Local authorities will receive average increases of 3.4 per cent for funded childcare entitlements for three- and four-year-olds and four per cent for the two-year-old entitlement, as part of an update to the Early Years National Funding Formulae (EYNFF).
DfE said the increase, which will be introduced from April next year for the 2023/24 financial year, will “help to ensure that the early years funding system is responsive and targets investment towards those areas where it will do the most good”.
However, analysis by the National Day Nurseries Association (NDNA), finds while that the largest rise in funding rates will be 5.6 per cent in Leicestershire., across England, 35 areas remain on the lowest funding rate of £4.87 per hour and 42 areas see an uplift of just one per cent on current rates.
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Responding to the changes: Purnima Tanuku, chief executive of the NDNA, said: “In nearly a third of councils, the increase will be around one per cent which is a massive cut in real terms. Providers in these areas are already struggling and this will have disastrous consequences for their sustainability.”
The announcement says that funding has been taken from a wider allocation of £2bn announced for schools in Chancellor of the Exchequer Jeremy Hunt’s autumn statement.
Early years leaders have said the increase will not help the sector to face challenges including “the consequences of years of government underfunding, alongside soaring energy prices, sky-high inflation rates and record increases in the national living and minimum wage”.
Neil Leitch, chief executive of the Early Years Alliance, said: “The early years is in crisis. What our sector needs is a comprehensive long-term strategy underpinned by substantial investment. What we are getting is the equivalent of rearranging the deckchairs on the Titanic.
"Average funding increases of no more than four per cent will amount to pennies in practice – and a few extra pennies on an already-wholly insufficient funding rate isn't going to stop prices going up for parents, or more and more settings being forced to close their doors for good.
"When it came to schools, the Chancellor rightly recognised that what the government had committed to at the last spending review was not enough to tackle the financial challenges that the sector is currently facing and took urgent steps to address this through a £2.3bn boost in funding. So why should the early years be any different?
"The government knows full well that early years funding is nowhere near what it needs to be to safeguard the future of the sector. What will it take for ministers to stop pretending otherwise and actually do something about it?"
Tanuku added: "The funding each child gets will increase by less than four per cent but the real costs for providers will be well over 10 per cent higher. Every child in early years learns about quantity, number and understands less and more. While Ministers have recognised that something needs to be done, they are not doing enough for our children, families and childcare providers.”
The changes come alongside the publication of the government's reponse to its consultation on the EYNFF and changes to funding for two-year-olds.
It also moves to address sector concerns over how providers will meet the increased National Living Wage announced in Hunt's autumn statement.
It states: "In 2023/24, we will invest an additional £20m in the early years entitlements to help
meet the cost of the National Living Wage increase next year at a national level. We
will apply year-to-year protections of + one per cent and a gains cap of 4.9 per cent and 10 per cent for the EYNFF and two-year-old formula respectively. We will also increase the minimum
funding floor for the EYNFF to £4.87."
DfE has also announced allocations of 10.6 per cent – almost £1m - for children and young people with complex special educational needs and disabilities (SEND) and says that special schools and alternative provision receive an average 3.4 per cent per place increase in their funding in 2023/24.
It also claimed that the investment will see pupil premium rates increase by five per cent in 2023/24 compared with this year.
"The increase will support schools to continue using high quality tutoring as a key means of targeted support for the children who need it most, and embed tutoring in schools long-term," according to DfE.
The announcement comes comes as the sector awaits ministers’ response to the SEND and alternative provision green paper.
