Government announces £4.30 minimum funding rate for childcare places

By Neil Puffett

| 01 December 2016

Every council will receive a minimum funding rate of at least £4.30 per hour to cover the cost of childcare places for three- and four-year-olds, it has been announced.

Free childcare for working parents of three- and four-year-olds is set to be extended to 30 hours per week from September 2017. Picture: Lucie Carlier

Publishing its response to a consultation on early years funding launched earlier this year, the government said this will give local authorities the scope to pay providers an average funding rate of at least £4 per hour.

The £4.30 minimum funding for councils will form part of a new early years national funding formula that will allocate funding to local authorities for the existing 15-hour entitlement for all three- and four-year-olds, as well as the additional 15 hours for three- and four-year-old children of eligible working parents which is due to come into effect from September 2017.

The government said the changes will mean national average funding rates increase from £4.56 to £4.94 for three- and four-year-olds.

Around 80 per cent of local authorities will see increases in their hourly funding rates, with the government setting a "funding floor" to ensure that no authority will see a reduction of more than 10 per cent as a result of the formula.

The government also announced increased support for children with disabilities through the introduction of a Disability Access Fund, which will provide £615 per year for every eligible child.

Meanwhile, the government has confirmed it will invest £55m per year in additional funding for maintained nursery schools up to the end of the current parliament in 2020. The announcement of investment in maintained nurseries comes ahead of a planned consultation on their future, due to take place shortly.

Early years minister Caroline Dinenage said: "Education lies at the heart of this government's ambition to make this a country that works for everyone - and today we are reaffirming our commitment by announcing this new, fairer way of funding our early years.

"It will ensure the dedicated individuals caring for our children have the support they need to give every child the best start, especially when looking after those who are most in need.

"We have listened to the many views shared in our consultation, and these have played a pivotal role in shaping our final proposals which aim to make our education system sustainable, transparent, and above all, fair for everyone."

Neil Leitch, chief executive of the Pre-school Learning Alliance, said news of additional early years funding for the introduction of a minimum hourly funding rate is welcome.

"Many providers, especially those whose local authorities are among the least well-funded in the country, have voiced serious fears about their sustainability, and so today's news is likely to be welcomed by them," he said.

"That said, while this is undoubtedly a positive step in the right direction, it remains to be seen how much of an impact this will have on providers' sustainability in the long term.

"Some areas that are seeing significant falls in funding will not actually be affected by today's announcement, and so it's clear that there is much more to be done to support providers in such areas." 

Purnima Tanuku, chief executive of the National Day Nurseries Association said she is concerned that the government has not committed enough money to making the 30-hour childcare offer sustainable.

"Many people in the nursery sector will remain bitterly disappointed that they will be not be given the level of funding to allow them to deliver 30 funded hours sustainably," she said.
"While it's welcome that the government has listened to concerns, looked at the principle of a minimum level of funding and allocated more money to address the lowest funded local authorities, the small uplift in funding doesn't go far enough.
"Many nurseries will still question how they can extend their offer of funded hours and remain sustainable.
"The DfE minimum rate and funding allocations are set to flatline from 2017, not rising year-on-year with inflation, while nurseries are facing above-inflation wage increases, driven by the National Living Wage.

"They also have the added financial pressure of business rates rises averaging 30 to 40 per cent next year. Nurseries are ideally placed to deliver 30 hours, but conditions have to be right.

"NDNA is clear that if enough funding can't be found to plug the gap, then nurseries must be allowed to treat government funding as a contribution to the cost of a place with parents able to make up the difference at their chosen childcare provider."

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