Early years funding

In England, Ofsted-registered early years providers are able to offer 'free' early years education and childcare for children aged 3 to 4 and, in some instances, aged 2.

Providers are paid directly for these hours by their local authority using rates worked out according to the Early Years National Funding Formula (EYNFF).

Local authorities have a duty to ensure that they deliver all funded hours according to the statutory guidance under the Act. The Government has also produced a model agreement between local authorities and providers to standardise agreements and ensure consistency across different authorities.

Early years funding FAQs

These FAQs provide more information about changes to early years funding and the EYNFF

How does early years funding work?

The Early Years National Funding Formula (EYNFF), first introduced in April 2017, aims to ensure that early years funding is distributed fairly and transparently across the England. Central government allocates early years funding to local authorities. Local authorities then distribute this funding to early years providers.

The EYNFF also aims to ensure that local authories pass at least 95% of the funding they receive to providers and also from paying different rates to different types of providers, for example by paying higher rates to maintained settings (schools and nursery schools) than private, voluntary and independent (PVI) providers (e.g. childminders and private and voluntary nurseries and preschools).

The EYNFF is a means of allocating funding for the free early education and childcare entitlement for 3- and 4-year-olds, also known as the universal 15-hour entitlement and the 30-hour entitlement for working parents. Providers are paid the same rate by their local authority for delivering both schemes. The funding for the 40% most disadvantaged 2-year olds falls outside of this formula.

Under this EYNFF, nationals funding for all 3- and 4-year-old children is determined by four factors:

1. A universal base rate of funding for each child will allocate the majority (89.5%) of all funding;

2. Funding based on proxy indicator for the number for 3 and 4-year olds eligible for free school meals (FSM), which reflects the additional costs of providing childcare for children with disadvantage for low SEN (8% of total formula)

3. Funding based on a proxy indicator for the number of 3 and 4-years-old children that have English as an additional language (EAL) which reflects the costs of additional support for children who do not have English as a first language (1.5% of total formula)

4. Funding based on a proxy for the number of 3 and 4-year-old children who are entitled to DLA, which reflects the cost for children with more complex special educational needs and disabilities (SEND) (1% of the total formula)  

Each local authorities’ individual rates are then calculated using their Area cost Adjustments – a complex calculation that takes into account staff costs and premise cost in each local area.  Once the government has calculated this, it then lets each local authority know the funding rate that they will receive.  There is a minimum funding floor, which means that no local authority will receive an hourly rate below this.  It currently stands at £4.87 (increased from £4.61 in 2022-23)

All local authorities are required to pay at least 95% of this universal base rate for all their childcare providers in their local 3- and 4-year-old early years single funding formula. The universal base rate must – in all cases – be multiplied by the number of estimated hours of attendance of children.

A detailed operational guide for the funding formula is available here.

The 2-year-old entitlement is determined by 2-year-old funding formula.  Pupil number from the annual census taking in January are used to determine the following years 2 year entitlement allocation.  The total amount allocated to each local authority is determined by the 2-year funding formula.  Essentially this is made up of a base rate that this multipled by an areas cost adjustment for each local authority

 

How much will providers be paid?

For the year 2023/2024 the government has promised a base rate of £5.36 and aminimim rate to local authorities for 3- and 4-year-olds is currently £4.87 to which supplements can be added.

How much you get paid will depend on which local authority area you work in. You can find details of you local authority on the Early Years Funding Rates spreadsheet.

 

How will the Government ensure that local authorities don’t top-slice the funding?

Local authorities have been required by law to pass on 95% of the early years funding they receive from central government to providers since April 2018.

The Government has said that in ‘exceptional circumstances’ it will consider permitting local authorities to pass on less than the required amount, but only if local providers are still willing to deliver the 30-hour entitlement.

 

Do local authorities have to pay all providers the same amount?

same base rate as a child in a nursery class in a primary school. Within the PVI sector, rates will also be harmonised, so that nurseries and childminders will receive the same amount.

When it comes to ‘Maintained Nursery Schools’ (MNS), local authorities continue to receive supplementary funding in 2023 to 2024. This funding is provided in order to enable local authorities to protect their 2016 to 2017 funding rates for MNS (the rates that existed before the EYNFF). Maintained Nursery Schools rates were uplifted by 3.5% which is equivalent to the increase in 3 and 4-year old funding rates. 

 

Early Years Supplementary Grant 2023 to 2024

In the Spring 2023 Budget additional funding for the existing early years entitlements for disadvantaged 2-year-old and 3 and 4-year old children for the 2023 to 2024 and 2024 to 2025 financial years was announced.  This is called the Early Years Supplementary Grant (EYSG) and came into effect from 1 September 2023 to 31 March 2024.  This has resulted in an average increase for the 3 and 4-year old funding of 6.1% and for 2-year old funding of 32.9%

Further information is available here

 

Will there be any additional funding supplements?

Local authorities will still be able to top-up the base rate with funding supplements, although these will be capped to 10% of the hourly rate and strictly limited to five areas:

  1. Deprivation – this is currently mandatory, and it will remain so, with local authorities still able to use their own choice of metric for allocating funding;
  2. Rurality/sparsity – giving local authorities the discretion to use funding to help rural childcare settings remain sustainable;
  3. Flexibility – giving local authorities the discretion to use funding to promote different types of flexibility, including growing the childminder segment of their local childcare market;
  4. Quality – giving local authorities the discretion to use funding to recognise ‘workforce qualifications’ and ‘system leadership,’ though not Ofsted grades;
  5. English as an additional language – giving local authorities the discretion to use funding to recognise the extra cost of caring for a child with English as an additional language.

The Government has scrapped previously mooted plans for supplements on efficiency and delivery of the additional 15 hours free childcare, although the latter will be kept under review and may be implemented in the future.

Whilst all local authorities will have a deprivation supplement, they can choose which of the other four supplements they would like to use, if any.

 

What further support will there be for children with special educational needs and disabilities (SEND)?

There will be two means of increasing the amount of funding that providers receive for caring for children with special educational needs and disabilities (SEND):

1. Disability Access Fund – an annual automatic up-front payment of £881 for providers for every child in their setting in receipt of Disability Living Allowance (DLA) and eligible for a funded place.  Providers will need to evidence a child’s eligibility to their local authority by providing the DLA certificate to them via their chosen means;

2. SEN Inclusion Fund – mandatory local authority-run funds will provide additional top-up funding to providers to improve outcomes for children with special educational needs based on eligibility criteria drawn up by the authority.

If you are caring for children with SEND, contact your local authority for more information about how you can access these funding streams. It will be up to providers to identify eligible children and refer them to their local authority to check eligibility.

If a child is sharing their funded place between two or more settings, funding will be given to the setting that the parent nominates as ‘the main setting’.

 

How can I find out how much my local authority will pay me under the formula?

Please see the link in the Early Years Supplementary Grant 2023 to 2024 section above

 

How often will I get paid?

Local authorities should pay all providers, particularly childminders, monthly. Those that aren’t doing so yet must be working towards doing so. Providers can request alternative payment options from their local authority.

If you have any queries about early years funding, please contact our policy team.

Childcare Reforms 2023 Early Years Entitlements

In 2023 the government announced significant changes to childcare support.  From April 2024 working families with 2-year-olds will be able to claim 15 hours of funding for 38 weeks of the year if the meet the eligibility criteria and in September 2024 working families with children aged over 9 months who are eligible will also be able to claim 15 hours of funded childcare for 38 weeks of the year.  It will work in a similar way to the current funding and eligible children will be able to access their funded place in the term following their birthday (incl 9 month ‘birthday’).  There will be further expansion of childcare support in 2025. 

The table below will help you for work out when a child’s ‘9-month birthday falls, and when 9-month-olds and 2-year-olds will be able to claim the funding. 

The government have not yet confirmed what the eligibility criteria is, but the have stated that parents will be able to get their Eligibility codes in a similar way to the current ’30 hours codes’ for eligible 3-year-olds.

Childcare Choices Website

The Childcare Choices website will be ready from 2 January 2024 to allow parents to apply for their 2-year-old Eligibility Codes, in preparation for the April 2024 start.

From January 2024 the codes will be known as ‘Eligibility Codes’ rather than ’30 hours codes’.

It is advisable for parents not to apply too early for their codes, as they will only last 3 months and then move into the grace periods.  NB: children cannot start claiming for the funding during a grace period.  It is also important that parents ensure they get their codes before the deadline for the term they wish their child to start accessing it.  If they miss the deadline, they will not be able to access for funding until the next term.

The table below advises the best time for parents of 2-year-old upwards to apply for their eligibility code (and the final date code must be received by):

The upcoming expansion – 2024-2025

Starting from April 2024, existing childcare support will be expanded in phases. By September 2025, most working families with children under the age of 5 will be entitled to 30 hours of childcare support.

The changes are being introduced gradually to make sure that providers can meet the needs of more families. This means that:

  • From April 2024, eligible working parents of 2-year-olds will be able to access 15 hours childcare support.
  • From September 2024, 15 hours childcare support will be extended to eligible working parents of children from the age of 9 months to 3-year-olds.
  • From September 2025, eligible working parents of children under the age of 5 will be entitled to 30 hours of childcare a week.

Like the existing offer, depending on your provider, these hours can be used over 38 weeks of the year (during school term time), or up to 52 weeks if you use fewer than your total hours per week.

Sign up for more details about the upcoming expansion from April 2024, as well as how and when to register for support with childcare costs.