DfE Confirm New Funding Rates

DfE Confirm New Funding Rates

The government has confirmed that from September 2023, funding rates per child will increase from an average of £5.29 to £5.62 for three-and-four-year-olds, and from an average of £6.00 to £7.95 for two-year-olds. The increase in funding rates has been driven by the £204 million extra funding that the government announced in the budget in March. It is important to note that the average funding rates quoted are the amount that will be paid to the local authorities rather than the rates that Nurseries will receive. The rates that childcare providers receive will be dependent on how much the local authorities take from the funding, in previous years this has averaged around 3.7%. It is still unclear whether the percentage of early years funding that local authorities are allowed to keep back from providers in the Early Years Funding Formula will be altered.

The grant will provide supplementary funding for all existing early years funding stream including;

• 15 hours entitlement for disadvantaged two-year-olds

• 15 hours universal entitlement for three- and four-year-olds

• 15 hours additional entitlement for three- and four-year-old children of eligible working families

• Early Years Pupil Premium

• Disability Access Fund

The Government have called the increased funding ‘transformative’ and the first step towards the expansion of 30 hours of free childcare for all children 9 months old and older from September 2025. 
However, there has been widespread criticism of the new funding rates throughout the sector. Key figures have expressed their disappointment in the new rates with complaints that the sector hasn’t been listened to nor consulted before the new rates were calculated. Criticism of years of past underfunding, which won’t be reversed by this investment, and inaccurate estimations of the costs to provide early years care form major points of criticism.

Analysis of the figures show that 27% of the 151 local authorities will be on the lowest funding level of £5.20 for 3- and 4-year-olds. In addition, 19 areas have an increased rate of less than 2% while 21 have increases over 10%, highlighting the discrepancy between regions. While the rates for 2-year-olds have increased by a larger percentage, an average of 33%, 96 local authorities have rates below the national average of £7.95 and the average is skewed higher due to a handful of regions having rates over £10. The disparity in rate increases is vast, with the lowest increase being 26.5% while the largest is 48%.

It is evident that the increases in rates don’t meet the requirements for the sector and more needs to be done to ensure the expansion of free childcare can be achieved. You can view more information about the funding rates here and information specific for each local authority here.

The government has also launched a consultation on the future of funding rates in view of the anticipated extension of the 30 hours entitlement, which can be found here.