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Portsmouth City Council (20 012 829)

Category : Education > COVID-19

Decision : Not upheld

Decision date : 08 Jun 2022

The Ombudsman's final decision:

Summary: We did not uphold Mrs X’s complaint about how the Council funded nurseries and pre-schools in the first national lockdown in response to COVID-19. There was no fault in the way the Council decided its funding arrangements.

The complaint

  1. Mrs X complains the Council did not fund her nursery correctly during the first national lockdown in response to COVID-19. She says as a result as has suffered a financial loss. She would like the Council to recalculate her funding and make a further payment to remedy the loss.

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The Ombudsman’s role and powers

  1. We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word fault to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
  2. We cannot question whether a council’s decision is right or wrong simply because the complainant disagrees with it. We must consider whether there was fault in the way the decision was reached. (Local Government Act 1974, section 34(3), as amended)
  3. If we are satisfied with a council’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)

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How I considered this complaint

  1. I have considered the complaint made by Mrs X and the documents she provided.
  2. I considered the Council’s comments about the complaint and the documents it provided in response to my enquiries.
  1. Mrs X and the organisation had an opportunity to comment on my draft decision. I considered any comments received before making a final decision.

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What I found

Free Early Education Entitlement

  1. Councils must secure sufficient childcare, so far as is reasonably practicable, for working parents, or parents in education or training.
  2. The Childcare Act 2006 (as amended) places a duty on councils to secure early years provision free of charge. Regulations set out how councils should discharge their duty.
  3. All children who meet the eligibility criteria can take up a free childcare place if their parent wants one. This is known as the ‘free early education entitlement’.
  4. Children are entitled to between 570 and 1,140 hours of childcare over no fewer than 38 weeks of the year depending on their age and eligibility.
  5. The eligibility criteria are different for two-, three- and four-year-olds, and for children of working parents. Children are eligible from the term after their relevant birthday. For children born in the period 1 January to 31 March, this is the start of term beginning on or following 1 April after the child’s birthday.
  6. Early years providers usually have a mix of public income (through the free early education entitlement) and private income (from the fees parents pay for childcare beyond the free entitlement).


  1. Councils pay local childcare providers for each funded place they deliver. Councils can adjust these payments to reflect actual levels of participation in the financial year.
  1. The guidance says councils should ensure that providers are not penalised for short term absences of children, but use their discretion where absence is recurring or for extended periods considering the reason for the absence and the impact on the provider.
  1. In this Council area, providers complete a ‘forecast task’ which tells the Council which children in their setting will be accessing a funded place and for how many hours, in the following term. Providers are paid for the hours they include on the forecast at the beginning of term.
  2. Providers also complete a ‘headcount task’ during the term which checks if there have been any changes since the forecast task. If there are more or less children in the setting than forecast, the Council will finalise payment at the end of the term. It pays providers more if they delivered more funded hours than forecast, or invoices providers if they delivered less hours.
  3. The Council used the term ‘vacant places’ to describe children on roll who the provider has been paid for but who were not attending the setting during the lockdown periods in response to COVID-19.

Impact of COVID-19 pandemic

  1. On 17 March 2020, the government announced it would continue to pay councils free early education entitlement funding for two-, three- and four-year-olds during any period of closures, or where children could not attend due to COVID-19. The government said this was to provide reassurance and minimise short-term disruption for early years settings. The following day the government announced nurseries would not have to pay business rates for the 2020 to 2021 tax year.
  2. On 20 March, all schools, colleges and early years settings closed, except for the children of key workers and vulnerable children, in the first national lockdown.
  3. On the same day, the government announced the ‘Coronavirus Job Retention Scheme’ (CJRS) which allowed employers to place employees on furlough and apply for a grant to pay 80% of their wages.
  4. The Department for Education (DfE) issued guidance at the end of April about financial support for early years providers. This said no organisation should profit from the exceptional financial support available and should only access the support required. Organisations which continued to receive government funding were told not to furlough staff whose salaries were typically covered by that funding. The guidance said that where funding continued to be paid, the government expected providers to continue to deliver that service as far as possible.
  5. The guidance said it expected providers to first consider any options to reduce their running costs and secure commercial loans before seeking access to grant schemes or seeking specific support from the DfE. It set out the conditions which had to be met for early years employers to be allowed to furlough staff.
  6. Early years providers could access the CJRS to cover the proportion of their wage bill which could be considered to have been paid for from their private income. For example, if a provider received 40% of its monthly income from private income, the provider could claim CJRS support for up to 40% of their wage bill. This would be done by furloughing staff whose usually salary or combined salaries come to no greater than 40% of the provider’s total wage bill.
  7. In further guidance issued in April, the Department for Education set out how councils could use the free early education entitlement funding differently during the COVID-19 outbreak.
  8. This guidance said councils were best placed to monitor and manage their local childcare market and take responsibility for ensuring sufficient childcare places. In exceptional circumstances, when all other options have been exhausted, councils could redistribute funding from closed providers to those who remained open to secure sufficient childcare. However, the guidance noted that demand for childcare was low in the lockdown period so there was expected to be little need to redistribute funding in practice.
  9. The guidance said councils should give providers appropriate notice of any decision to remove funding to allow settings to adapt their business planning accordingly.

What happened

  1. Mrs X runs a nursery which cares for children up to the age of five. The nursery offers places funded by the early education entitlement funding as well as places paid for privately.
  2. In February 2020, Mrs X sent the Council a forecast of the hours she expected to deliver in the summer term. Mrs X forecast the nursery would have delivered 16,291 hours of provision to children receiving early education entitlement funding.
  3. On 19 March, the Council wrote to providers about the government’s decision to close schools and early years settings. It said, where there were children eligible for a ‘free’ early education place, “for each funded child who is not attending you should allocate a new eligible child to that ‘vacant’ funded place.” The Council said if a new child wished to join a setting and there were no vacant funded places to use, it would ask providers to complete a headcount and claim at some point in the summer term. It said “We can reassure you that eligible children will be funded, however given the speed at which guidance is changing, we cannot guarantee this.”
  4. On 20 March, the Council issued a ‘frequently asked questions’ document to providers. This said:

“Q. Will settings be funded just for the eligible children of keyworkers, or for all the children on our forecast task? Will the funding we receive in April have to be paid back if we are closed?

A. In line with government guidance, early year's entitlements will continue during any periods of nursery, preschool or childminder closures or where children cannot attend due to coronavirus (COVID-19). This means that the forecast payment due to you in April will not need to be paid back and relates to all of the children that you claimed for and not just those of key workers.

Q. I am remaining open for children of keyworkers and vulnerable children. I am accepting new children in these groups, when will I receive payment for these new children?

A. Where children are eligible for a funded early education place there are 2 ways this will be funded -

1) you should use any spaces you have already been funded for that are not being used by children - i.e. those you claimed for on the summer headcount and who are not keyworker children.

2) complete the 'Exceptional Headcount' claim form and await further information on submitting this. [The Council] have made arrangements for the summer funding to be paid in advance, so expect the majority of children to be covered in point 1. We aim to resolve any additional claims by the end of the funding period.”

  1. When settings were advised to close to all but keyworker and vulnerable children Mrs X’s nursery initially remained open. However, due to the low number of children taken up their places, she decided to close the nursery at the end of March.
  2. Mrs X furloughed all her staff. However, three weeks later the Department for Education advised she could not furlough staff funded by the early education entitlement funding. As most of the nursery’s income was from private fees, Mrs X could keep several staff on furlough.
  3. On 27 March, the DfE held a webinar for early years managers in local government. The DfE was asked whether councils could ‘double fund’ a child, where one provider was claiming funding for them but then closes and the child had to attend another provider. The DfE said there would be several “pre-paid” places available in those settings which remain open, given the number of children attending would be much lower than in normal times. It anticipated councils use ‘empty’ funded places available in settings to make sure the child could access a place. The DfE also said that where settings were closed and did not have data for the summer term, councils could fund them based on their spring census.
  1. In April, the Council contacted providers and said it would not be issuing its headcount task. Instead, providers were asked to complete weekly returns of the number of children attending. Mrs X queried what she should do about children who started in her nursery, or who became eligible for funded hours, after she submitted the forecast task in February. The Council said there would be an opportunity for amendments to the summer term claims before the end of the summer term.
  2. The Council paid Mrs X £75,528.90 based on her February forecast for the summer term.
  3. In May, the Council commissioned an organisation to provide advice to early years providers about sufficiency and offer one-to-one business support. It shared information about this with providers in May and June. Mrs X did not access the service.
  4. Mr X reopened the nursery on 1 June. Due to ongoing concerns about COVID-19, not all parents returned their children to nursery immediately. As a result, some of the staff remained on furlough while others returned to work.
  5. On 4 June, the Council wrote to early years providers. It said it had paid providers 100% of their funding based on the forecast they provided in April. It asked that any new children who accessed early years provision in the summer term use vacant places providers had already been funded for. It said using already funded places meant the Council would not need to redistribute funding and would not withdraw any funding already paid.
  6. The Council said it would pay any settings which had delivered hours to eligible two-, three-, and four-year-olds that were above the amount paid for at forecast.
  7. On 8 June, Mrs X asked the Council if she could submit a claim for children who would have started in her nursery on 1 April. The Council said Mrs X would need to show she had delivered more than the funding hours she had received.
  8. In response, Mrs X said if she had known she would have to use funding money to pay her wage bill she would have planned differently for her business. She explained the difficulties she was experiencing in parents not returning their children to nursery due to concerns about COVID-19. She said as these parents had not given notice on their child’s places, the funding she had been given by the Council was allocated to those children. She had not had any funding allocated for new children who had joined the nursery since 1 April and were not on the forecast she provided.
  9. The Council said it had to adapt its funding arrangements to ensure they were as fair as possible for all providers. It said it was not taking any money back from Mrs X and that it hoped she had been able to furlough some staff against her private income as well as accessing other financial support such as business rate relief. The Council said it would only consider a claim from Mrs X if it exceeded the number of children she had already received funding for. It invited Mrs X to provide evidence of the excess hours she had provided.
  10. Mrs X wrote to the Council again in July. She said as the setting was closed from late March until the beginning of June, children would have attended for less than the forecasted hours. Mrs X said she had to keep these places open for children to return to and had to keep places open for those children who would have started on 1 April as she did not know when the nursery would be able to reopen. Mrs X said if she knew she was not going to receive funding for the extra children, she would have told parents they could not start attending the nursery until September 2020.
  11. Mrs X sent the Council an updated ‘headcount form’ including the children who had started after 1 April. This included children who were not on the forecast she had previously submitted. The Council said it would not be making any further payment for the summer term as Mrs X had been paid for more hours than she delivered.
  12. The Council recorded a complaint from Mrs X about her funding in August 2020. In response, it said its decisions had been based on guidance from the Department for Education and careful consideration about the future sustainability of the childcare market across the city.
  13. Mrs X was unhappy with the Council’s response and asked for a meeting with senior officers. The meeting took place in October. Mrs X sent further information to the Council about the hours of provision she had delivered.
  14. The Council sent a further complaint response to Mrs X in November. This said officers had acted in line with government guidance and had been consistent in their approach to payments. The Council said it would be inappropriate to recommend Mrs X’s setting be treated differently to other early years settings in the area.
  15. The Council issued its final response to Mrs X’s complaint in December 2020. It said the setting had delivered less hours than the 16,291 it had been paid for. The Council maintained it had acted in line with the guidance and reiterated the guidance it had issued in June.
  16. In December, the Council approved a grant of £2,700 to all nurseries and pre-schools to support the sustainability of the market. It paid a further grant for the same amount in the spring term.
  17. Mrs X maintains she is owed several thousand pounds in unpaid early education entitlement funding.

Council’s response to our enquiries

  1. In response to our enquiries, the Council said many settings that remained open during the first national lockdown did so at added cost to themselves. The Council agreed to pay settings which decided to open during the Easter holidays and summer half-term to provide childcare for keyworker and vulnerable children. It also said it had to double-fund some children as they needed to go to childminders when their early years settings closed. The Council said there was no extra government funding to meet these and other costs and it was uncertain about the number of children it would need to fund. It says it gave considerable thought to how to manage its budget to ensure it did not result in an overspend.
  2. The Council also said government guidance was frequently being updated and it was later advised it could recoup money from settings which had decided to close to support those which remained open. The Council decided it would not be prudent to claim back money from closed settings, for the sake of childcare sufficiency across the city. Instead, it decided children could access vacant places in open settings without any disadvantage to settings which were closed.
  3. The Council said of 183 settings in the city, only one delivered above their forecast hours during the summer term. The Council paid the setting for the extra hours delivered. All other settings in the city were funded in the same way as Mrs X’s.


  1. I am satisfied there was no fault in the way the Council decided to fund early years settings in the period under investigation. The Council quickly shared information with providers about how it expected them to manage children coming into their settings where there were vacant places and how these would be funded. It made business support available to providers to help them with their financial sustainability. The Council took account of its duty to ensure sufficient childcare as well as the guidance in place at the time in reaching its decisions. Where there is no fault in the way the Council has reached its decision, I cannot question the merits of the decision.

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Final decision

  1. I have completed my investigation. There was no fault in the actions of the Council.

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Investigator's decision on behalf of the Ombudsman

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