Question to the Department for Education:

To ask the Secretary of State for Education, what recent assessment she has made of the adequacy of funding for childcare providers; and what steps she is taking to help ensure such funding takes account of high facility costs.

The department has substantially uplifted the hourly rates paid to local authorities for childcare providers to deliver existing free entitlements offers. The department is also providing £204 million of additional funding in 2023/24 financial year, and a further £288 million in 2024/25 financial year.

The additional £204 million, coming on top of local authorities’ existing allocations, allows an average increase of 32% for the current 2-year-old entitlement, and an average increase of 6.3% for the 3-and 4-year-old entitlements, compared to original 2023/24 financial year rates.

For 2-year-olds, this means that the average hourly rate for local authorities has risen from the original £6 per hour in the 2023/24 financial year to an effective £7.95 per hour. The 3-and 4-year-old national average hourly rate has increased from £5.29 to an effective £5.62 from September 2023.

The Spring Budget also announced an additional £288 million for the 2024/25 financial year to allow for further uplifts next year. This will be rolled in within the early years funding streams via the dedicated schools grant as normal. Funding rates for 2024/25 will be confirmed shortly.

This funding is on top of the £4.1 billion that the government expects to provide by the 2027/28 financial year to facilitate the expansion of the new free hours.

The government funds local authorities to deliver the government-funded entitlements through the Early Years National Funding Formula (EYNFF) and the separate 2-year-old formula. These have been designed to allocate the record investment in early years entitlement funding fairly and transparently across the country.

The formula includes an area cost adjustment (ACA) multiplier to reflect variations in local costs. This uses the General Labour Market measure to reflect staff costs and a Rates Cost Adjustment to reflect premises related costs. Each local authority’s EYNFF rate will vary depending on their level of additional needs and their ACA values.

The department regularly surveys a representative sample of over 10,000 providers to gain insights into how they run their provision and the challenges they face. The department also regularly surveys over 6,000 parents to understand their usage of childcare. This data has informed departmental methodology and the uplift required to meet the pressures providers faced.

The government recently announced £100 million of capital funding for local authorities, to support the delivery of the expansion of the 30-hours early years entitlement for working families and of wraparound provision in maintained primary schools. More detail, including allocation amounts to local authorities and accompanying guidance will be published in the coming weeks.