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Consultation on changes to early years funding published

The Department for Education today has published the long-awaited early years national funding formula consultation. The six- week government consultation seeks the views of early years providers and other key stakeholders in England on the introduction of a new early years national funding formula for 3- and 4-year-olds receiving the free early education and childcare entitlement. It outlines changes to the way Local Authorities (LAs) fund early years providers in their area, and how to make sure that children with special educational needs or disabilities attract the extra funding they need.

The proposed changes are designed to deliver fairer and more transparent funding system, with funding levels based on actual costs rather than historical precedent.

The Government is proposing that LAs pay all early years providers - regardless of the type of setting - the same hourly base rate calculated using a national formula. LAs will also be duty bound to pass on 95% of funding directly to providers.

The national average rate paid to providers 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. Illustrative rates in each area have been published by the Government.

LAs will have the discretion to top up their hourly funding rate by up to 10% using supplements in five key areas: deprivation, rurality, flexibility, efficiency and delivery of the additional 15 hours free childcare.

There will also be additional up-front funding for providers caring for children in receipt of Disability Living Allowance (DLA), and more transparency around local funding available for children with special educational needs (SEN).

The Government is proposing that the new funding formula apply to the current 15-hour early education entitlement from April 2017. In September 2017, when the extended entitlement is rolled out, it will apply to all 30 hours.

The deadline for responding to the consultation is 22nd September. PACEY will be responding to the consultation, and we are encouraging all members to respond as well. If you have any questions or feedback, please contact our policy team.

Liz Bayram, PACEY's Chief Executive comments:

"Getting the Early Years Funding Formula right for private, voluntary and independent providers is key to ensuring 3 and 4 year olds entitled to a free early education place for 30 hours a week, from next September, actually get one and that it provides high quality early education. Ultimately this can only happen if providers get the full cost of delivering that place covered. 

“With 30,000 childcare providers as members, PACEY knows many decide not to deliver the current 15 hours universal entitlement because it just isn't sustainable for their small business. We've worked hard with government to ensure barriers currently preventing so many from delivering these places are removed. These proposals should address many of these barriers and its clear government has listened to sector concerns.

“We need to share the consultation’s detail with our members, but these proposals provides a solid basis for us to move forward. Plans to require local authorities to pass on 95% of the government funding they receive to providers and for a universal base rate to be paid to all providers should, for example, stop the artificial distinction some authorities make between nursery and childminding provision. Additional funding for disabled children and children with SEND recognises the many obstacles these children and their families currently face when trying to access childcare.

“We'll need to better understand how the five proposed areas for funding supplements could work but a focus on supporting settings with higher staff costs such as those in London,  rural childcare and flexible, out of hours childcare is positive. If they work well, these supplements and the other proposals could encourage more providers, in particular registered childminders, to offer free places.

“Ultimately, all this only work if the funding allocation local authorities receive is enough to meet the vary needs of local families. This remains the key ensuring this extension of free early education delivers the extra support so many families desperately need."

Useful links

FAQs about the consultation

Funding formula factsheet

Early Years Funding Formula