Question to the Department for Education:

To ask the Secretary of State for Education, whether her Department plans to offer additional funding to areas where the Early Years Supplementary Grant results in below national average funding for early years education.

At the Spring Budget 2023, the Chancellor announced an increase to the funding for the existing early years entitlements for two, three and four-year-olds of £204 million from this September, and £288 million in 2024/25, for local authorities to increase the rates paid to childcare providers.

On 7 July 2023, the department confirmed that the £204 million for 2023/24 would be distributed via a new Early Years Supplementary Grant (EYSG), and the hourly funding rates that each local authority will receive from September 2023.

This additional funding through the EYSG, coming on top of local authorities’ existing allocations, will allow an increase to an average of 32% for the current two year old entitlement, and by an average of 6.3% for the three and four-year-old entitlements. For two-year-olds, this means that the average hourly rate received by local authorities will rise from the current £6 per hour in 2023/24, to an effective £7.95 per hour. The three and four-year-old national average hourly rate will rise from £5.29, to an effective £5.62 from September 2023.

In order to recognise cost variations between local authority areas, the existing funding formulae for two, three and four-year-olds has been used to determine the EYSG rates for individual local authorities. This means there will be variation around the average increases stated above.

For three and four-year-olds, as with the 2023/24 early years national funding formula (EYNFF) rates, the department is including protections to ensure that all local authorities see an increase in the effective combined hourly funding rate (September to March) they receive. The minimum increase that local authorities can see between their effective combined hourly rate (September to March) and their 2023/24 EYNFF hourly rate is +1%. Without this protection, some areas would see very low percentage increases, or decreases, compared to their 2023/24 rates based on the pre-protection calculation.

For two-year-olds, no protection or gains cap have been applied in calculating the effective combined hourly funding rates, because all local authorities will see a substantial increase to their hourly funding rates.