DfE announces increases to early years funding that are branded 'tokenistic' by sector

The Department for Education (DfE) has today (16 December) published the new three and four-year-old and disadvantaged two-year-old funding rates for local authorities for 2023-24, along with its response to its consultation on proposals to update the Early Years National Funding Formula.

The consultation, which was held over the summer, put forward plans to update the Early Years National Funding Formula for 2023-24 with the most recent data available, which it says the vast majority of respondents agreed with.

Within its response, the DfE has also announced further funding of £20m to help providers with the increase to the national living wage in April.

It says this money is on top of the additional £180m for 2023-24 already announced at the Spending Review.

While early years organisations have welcomed the additional funding, they claim it is nowhere near enough to help ‘safeguard the future of the sector.’

Funding rates

The Department for Education has today published the new hourly funding rates local authorities will receive for two, three and four-year-old places following the changes made to the formula as set out in the consultation.

In 2023-24, local authorities will receive average funding increases of 3.4 per cent for three and four-year-olds and 4 per cent for eligible two-year-olds, compared to their 2022-23 rates. All local authorities will benefit from at least a 1 per cent increase in their funding rates in 2023-24, with increases for some of up to 4.9 per cent for three and four-year-olds, and up to 10 per cent for two-year-olds.

The minimum funding floor for the EYNFF (Early Years National Funding Formula) will increase to £4.87 for 2023-24. Year-to-year protections of +1 per cent and a gains cap of 4.9 per cent and 10 per cent will be applied for the EYNFF and two-year-old formula respectively.

The funding rate each local authority will receive is available here.

It shows the largest rise in funding rates will be 5.6 per cent in Leicestershire. Across England, 35 areas remain on the lowest funding rate of £4.87 per hour and 42 areas have an uplift of just 1 per cent on current rates.

For two-year-olds, the average increase is 4 per cent with the highest increase of 10 per cent seen in 31 local authority areas. However, 89 council areas will see an increase that is below the 4 per cent average and 72 of these will see an increase of 2 per cent or lower.

Nursery schools

The consultation also put forward proposals regarding reforms to the distribution of maintained nursery school supplementary funding.

The DfE says the proposals were ‘broadly welcomed’, with a majority of respondents supporting a new minimum funding floor and a cap on the supplementary funding hourly rate that local authorities can receive for their maintained nursery schools.

It reveals that from 2023-24, the minimum funding rate will be £3.80 per hour. The cap on the funding hourly rate will be set at £10, with transitional arrangements for the most affected local authorities. Local authorities not affected by the floor or cap will see their supplementary funding rate increase by 3.4 per cent in 2023-24.

Sector response

Neil Leitch, chief executive of the Early Years Alliance, said, ‘The early years is in crisis. What our sector needs is a comprehensive long-term strategy underpinned by substantial investment. What we are getting is the equivalent of rearranging the deckchairs of the Titanic.

‘Nurseries, pre-schools and childminding settings are dealing with the consequences of years of Government underfunding, alongside soaring energy prices, sky-high inflation rates and record increases in the national living and minimum wage. And yet, average funding rates of no more than 4 per cent will amount to pennies in practice – and a few extra pennies on an already-wholly insufficient funding rate isn’t going to stop prices going up for parents, or more and more settings being forced to close their doors for good.

‘The Government knows full well that early years funding is nowhere near what it needs to be to safeguard the future of the sector. What will it take for ministers to stop pretending otherwise and actually do something about it?’

Beatrice Merrick, chief executive of Early Education, commented, ‘While an additional £10m for the least well-funded maintained nursery schools (MNS) is welcome, and an additional £20m for the Early Years National Funding Formula represents a token acknowledgement of the additional wage and inflationary costs facing the sector, it is nowhere near enough to address the crisis in recruitment and retention which is having a real impact on quality, sufficiency and affordability, especially in the most economically challenged areas. Young children will bear the brunt of this failure to invest in the high-quality early childhood education which is needed more than ever to address the impact of the pandemic.’

Purnima Tanuku, chief executive of National Day Nurseries Association (NDNA) said, 'NDNA has been lobbying the Government continually for a childcare funding rate which enables providers to cover their costs.

'Any additional funding is welcome to help childcare providers, however the increases announced are well below inflation and a fraction of the £2 billion announced to help schools face similar rising costs. The devil will be in the detail of how much this translates to for providers once local authorities factor in the changes to teachers’ pension funding.

'Ofsted data has now backed up our research showing that nurseries are closing their doors at record rates due to underfunding. That means any increase in funding must be ring-fenced.

'The funding each child gets will increase by less than 4 per cent but the real costs for providers will be well over 10 per cent higher. While Ministers have recognised that something needs to be done, they are not doing enough for our children, families and childcare providers.'