Lancashire trusts providers’ decision

Derren Hayes
Wednesday, January 3, 2024

Lancashire County Council says its decision to pass all early years funding to providers is helping stabilise the sector and boosting uptake of funded placements.

Each year, Lancashire passes on £3.65m to around 1,500 early years providers. Picture: Monkey Business/Adobe Stock
Each year, Lancashire passes on £3.65m to around 1,500 early years providers. Picture: Monkey Business/Adobe Stock


A recent investigation by CYP Now highlighted the different approaches taken by local authorities in the amount of funding they retain to administer the government-funded childcare programme. Under the scheme, councils are allowed to retain a maximum of five per cent of the total amount of government funding to deliver 30-hours of funded early education to three- and four-year-olds. This pays for functions like promotion, administering the scheme, staff costs and providing training for early years practitioners.

The average proportion councils retain is 3.8 per cent out of the possible five per cent, but four authorities have decided to pass on all the funding to childcare providers – one of which is Lancashire County Council. Matt Dexter, principal accountant at the North West council, says it has always passed on the funding in full “to give providers as much help as we possibly can”.

The authority receives around £73m annually from the Department for Education through the designated schools grant (DSG) to deliver the programme meaning it passes on £3.65m to around 1,500 early years providers which it could otherwise retain. While a significant sum, the council receives one of the lowest childcare base rates in England.

“We pay out everything we get coming in,” says Dexter, adding that it tops up the base rate with an extra four pence an hour for three- to four-year-olds, from either DSG reserves or other funding. “We’re always doing what we can to support the sector – there’s a lot of people who want to do everything they possibly can to support them,” he adds.

CYP Now’s investigation found that 42 per cent of councils retain the full five per cent allowed by the DfE with many saying the funding is vital to deliver the programme. Yet, Dexter says Lancashire gets around this by running a lean team and keeping costs low.

“There is only a couple of people, including myself, that work on the funding side and then the early years team is very small,” he adds. “We’re talking maybe five people for an area the size of Lancashire, which is huge.”

Despite this, he says there is “a lot” of marketing of the funded childcare offer that the council’s early years team provide.

“I personally received a letter a few years ago when my children were that age, so I know they spend a lot of time and resource making sure that people are aware because there’s a lot, surprisingly, that aren’t.”

The policy of not retaining any government funding was developed with providers through the council’s early years forum. This meets regularly to get feedback from a range of different childcare operators to hear about market conditions.

“It’s an open forum,” says Dexter. “You get some who attend every meeting and others who drop in occasionally. Whether they are a head teacher or independent owner, they always say the authority has been unbelievably supportive. This is not me blowing our trumpet, they genuinely say: ‘In Lancashire, they’ve always paid the full 100 per cent – they don’t hold anything back’.”

The extension of the funded childcare scheme to children aged nine months to two years has the potential to significantly increase the number of families that councils will need to engage and create additional administration costs. But Dexter is confident that the scheme’s expansion will not result in Lancashire changing its policy in passing on all the funding to providers.

“I can’t see it ever changing,” he says. “It certainly wouldn’t be something that I would recommend be taken to the forum. And even if it was, I think the way our relationship is they will turn around and say ‘no, that’s not happening’ because we need to fully support the childcare sector.

“We’ve taken money out of DSG reserves and other funding blocks to give additional support to the sector, so I don’t see that ever changing. We have a strong relationship with the sector, and we need to maintain that – if we were to change that it wouldn’t help.”


The main outcomes the council’s policy on retained funding hopes to achieve is to improve the financial situation for providers and increase uptake of the funded childcare offer.

On both counts, Dexter says there are encouraging signs of progress in recent years.

Up take of funded three- and four-year-old places has grown from 84 to 91 per cent in autumn 2022 compared with the same period the year before and remained high – at 87 per cent – into the summer term 2023. Dexter says this reflects the “big push” the council has made over the past 18 months in promoting the offer.

At a time when studies are showing a 50 per cent rise nationally in the number of early years settings closing due to the impact of rising costs, the picture in Lancashire has remained relatively stable, says Dexter.

“There’s been a small number of closures over the years, but nothing that’s causing any red flags or great concerns, which is a good thing,” he says.

The council keeps a closer eye on finances of the county’s 24 maintained schools that provide childcare places whose budgets are monitored throughout the year “so that we keep on top of any settings that are struggling and don’t let them go into deficit”. Dexter says the council also has a “good grip” on the financial position of the roughly 200 nursery schools in the county.

“That information is often fed up to directors as well because they want to know we are sustainable,” he adds.



Councils that responded to CYP Now’s investigation said they use some of the retained funding to pay for additional support for the growing number of young children with special educational needs and disabilities (SEND) – latest DfE figures show the number of school children with SEND needs has risen 19 per cent since 2016.

In Lancashire, rising demand for SEND support has seen the council spend the entire amount it allocated for this from the early years budget by the end of 2023, with it having to dip into the designated schools grant to fund provision until 1 April 2024.

“That initial budget that we set, has already been fully spent,” explains the council’s principal accountant Matt Dexter. “We knew the demand was coming up, but we weren’t expecting it to be as severe as it has been this year. It will make for interesting times when it comes to the next round of budget setting.”

Dexter says more funding is needed from central government to reflect the growing demand for SEND support in the early years.

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