They were created with the noblest of intentions - to provide childcare for parents in the most disadvantaged areas and enable them to find a route out of poverty through employment. The Neighbourhood Nurseries Initiative (NNI) created 45,000 childcare places in 1,400 new nurseries. And yet their three-year tapered funding was always seen as their Achilles heel.
Would they be able to remain sustainable after the three-year period of funding ended? Well, there is now growing evidence that as the subsidies from Government have dried up, the future of some of these nurseries is in doubt. Local authorities are having to weigh up the cost of continuing to fund their deficits or cut their losses and close them down, or find private sector providers to take them over.
Wakefield Metropolitan District Council is reviewing the future of its seven neighbourhood nurseries because of the strain on local authority finances as it has had to prop them up after tapered funding ended in March 2007. A report to the council's cabinet warns, 'The cost of such maintenance impacts on the local authority's other budgets. It is forecast that without action taken, the impact in 2008/09 will be in the order of £480,000.'
The Wakefield report provides a microcosm of the problems faced by councils up and down the country, and it highlights the central dilemma of the whole initiative when it states: 'The overall objective of targeting families in most need has made the task of financial management difficult. Nursery provision in general is more likely to be sustainable where families are more affluent and able to afford higher fee levels.'
That was certainly one of the key findings of a team of academics tasked with evaluating the Neighbourhood Nurseries Initiative. Teresa Smith, a lecturer in the Department of Social Policy and Social Work at Oxford University, who took part in the evaluation, says, 'Our analysis suggested that sustainability problems might be less for nurseries who could bring in a mixed clientele - whereas the ones you might want to give five gold stars to because they were right slap bang in the middle of the most disadvantaged neighbourhoods might be under pressure.'
Naive or immature?
This chimes with the analysis of Steve Alexander, chief executive of the Pre-School Learning Alliance (PLA), who says that neighbourhood nurseries, 'by their very definition, were in areas of high disadvantage but almost consistently in areas of low ability for parents to pay fees'.
This strategy coincided with commissioning that was 'either naive or immature', and business plans assumed occupancy levels at the end of the three-year subsidy period that were 'never realistic'.
He adds that the ending of NNI funding also coincided with the Government devolving responsibility for the distribution of funds to local authorities, effectively 'washing its hands' of calls for sustainability support, insisting that this was now the domain of council leaders.
From the experience of the PLA's own 30 neighbourhood nurseries, Mr Alexander says that the response from local authorities to appeals for sustainability funding is 'very variable across the country'. The charity's nurseries have survived with 'extensive management input' but have never been in a position to help meet its management overheads.
For Marilyn Barton, head of the early childhood service at West Sussex County Council, the chief concern is that while the NNI was engaged in a longer-term process, funding tapered off too quickly. Some families need support while they develop the skills to find employment, she argues.
She acknowledges the sustainability issues and says they vary according to the size of a setting and other local factors. Last year the council decided to close its South Lodge nursery in Worthing. A report to the council revealed that 'although the original business and financial plan showed break-even point at 91 per cent occupancy against a predicted occupancy of 93 per cent, the current occupancy has fluctuated between 30 per cent and 40 per cent in the past year'. It blamed oversupply from new nurseries opening nearby.
Another pressure Ms Barton identifies is the growing tendency for parents to need variable patterns of childcare, often just access to the entitlement to free nursery education sessions for three- and four-year-olds. This has posed a challenge for some nurseries who have resorted to charging hourly rates.
Teresa Smith says the need for flexible childcare was most starkly apparent to the evaluation team when it visited settings in areas where there was seasonal work and women with young children were often looking for part-time care while they worked in catering in hotels.
'Dealing with this ebb and flow was very difficult for nurseries and they were forced to charge hourly because parents would not pay for two whole sessions if they were only going to use part of them,' she adds.
The part-time nature of demand was also shown in the report for Wakefield council. For example, at the 40-place Oakhill neighbourhood nursery, occupancy amounted to just nine full-time equivalent places with 46 attending, while Agbrigg had 12 with 47 using the nursery at various times.
Safety net
Lynn Hoare, who runs the Poet's Corner nusery in Hove and two others in Brighton, has a largely positive view of the NNI. She says the NNI subsidy for eight of the 32 places enabled the Hove nursery to survive during its first five years. 'We would have gone under without the safety net it provided us with,' she adds.
But her nursery was not heavily dependent on NNI subsidy and had 24 independent places, which meant that it was well placed to build up its numbers and reach the 'enviable position' of having a waiting list.
Mia Kilburn opened the Hocus Pocus day nursery in Bolton five years ago, with about a third of her 60 places backed by the NNI money. After a 'nail-biting' period during which the nursery struggled to establish itself, she says it has now 'turned the corner'.
She insists that the Government devoted too much money to opening facilities and it would have been more beneficial for nursery owners if they had put half the money towards advanced training to ensure that strong management teams were in place. 'We really struggled for years to get the nursery manager we wanted. The one we have now has made such a difference,' she adds.
But where, as in Wakefield, neighbourhood nurseries are not making ends meet, the options appear limited and bleak. The Wakefield report states that continuing to provide all seven nurseries and attempt to remarket them 'carries high financial risk to the authority'. To close them because they are not self-sustaining would have 'a major impact on the childcare provision across the district'.
The last option, which the council believes might carry the least risk 'in the context of the wider financial position', is to consult service users in nurseries carrying the highest financial risk. None of these options is likely to be palatable to the council, parents or the nurseries themselves.
Bournemouth City Council faced similar mounting deficits at its two neighbourhood nurseries, Townsend and Boscombe, whose debt at the end of the 2007-08 financial year was £105,000, according to a report to a meeting of the council in January.
The council has now successfully offloaded them to Sequal Childcare, a social enterprise nursery group which has aspirations to establish a chain of childcare facilities. Development manager Lucy Culkin says that the combined debts of the two nurseries had soared to around £150,000.
No doubt councils in other parts of the country will be watching, and even hoping, that like Bournemouth council they can find a suitable partner to take on what are increasingly seen as their neighbourhood nursery liabilities. Some, of course, have found some security by being linked to children's centres.
The lessons of the NNI experience go far deeper than a cursory look at mounting deficits. Many have provided a vital lifeline to parents wanting to escape the poverty trap by seeking employment. But if nurseries are to play this crucial role in severely disadvantaged areas, they cannot be expected to survive and compete as quickly or on the same basis as facilities in more affluent areas. They need and deserve more long-term subsidies.
