Cabinet report into Nursery closure
Save the nursery | 26.06.2002 13:34
This is a bit dry but gives an insight into the local and central government mechanism into the closure of this nursery. Along with the added links, written by members of the public, shows the other side. If you are interested in the ending of the nursery and how it happened, read on.
REPORT OF CHIEF EDUCATION OFFICER AND CABINET MEMBER FOR EDUCATION
BUDGET SAVINGS EARLY YEARS PROVISION
CABINET
24 June 2002
Classification
DECISION
1. INTRODUCTION BY CABINET MEMBER FOR EDUCATION
1.1 The Council has for a long time faced serious financial problems. Last year we were directed by the Government to produce a strategy for tackling those problems and returning to a balanced budget.
That strategy had to be agreed by the Council by 30 November.
1.2 In agreeing that strategy councillors rejected swingeing cuts which had been suggested including cuts of almost half of the Council's early years service. Instead, councillors asked the Government for additional money. The Goverment agreed to give the Council some £25 million additional funding, which enabled those List of cuts
3.2 Agree that all displaced staff will be relocated to other nurseries where vacancies exist to ensure there are no staff redundancies
3.3 Agree that the Council commits itself to work with parents of the affected nursery to offer an alternative nursery place for their child.
3.4 Agree that the Council works with a voluntary or private sector provider who expresses an interest in developing the decanted site
3.5 Agree that the Council commits to offer support to parents of Fernbank nursery in developing a robust business plan.
4. RELATED DECISIONS
4.1 At Education Committee 27th November 2001 it was agreed that savings of £981,000 were to be implemented in 2002/03 of which £209,000 related to savings in Council nursery provision. In addition £173,000 was to be saved in support to community nurseries and £23,000 from one o'clock clubs. These are all part of year savings. The impact in a full year is £1.3m in total and £0.3 on Council nurseries. These other savings have been achieved.
4.2 The Council agreed on the implementation plan for Early Years following a Best Value Review. Within this plan, a number of nurseries were identified as potential sites which could be developed/managed via alternative arrangements.
5. FINANCIAL CONSIDERATIONS
5.1 There are two elements to the £209,000 savings. First the £50,000 reduction in the budget for Mapledene to reflect lower numbers. The major saving of £159,000 was to come from the closure of a Council nursery part way through a year.
5.2 The gross annual cost of St. Johns is £300,000. After income of £120,000, the net costs is £180,000. This is equivalent to closure in September 2002, which is consistent with the budget provision made. Staff will be redeployed to other nurseries, reducing the need for agency staff. The aim is that no children will be left without a place. The building is not owned by the Council and is in a relatively poor condition, allowed to be run down by the council. It is expected that an alternative use will be found for the building and that funding will be identified for refurbishment. It is not therefore expected that there will be any one off costs of closing St John's.
5.3 The closure of St. Johns is necessary to achieve the budget savings required. If this recommendation is not accepted, then an alternative and equivalent saving must be identified. (£3.5 million was provided by central government to accountants Deloitte & Touche and PriceWaterHouseCoopers in a year and a half, maybe a bit less to them could have saved the nursery and other cuts.)
5.4 The Financial Controller advises that this report seeks approval to close a Council-run nursery in order to make savings to the Education budget estimated to be in the region of £159,000.
5.5 The full-year budget for the nursery in question consists of expenditure of £300,000 offset by income of £120,000. By closing the nursery in September it is expected that savings of £150,000 can be made, which is equivalent to half the full year running costs of £300,000. Additional savings of £9,000 are needed to achieve the £159,000 target but have not been quantified in this report.
5.6 The proposal assumes that overall income budgets will not need to be reduced as children will be transferred to other Council-run nurseries. It is intended that existing surplus capacity in other nurseries will meet this demand. 5.7 It has been assumed that when the nursery closes there will be no overlap between staff leaving one establishment and starting work at another, and there will be no additional costs associated with this process. Relocated staff costs will have to be offset in full by savings in existing budgets for agency staff. There is a potential to make savings in this area but these have not been quantified in the report.
5.8 When the building becomes vacant, the Early Years budget will become liable for refurbishment costs before it can be passed to another user within the Education Directorate. These costs have not been quantified in the report but it has been assumed that they will be fully offset by Grant Aid available for such works. There may also be additional unbudgeted costs associated with keeping the building empty prior to its new intended use such as security costs, rental payments, day to day repairs and utilities bills. It has been assumed that overall these costs will not be significant, but they will have some bearing on the final amount of savings achieved by the closure. The Director of Finance therefore recommends that these costs, as well as the changes in staffing expenditure, are clearly identified and reported as part of the monthly budget monitoring process.
6. COMMENTS OF THE MONITORING OFFICER
6.1 The Director of Law and Probity has read the report and has no additional comments.
7. COMMENTS OF THE HEAD OF PAID SERVICE
7.1 The Chief Executive has nothing to add to this report.
8. IMPLICATIONS OF THIS REPORT ON THE GOVERNMENT'S DIRECTIONS
8.1 The Council is under Directions from the Sectetary of State, and its prime duty is to ensure a balanced budget. It is not possible therefore for members to avoid taking a decision which will result in the required savings being made (Dictator not democracy, as it is illegal for the councillors to not comply with balancing the books first.)
9. BACKGROUND
9.1 As already stated, Education Committee agreed to make savings in Council nursery provision of £209,000 in 2002/03 and £300,000 in 2003/04. In response to this decision the Managing Director requested that project plan should be developed for each area of savings, which were to be delivered on time and to make a monthly report to the centre.
To date early years has completed this request on time and has kept senior management appraised of progress in implementing the savings.
9.2 In agreeing the project plan in January 2002, two nurseries were identified as possible sites where savings could be made. These nurseries were: St John's, located in Mare Street E8, currently offers 37 places; and Fernbank which is located in Fountayne Road N16, currently offers 29 places.
9.3 These two nurseries were identified in the Best Value Review for Early Years that was undertaken in 2001, as potential sites for development via externalisation and other models of delivery or closure.
9.4 In implementing the project plan for achieving savings in Council managed nurseries officers in Early Years took a Best Value approach of consult, compare, challenge and compete in arriving at their recommendations. What follows is the approach under each criteria.
9.5 Consultation: At least two meetings were arranged by nursery managers at each site with parents to discuss the proposals and to seek possible alternative funding streams. From these discussions, parents and nursery managers at each site have submitted papers on proposals to sustain the nursery if the decision were to cease council funding. In both cases the aspiration of seeking alternative funding streams via, Sure Start, New Opportunity Funding, commission arrangements with other statutory agencies, and raising fees for different groups were suggested. No commitments have been made by funding bodies or statutory agencies at this stage. Increasing fees for working parents to the level required to cover all running costs could have the detrimental effect of reducing take up at the Council managed nursery and would be unsustainable. In addition, parents would seek provision at voluntary and private providers who offer a competitive pricing structure. Given additional time and support, Fernbank has the potential to attract additional funding due to its location in an area close to Sure Start and SRB schemes. There also exists a commitment from parents to develop their business plan. An audit trail of meetings with parents and staff of both sites and consultation reports is available for members to inspect.
9.6 Senior managers and the Lead Member for Education have been consulted on the proposal. Both have been in agreement with the approach and have been fully engaged and committed to the process.
9.7 Compare: Fernbank Nursery is leased from the Primary Care Trust. The Council does not pay any rent for the site and there are no issues with the lease. The building is in good condition and in need of minor repairs. The nursery currently provides 29 places. It has the capacity to offer 55 places if developed with revenue investment from external funding streams. There exists a very positive working relationship with the Health Centre that is attached to the nursery.
9.8 The London Diocesan Fund owns St Johns Nursery site. The Council has a 10 years lease that was entered into in 1995. Currently the annual rent is £16k however there is a rent review outstanding for over a year. It is likely that the rent will be increased to a significant and substantive level, approximately £25k. The building is in a poor condition and in need of major repair. There is no break clause in the lease and no security of tenure. Officers have met with the Diocesan solicitors (Biscoe Craig Hall) who have stated that if the Council surrenders the lease there would be a premium and there is an expectation to make good the repair schedule. However, the Diocesan has intimated that they would consider a reassignment of the lease to an alternative Council service or to voluntary / community provider. The nursery has 45 places and is currently full.
9.9 Challenge: It is the Councils' duty to challenge the viability and performance of services on a regular basis. All Council nurseries have been subject to such challenge through the recent Early Years Best Value Review where the report has identified these two nurseries for further external development.
9.10 Fundamental questions considered in relation to each nursery were: the geographical location, whom does the nursery currently cater for, could it be provided by an alternative, is the nursery cost effective and efficient. Within the body of this report these have been addressed.
9.11 Compete: St John's nursery is positioned in the centre of Hackney and has very few competitors in attracting working parents, many of who work in and around Central Hackney. However, the nursery is currently full and cannot take advantage of its competitive advantage by increasing the number of places. The imminent rent increase and capital costs will further erode its competitive position. As already stated, Fernbank has the potential to increase its capacity and has little overheads. Whilst there are other providers nearby, the market is not saturated. It can be sustained in the medium and long term. Fernbank represents value for money. It works with the Health Centre in providing for children in need and is located in an area to attract a number of external funding streams.
9.12 As has already been stated parents and staff are aware of the imminent decision to close a nursery. Those parents and staff are who are affected by a closure will be relocated to other nurseries in the borough. There is sufficient capacity in Early Years. No redundancies will have to be made. Staff will be assimilated into vacancies that already exist. Those members of staff with time bound contracts (July 2002) will not have their contracts extended. It is intended that any decision to close a nursery will be completed by the end of July 2002.
10. Conclusion
10.1 As demonstrated above, St John's nursery although successful in attracting a full capacity of children and in a prime location, does not represent value for money and cannot be sustained, nor is there any room to increase its client base. There is the potential for an alternative provider to deliver a sustainable service to the community of central Hackney. For this reason it is recommended that St John's nursery is closed from August 2002.
Max Caller
Chief Education Officer
Councillor Ian Peacock
Cabinet Member for Education
BUDGET SAVINGS EARLY YEARS PROVISION
CABINET
24 June 2002
Classification
DECISION
1. INTRODUCTION BY CABINET MEMBER FOR EDUCATION
1.1 The Council has for a long time faced serious financial problems. Last year we were directed by the Government to produce a strategy for tackling those problems and returning to a balanced budget.
That strategy had to be agreed by the Council by 30 November.
1.2 In agreeing that strategy councillors rejected swingeing cuts which had been suggested including cuts of almost half of the Council's early years service. Instead, councillors asked the Government for additional money. The Goverment agreed to give the Council some £25 million additional funding, which enabled those List of cuts
3.2 Agree that all displaced staff will be relocated to other nurseries where vacancies exist to ensure there are no staff redundancies
3.3 Agree that the Council commits itself to work with parents of the affected nursery to offer an alternative nursery place for their child.
3.4 Agree that the Council works with a voluntary or private sector provider who expresses an interest in developing the decanted site
3.5 Agree that the Council commits to offer support to parents of Fernbank nursery in developing a robust business plan.
4. RELATED DECISIONS
4.1 At Education Committee 27th November 2001 it was agreed that savings of £981,000 were to be implemented in 2002/03 of which £209,000 related to savings in Council nursery provision. In addition £173,000 was to be saved in support to community nurseries and £23,000 from one o'clock clubs. These are all part of year savings. The impact in a full year is £1.3m in total and £0.3 on Council nurseries. These other savings have been achieved.
4.2 The Council agreed on the implementation plan for Early Years following a Best Value Review. Within this plan, a number of nurseries were identified as potential sites which could be developed/managed via alternative arrangements.
5. FINANCIAL CONSIDERATIONS
5.1 There are two elements to the £209,000 savings. First the £50,000 reduction in the budget for Mapledene to reflect lower numbers. The major saving of £159,000 was to come from the closure of a Council nursery part way through a year.
5.2 The gross annual cost of St. Johns is £300,000. After income of £120,000, the net costs is £180,000. This is equivalent to closure in September 2002, which is consistent with the budget provision made. Staff will be redeployed to other nurseries, reducing the need for agency staff. The aim is that no children will be left without a place. The building is not owned by the Council and is in a relatively poor condition, allowed to be run down by the council. It is expected that an alternative use will be found for the building and that funding will be identified for refurbishment. It is not therefore expected that there will be any one off costs of closing St John's.
5.3 The closure of St. Johns is necessary to achieve the budget savings required. If this recommendation is not accepted, then an alternative and equivalent saving must be identified. (£3.5 million was provided by central government to accountants Deloitte & Touche and PriceWaterHouseCoopers in a year and a half, maybe a bit less to them could have saved the nursery and other cuts.)
5.4 The Financial Controller advises that this report seeks approval to close a Council-run nursery in order to make savings to the Education budget estimated to be in the region of £159,000.
5.5 The full-year budget for the nursery in question consists of expenditure of £300,000 offset by income of £120,000. By closing the nursery in September it is expected that savings of £150,000 can be made, which is equivalent to half the full year running costs of £300,000. Additional savings of £9,000 are needed to achieve the £159,000 target but have not been quantified in this report.
5.6 The proposal assumes that overall income budgets will not need to be reduced as children will be transferred to other Council-run nurseries. It is intended that existing surplus capacity in other nurseries will meet this demand. 5.7 It has been assumed that when the nursery closes there will be no overlap between staff leaving one establishment and starting work at another, and there will be no additional costs associated with this process. Relocated staff costs will have to be offset in full by savings in existing budgets for agency staff. There is a potential to make savings in this area but these have not been quantified in the report.
5.8 When the building becomes vacant, the Early Years budget will become liable for refurbishment costs before it can be passed to another user within the Education Directorate. These costs have not been quantified in the report but it has been assumed that they will be fully offset by Grant Aid available for such works. There may also be additional unbudgeted costs associated with keeping the building empty prior to its new intended use such as security costs, rental payments, day to day repairs and utilities bills. It has been assumed that overall these costs will not be significant, but they will have some bearing on the final amount of savings achieved by the closure. The Director of Finance therefore recommends that these costs, as well as the changes in staffing expenditure, are clearly identified and reported as part of the monthly budget monitoring process.
6. COMMENTS OF THE MONITORING OFFICER
6.1 The Director of Law and Probity has read the report and has no additional comments.
7. COMMENTS OF THE HEAD OF PAID SERVICE
7.1 The Chief Executive has nothing to add to this report.
8. IMPLICATIONS OF THIS REPORT ON THE GOVERNMENT'S DIRECTIONS
8.1 The Council is under Directions from the Sectetary of State, and its prime duty is to ensure a balanced budget. It is not possible therefore for members to avoid taking a decision which will result in the required savings being made (Dictator not democracy, as it is illegal for the councillors to not comply with balancing the books first.)
9. BACKGROUND
9.1 As already stated, Education Committee agreed to make savings in Council nursery provision of £209,000 in 2002/03 and £300,000 in 2003/04. In response to this decision the Managing Director requested that project plan should be developed for each area of savings, which were to be delivered on time and to make a monthly report to the centre.
To date early years has completed this request on time and has kept senior management appraised of progress in implementing the savings.
9.2 In agreeing the project plan in January 2002, two nurseries were identified as possible sites where savings could be made. These nurseries were: St John's, located in Mare Street E8, currently offers 37 places; and Fernbank which is located in Fountayne Road N16, currently offers 29 places.
9.3 These two nurseries were identified in the Best Value Review for Early Years that was undertaken in 2001, as potential sites for development via externalisation and other models of delivery or closure.
9.4 In implementing the project plan for achieving savings in Council managed nurseries officers in Early Years took a Best Value approach of consult, compare, challenge and compete in arriving at their recommendations. What follows is the approach under each criteria.
9.5 Consultation: At least two meetings were arranged by nursery managers at each site with parents to discuss the proposals and to seek possible alternative funding streams. From these discussions, parents and nursery managers at each site have submitted papers on proposals to sustain the nursery if the decision were to cease council funding. In both cases the aspiration of seeking alternative funding streams via, Sure Start, New Opportunity Funding, commission arrangements with other statutory agencies, and raising fees for different groups were suggested. No commitments have been made by funding bodies or statutory agencies at this stage. Increasing fees for working parents to the level required to cover all running costs could have the detrimental effect of reducing take up at the Council managed nursery and would be unsustainable. In addition, parents would seek provision at voluntary and private providers who offer a competitive pricing structure. Given additional time and support, Fernbank has the potential to attract additional funding due to its location in an area close to Sure Start and SRB schemes. There also exists a commitment from parents to develop their business plan. An audit trail of meetings with parents and staff of both sites and consultation reports is available for members to inspect.
9.6 Senior managers and the Lead Member for Education have been consulted on the proposal. Both have been in agreement with the approach and have been fully engaged and committed to the process.
9.7 Compare: Fernbank Nursery is leased from the Primary Care Trust. The Council does not pay any rent for the site and there are no issues with the lease. The building is in good condition and in need of minor repairs. The nursery currently provides 29 places. It has the capacity to offer 55 places if developed with revenue investment from external funding streams. There exists a very positive working relationship with the Health Centre that is attached to the nursery.
9.8 The London Diocesan Fund owns St Johns Nursery site. The Council has a 10 years lease that was entered into in 1995. Currently the annual rent is £16k however there is a rent review outstanding for over a year. It is likely that the rent will be increased to a significant and substantive level, approximately £25k. The building is in a poor condition and in need of major repair. There is no break clause in the lease and no security of tenure. Officers have met with the Diocesan solicitors (Biscoe Craig Hall) who have stated that if the Council surrenders the lease there would be a premium and there is an expectation to make good the repair schedule. However, the Diocesan has intimated that they would consider a reassignment of the lease to an alternative Council service or to voluntary / community provider. The nursery has 45 places and is currently full.
9.9 Challenge: It is the Councils' duty to challenge the viability and performance of services on a regular basis. All Council nurseries have been subject to such challenge through the recent Early Years Best Value Review where the report has identified these two nurseries for further external development.
9.10 Fundamental questions considered in relation to each nursery were: the geographical location, whom does the nursery currently cater for, could it be provided by an alternative, is the nursery cost effective and efficient. Within the body of this report these have been addressed.
9.11 Compete: St John's nursery is positioned in the centre of Hackney and has very few competitors in attracting working parents, many of who work in and around Central Hackney. However, the nursery is currently full and cannot take advantage of its competitive advantage by increasing the number of places. The imminent rent increase and capital costs will further erode its competitive position. As already stated, Fernbank has the potential to increase its capacity and has little overheads. Whilst there are other providers nearby, the market is not saturated. It can be sustained in the medium and long term. Fernbank represents value for money. It works with the Health Centre in providing for children in need and is located in an area to attract a number of external funding streams.
9.12 As has already been stated parents and staff are aware of the imminent decision to close a nursery. Those parents and staff are who are affected by a closure will be relocated to other nurseries in the borough. There is sufficient capacity in Early Years. No redundancies will have to be made. Staff will be assimilated into vacancies that already exist. Those members of staff with time bound contracts (July 2002) will not have their contracts extended. It is intended that any decision to close a nursery will be completed by the end of July 2002.
10. Conclusion
10.1 As demonstrated above, St John's nursery although successful in attracting a full capacity of children and in a prime location, does not represent value for money and cannot be sustained, nor is there any room to increase its client base. There is the potential for an alternative provider to deliver a sustainable service to the community of central Hackney. For this reason it is recommended that St John's nursery is closed from August 2002.
Max Caller
Chief Education Officer
Councillor Ian Peacock
Cabinet Member for Education
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