional £270,000 leading to an overall net cost of £925,853, roughly in line with the c.£1million suggested prior to the review.  The benefit of the review in forcing a significant degree of financial housekeeping and adjustment of accounting processes should not be underestimated.

The review noted there were significant vacancies, with the potential to create £327,890 additional income, thus demonstrating the potential to meet the financial objective of the project by addressing this issue. Moreover a clear link was established between quality and vacancies with all spare capacity in full day-care settings rated ‘Good’ and no spare capacity in the two ‘Outstanding’ full day-care settings. This also linked to the average subsidy per child, which was £1,396 in ‘Good’ settings and £1,097 in ‘Outstanding’ settings.

The review also examined the potential for reducing lost income arising from the introduction of a stretched offer in which the 570 hours of free funded childcare for two and three olds is offered flexibly beyond the 15 hour 38 week term time window.  The financial implications of providing a stretched offer were possible loss of income through missed funded sessions, additional staff costs and greater reliance on agency staff. Only one setting would be capable of moving to a positive position if all reported missed sessions were taken up. It was therefore clear that the stretched offer comes with an additional financial commitment and that this is an area that requires in-depth review to ensure that demand and benefit justifies additional expense.

The review identified that staff costs accounted for over 90 per cent of costs (though the cost of premises was not captured) and that as a result of council policy all staff are qualified to level 3 or above, in contrast to lesser qualified staff employed by other providers. Agency costs were 4 per cent of total staff costs, therefore changes here would not make an appreciable difference to the overall position. Furthermore, staff remuneration is comparatively generous, leading to a situation whereby in the most perfect of circumstances a Band 3 Nursery Assistant on an annual salary of £20,543.41 could only generate a maximum income of £22,572.12 from caring for two groups of four two year old children per session in two sessions per day, which would require operating consistently at maximum capacity. Once more senior, better remunerated positions are included in the calculation of the running of childcare settings in line with the council pay structure leads to a situation whereby significant subsidy is an unavoidable requirement if the service is to continue to be directly delivered.

The staff workshop identified some notable considerations in that the provision offered (hours, age, and sessions) doesn’t always match the need of the locality and that some settings have the demand, but the physical environment is not sufficiently flexible to accommodate it. There was also a sense that the budgets and specifically income targets do not match reality and that the review (and further work) is timely and additionally that a rebranding is strongly supported by the staff.  It was affirming that the staff were so candid and well attuned to the issues surrounding the service.

How is the new approach being sustained?

The work precipitated by participation in the programme has been immeasurably useful in bringing this area of expenditure in to focus in a way in which it may otherwise have escaped the degree of scrutiny it clearly deserves. There is now a cohort of enlightened and motivated stakeholders within the Council taking the project forward and building upon the findings and recommendations provided by the consultants.  Specifically, further work is being conducted to complete a childcare sufficiency assessment to determine whether reconfiguration of the current offer to better suit demand and market conditions, in line with the council’s new locality model, is feasible, as well as changes to the current management systems and budgeting processes.

Lessons learned

The project coincided with the conclusion of a far-reaching internal review of the local authority early years’ service, which offers a significant opportunity to align the management of the childcare settings within the new, wider, structure. By creating a locality model with a clearly understood tiered management system and more transparent budgets with more realistic income targets, the ability to better manage the service and flexibly adjust in order to ensure vacancies are minimised will contribute to increasing income and thus reduce the level of subsidy. Allied to this will be a drive to have all directly delivered settings rated as outstanding, noting the clear correlation with vacancies and therefore subsidy, and a thorough review of the way in which the service is marketed.

However, the fact remains that directly delivered childcare is costing a significant amount and will unavoidably continue to do so, despite our combined best efforts. It is therefore essential that we undertake a childcare sufficiency assessment to ensure that the service that is being delivered is necessary and proportionate and where the market is saturated or other providers can step in (such as in the case of reducing a stretched offer to a standard offer in a directly delivered setting), or where there is opportunity to expand to meet demand, this should be examined in detail.  Whilst it may be politically difficult to embrace a proposed new model which appears to be imbalanced, particularly in the context of a move to align settings with the locality model and set against evidence of improving outcomes at the early years foundation stage, the depth of understanding of the market provided by the CSA will allow us to provide options which could significantly reduce the degree of subsidy and potentially improve outcomes where clear need can be established.  This decision on the future structure will, therefore, be the crucial outcome of the next steps.


Beverley Scanlon

Grace Abel, Adviser – Productivity

Links to relevant documents