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FAQs: Funding to childcare providers offering 30-hours free childcare

The Government recently published a Policy Statement giving more details of how the provisions in the Childcare Bill will actually work in practice. PACEY has compiled a list of Frequently Asked Questions (FAQs) summarising what we know so far.

What has the Government announced?

The Government has announced that the national average rate paid to childcare providers for delivering government-funded childcare from 2017 will be £4.88 for 3- and 4-year-olds, including the Early Years Pupil Premium (EYPP). For 2-year-olds, the national average rate will be £5.39.

As these rates are only national averages, providers may find that the actual rate in their area will be higher or lower than these.

The rates were set following a 6-month-long Review on the Cost of Providing Childcare, which formed the evidence base for the Government’s decisions in the Autumn 2015 Spending Review.

The new funding rates will come into effect in September 2017, at the same time as the extended entitlement, which provides working parents of 3- and 4-year-olds with 30 free hours of childcare per week during term time.

I’ve heard the new rate includes the Early Years Pupil Premium (EYPP) – what does that mean?

The national average rate for 3- and 4-year-olds includes the Early Years Pupil Premium (EYPP). The Department for Education has said that EYPP accounts for around 5p an hour of the average rate, implying that the national average rate without EYPP is closer to £4.83.

Two year-olds are not eligible to receive the EYPP, therefore the 2-year-old rate does not include EYPP.

Since April 2015, early years providers have been entitled to claim the additional funding known as EYPP if they provide the free entitlement for disadvantaged 3- and 4-year-olds who meet certain criteria. EYPP currently amounts to £300 per year (53p per hour) per child. The Government has said that there will be no changes to EYPP funding or criteria.

If these are just national average rates, when will we know the actual rates we will get paid for providing the 30 hours?

A new national funding formula for early years will be introduced in 2017-18 to ensure that funding is transparently and fairly distributed between different types of providers and different parts of the country. The Government has said it wants local authorities to be able to pay providers a sustainable rate and ensure that as much funding as possible reaches the front line.

A public consultation will be launched in early 2016 on this new national funding formula, including on the transitional arrangements for the local authorities who will be most affected. The Department of Education has said it aims for this to be completed by the summer of 2016 so that local authorities can plan accordingly. It is not yet clear when individual local authority funding rates will be available.

How can the Government afford to offer this additional funding?

The Government has said that it is investing an extra £1 billion per year by 2019-20 in the extended entitlement. This includes nearly £300 million per year from 2017-18 for an increase to the national average rate paid for the two-, three- and four- year-old entitlements.

Critics, including Opposition MPs and peers and the Institute for Public Policy Research, argue that the scheme is substantially underfunded.

Who will be eligible for the 30-hour offer?

To qualify for the full 30 hours of free childcare, each parent (or the sole parent in a single parent family) will need to earn, on average, the equivalent of 16 hours on the national minimum wage per week (currently £107 per week), and no more than £100,000 per year. A family with an annual household income of £199,998 would be eligible if each parent earns just under £100,000. Self-employed parents and parents on zero-hours contracts will be eligible if they meet the average earnings threshold.

Families where one parent is not in paid employment (or neither parent works) will usually not be eligible for these additional hours. Parents who are studying or in training will not be eligible unless this is combined with paid work which meets the minimum average earnings threshold.

However, the government intends to make provision to support families where one parent is in receipt of benefits relating to caring responsibilities or has a disability and the other parent is working. It does not appear that single parents who are disabled or have substantial caring responsibilities will be eligible for the full entitlement, although this has not been officially confirmed.

Eligibility will be checked by HMRC and will be based on actual income earned. There will be a short grace period so that if parents lose their jobs, they do not automatically lose their childcare entitlement. More details of how this will work have not yet been confirmed.

Parents will be able to apply for both the 30-hour scheme and the Tax-Free Childcare scheme through a joint online application being developed by HMRC, as the eligibility requirements for both schemes are aligned.

The Government estimates that around 390,000 three and four year olds will be eligible for the full 30 hours of free childcare.

All 3- and 4-year-olds – and the most disadvantaged 2-year-olds – will remain entitled to 15 hours of early education per week during term time, regardless of the employment status of their parents.

How will providers apply to deliver the 30 hours? Will we still have to go through local authorities? Is this going to mean lots of paperwork and form-filling?

The details are not yet clear, but the Government has confirmed that local authorities will continue to be central to the delivery of free childcare.  However, it has said that the extended entitlement provides an opportunity to work with local authorities to look at how improvements can be made to how free childcare is delivered.

The Department for Education has laid out a number of delivery principles and has said that any delivery system must:

  • make available 30 hours of free childcare to eligible parents of three- and four-year-olds in England
  • be safe and of high quality
  • be deliverable for early implementation in September 2016 and full roll-out from September 2017
  • be simple and flexible for parents to use and responsive to parents’ working patterns
  •  welcome and incentivise a range of high quality providers to deliver the entitlement efficiently
  • respond to the needs of children with special educational needs and disabilities
  • offer value for money.

DfE has proposed that it will draft a national model agreement between local authorities and childcare providers to help increase consistency in local agreements, and simplify the process for providers that operate in more than one local authority area.

DfE has also said it is looking at what can be done to smooth out issues around payment arrangements between local authorities and providers.

Can the free 30 hours be delivered outside of term time?

Eligible parents will be entitled to 30 hours of free childcare per week over 38 weeks or the equivalent number of hours across more weeks per year. The Government has said that it wants to ensure that parents are given the choice of a ‘stretched offer’ so that the free hours are available outside of term time.

Will childminders be able to provide 30 hours of free childcare to children related to them?

This has not been confirmed, but as it stands, childminders are unable to claim the early years entitlement for related children in their care. PACEY believes that this policy is unfair, and disincentives many childminders from providing the entitlement. We will continue to raise the issue with government at every opportunity in the coming months.

Will the ratio requirements change under the 30 hours?

The Government has repeatedly stressed its commitment to retaining the existing adult: child ratios set out in the Early Years Foundation Stage.

It has also confirmed that the staff qualification requirements and indoor space requirements will remain the same for all 30 hours.

What are the Early Implementation pilots and where will they take place?

The Government will be piloting implementation of the 30 hours in a select number of local areas from September 2016. It has received over 1,800 expressions of interest from authorities and childcare providers and will announce the successful areas in the New Year. It is not yet clear how many local authorities will be selected to participate in the pilots.

UPDATE: Wigan, Staffordshire, Swindon, Portsmouth, Northumberland, York, Newham and Hertfordshire have been named as the local authority pilot areas. This core group of councils will be supported by 25 others who will look specifically at innovative ways of making sure childcare is accessible to as many parents as possible. Their experiences will then be used to support the full rollout in 2017, with the aim of removing significant barriers to parents taking up their entitlement.

The 25 Early Innovators are:

North West: Stockport, Bolton, Trafford, Cheshire West & Chester, Bury

Midlands: Nottinghamshire, Nottingham City, Walsall

South West: Cornwall

South & South East: Hampshire, West Sussex, Medway, East Sussex, Brighton & Hove

London & East: Kingston & Richmond, Barking & Dagenham, Islington, Ealing, Hillingdon

North East & Yorkshire and the Humber: Gateshead, Bradford, Sheffield, Eastriding, Wakefield, North Yorkshire.

Will children with special needs or disabilities (SEND) be entitled to additional support?

The Government has said that it will consider innovative approaches to providing flexible childcare for working parents whose children are disabled as part of early implementation of 30 hours from September 2016. It will also give due consideration to SEND funding for early years as part of its wider consultation on the national early years funding formula.

Will childcare providers be entitled to any additional support?

In the Spending Review, the Government announced that it would be allocating £50 million to support the creation of more early years places, though further details have yet to emerge on who will be eligible to receive this funding and what it can be used on.

The childcare business support grants scheme is also being extended into 2016 to support the set-up of new childcare businesses.

The Government has also said that it is committed to reviewing progression routes within the sector to determine what more can be done to enable good quality staff to maximise their potential and forge a successful career within early years. PACEY is calling on the Government to adopt a coherent workforce development strategy that seizes on the increasing professionalism of the sector and the momentum from the doubling of the free childcare entitlement – and supports and incentivises practitioners to continuously improve their skills and progress their careers.

What other support will be available to families to help with childcare costs?

Working parents who are eligible for the 30 hours of free childcare will additionally receive support with childcare costs of up to £2000 per child through the Tax-Free Childcare scheme, which will be available from early 2017.

Parents on low incomes will get up to 85% of their childcare costs reimbursed through the childcare element of Universal Credit, which is gradually being rolled out across the country over the next few years.

PACEY will be on hand with practical advice and guidance for childcare providers on how they can support families to participate in all of these schemes.