From September, hourly rates per child will rise from an average of £6.00 to £7.95 for two-year-olds through the government-funded scheme.
Currently, 15-hours of government-funded childcare is available to the 40 per cent most disadvantaged children in England, but from next April this will be expanded to be offered to all working parents of two-year-olds.
The inflation-busting rate rise is part of a £204m package announced by the Department for Education today (Friday), and which will also fund 16 local authorities to deliver primary school childcare provision from 8am to 6pm daily.
The 16 authorities funded through the scheme are: Barnsley, Blackburn with Darwen, Cambridgeshire, Central Bedfordshire, Cornwall, Dudley, Gateshead, Hampshire, Hartlepool, City of Hull, Merton, Newham, Norfolk, Nottinghamshire, Sheffield and Wiltshire.
The extra cash will also pay for a below inflation rise of six per cent in rates for three- and four-year olds places under the government-funded scheme – this will rise to an hourly average of £5.62 per child from September.
The funding is in addition to the extra £288m announced in the spring budget for funded childcare for 2024/25.
Education Secretary, Gillian Keegan said: “Today is a great step forward as we deliver on the largest ever expansion of childcare which will be transformational for working families and will help grow our economy.
“I want childcare to be truly affordable and available when and where parents need it.
“This initial investment will go a long way in supporting the fantastic early years sector to prepare for the expansion of free childcare hours available to parents next year.”
However, childcare groups said the extra money falls well short of the gap between government funding and providers’ costs.
Neil Leitch, chief executive of the Early Years Alliance, said: “It’s clear that the increases will do little if anything to address the years of underfunding that has devastated England’s early years sector.
“Given that government’s own figures show that there is a £1.8bn shortfall in the existing three-and-four-year-old offer, how can anyone argue that a mere six per cent increase in funding will come anywhere close to easing the pressures facing the sector, especially in the face of sky-high rates of inflation?
“Today marks yet another disappointment for the early years sector, and for parents hoping to be able to access affordable early years provision for their children in the coming year and beyond.”
Purnima Tanuku, chief executive of National Day Nurseries Association (NDNA), said: “Any increase in funding must cover the spiralling costs that early years settings have been facing, especially inflation and staffing costs.
“Our data shows a 50 per cent increase in the rate of nursery closures and this is backed up by Ofsted’s statistics. Many childcare providers will receive nowhere near the average rates that have been published once regional differences and budget top-slicing have been taken into account. For many more it will be too little, too late, especially in relation to three- and four-year-old rates.”
June O'Sullivan, chief executive of the London Early Years Foundation, said: "Whilst it’s a step in the right direction, this extra funding for childcare providers only covers approximately 10 per cent of the £2 billion shortfall from the DfE's own data in 2021. This will be significantly higher now given increased costs since the current government subsidy has not kept up with spiralling wages and inflation."
The DfE also confirmed that it will soon launch a consultation on how the funding for the new entitlements in 2024-25 will be distributed, to ensure it remains fair in light of expanded offer.
