Financial situation



When the Early Years Funding Formula (EYNFF) was introduced in April 2017, which introduced a flat hourly rate for all providers offering government funded places to 3 and 4 year olds, local authorities and Maintained Nursery School's argued that many of the schools would be forced to close if they were funded at the same rate as other provider types. The government acknowledged the higher running costs of MNSs and announced £55 million supplementary funding until 2019/20 to ensure that MNSs would receive the same hourly rate for the universal entitlement for 3 and 4 year olds as they had done prior to the introduction of the formula. This means that a small number of MNSs which had previously received an hourly rate equal to or below the new rate set for their local authority under the EYNFF do not receive any supplementary funding. The majority of MNSs involved in the research do receive the additional funding, but a few do not, and have different arrangements with the local authority to support them to remain sustainable. The supplementary funding has been guaranteed until March 2020, and the government is yet to announce what provision will be put in place for MNSs after this date.

Crucially, the interviews highlighted that the supplementary funding that most MNSs are receiving is not sufficient to make them sustainable in the future. Most of the interviewees highlighted that their school was in deficit and that this was growing each year. Several headteachers discussed how recent policy changes and cost rises have impacted on the financial resilience of MNSs, meaning that they may struggle to stay open until March 2020, even with the supplementary funding. The factors that are creating this difficult financial position for MNSs are highlighted below.

Factors contributing to an unsustainable financial situation for Maintained Nursery Schools

Maintained Nursery Schools (MNSs) have historically had higher costs than other settings. Due to the size of MNSs, they spend a higher proportion of their budget on fixed costs and overheads than primary schools. For example, MNSs and primary schools are both required to have one headteacher, deputy, governing body and Special Educational Needs Coordinator (SENCO) for the whole school. This is much more cost-effective for a primary school (the smallest of which would have 7 classes, with around 210 pupils) than a maintained nursery school (which typically has around 110 pupils). In comparison with PVIs, which are not required to have a head teacher, deputy, SENCO or governing body, MNSs inevitably have much higher overheads.

In addition, like primary schools, MNSs are required to employ qualified teachers to run their classes, which cost significantly more than a Level 2 or 3 practitioner. PVIs, by comparison, can run their setting with staff holding Level 3 qualifications and below. Some of the MNSs are required to pay all of their staff the London Living Wage as local authority maintained settings, unlike PVIs. Pensions and national insurance contributions are rising, and the teacher and general public sector pay rise is likely to exacerbate budgetary pressures. MNSs also have higher fixed costs than primary schools for services such as payroll and health and safety, and have to pay the apprenticeship levy, unlike most PVIs.

Implications of policy changes on costs

While most MNSs currently receive supplementary funding from the government to cover the delivery of the 15 hours universal entitlement for 3 and 4 year olds, this additional funding is not extended to cover the delivery of the additional 15 hours for 3 and 4 year olds with working parents. This means that MNSs who are offering the 30 hours must provide the additional 15 hours at a lower rate that does not cover their costs.

Some MNSs who took part in the interviews did not offer 30 hours, as they wanted to focus their provision on the more disadvantaged in the community. Some did offer 30 hours, and several of these settings emphasised that they needed to offer this entitlement because otherwise working parents would decide to move their children to another setting where they could take up their full entitlement.

Several London boroughs have previously offered full time places for the most disadvantaged 3 and 4 year olds, and MNSs have been instrumental in delivering these additional hours. However, the vast majority of boroughs have stopped offering this provision, or are gradually phasing it out since their funding has been reduced by the restrictions placed by the EYNFF on the level of funding that local authorities can hold back from providers. This means that a key funding source is disappearing for some MNSs, and cannot easily be replaced by the 30 hours entitlement for MNSs in areas of disadvantage, where it is less common for both parents to work. And, as described above, MNSs can only deliver the 30 hours entitlement at a loss.

Cost of supporting 2 year olds

The majority of settings that took part in the interviews reported that they offer places for disadvantaged 2 year olds. However, the funding rate that MNSs receive does not cover the costs of delivering this provision and the supplementary funding from government does not apply to the 2 year old entitlement. . This is because delivering 2 year old places requires higher staff to child ratios, and this cohort can be more challenging given that those who are eligible are predominantly from disadvantaged backgrounds or have SEND.

The fact that MNSs save places for 2 year olds in the next class, so that they are able to remain in the MNS until they are ready to go to school, means that they lose out on the opportunity of receiving funding for the nursery place for a period of time, usually a few months. Headteachers emphasised that PVIs do not normally take this approach, as it is not financially beneficial.

Cost of supporting children with SEND

The reputation of MNSs amongst parents and professionals, and the unwillingness of some providers to take on certain children with SEND, means that MNSs often end up supporting a disproportionate number of children with SEND, particularly those with some of the most complex needs. While some MNSs receive some extra funding from the local authority to support children with SEND, headteachers have stressed that this far from covers the true cost of supporting these children and their parents. It takes so long to secure an EHCP that children often do not receive one until they are close to leaving the setting, and in some cases not until they have already started at primary school. In the meantime, most MNSs do not receive extra funding to support the child but are committed to finding a way of meeting their needs nevertheless, which will often be complex and costly. The high needs budget, which central government allocate to local authorities to fund support for children and young people with SEND, is currently extremely stretched, and London boroughs spent £100 million more than the amount allocated by central government in 2016/17. This has meant that several local authorities are prioritising their statutory duties to children and young people with SEND, and do not have the extra capital to support settings such as MNSs to provide support prior to the receipt of an EHCP.

MNSs also support many children who may not yet be eligible for an EHCP, or whose parents may not be ready to apply for one; but they are still in need of additional and individualised support from Speech and Language Therapists or learning assistants.

The impact of reducing Maintained Nursery School funding


The majority of interviewees claimed that their nursery school would be unlikely to remain open if the supplementary funding that they currently receive were to be removed. Those who do not receive supplementary funding said that their reserves were gradually being depleted, which will soon places them in an unsustainable situation.

Less support for children with SEND

The majority of headteachers said that, if they did manage to stay open, this would only be by accepting fewer children with SEND, or significantly reducing the support available for these children.

Other consequences

Most headteachers did not highlight other consequences, as they did not believe the schools would be able to stay open if they did not have access to the supplementary funding. However, a few suggested that their first step would be making redundancies, and another suggested that MNSs would have to be staffed like PVIs, without any qualified teachers. Another interviewee said that the school would have to reduce the number of places provided to disadvantaged 2 year olds or 3 and 4 year olds who were only entitled to the universal 15 hours provision, and instead focus on providing places for children whose parents were entitled to 30 hours and can afford to pay for wraparound provision.

Urgency of the financial situation

Every headteacher emphasised how urgently the government needed to make a commitment to funding MNSs at a level that would allow them to operate sustainably. Some said they would struggle to remain open until March 2020, which is the point at which their funding looks set to reduce. Others said they would need to know what their funding situation was going to look like well before September 2019, so they could make a decision as to whether to open for the 2019-2020 academic year.

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