Question to the Department for Education:

To ask the Secretary of State for Education, for what reason her Department plans to provide higher funding per hour for childcare in London than in Barnsley.

The Government currently funds local authorities to deliver the government-funded entitlements through the Early Years National Funding Formula (EYNFF) for 3 and 4-year-olds and a separate formula for 2-year-olds. These have been designed to allocate our record investment in early years entitlement funding fairly and transparently across the country.

The EYNFF is made up of a universal base rate, (which is the same hourly funding rate for every child in a local authority) plus funding factors for additional needs, using measures of free school meals; disability living allowance and English as an additional language. The formula also includes an area cost adjustment (ACA) multiplier to reflect variations in costs across different areas of the country. This uses the General Labour Market measure to reflect staff costs and a Rates Cost Adjustment to reflect premises related costs. Each local authority’s EYNFF rate will vary depending on their level of additional needs and their ACA values.

Following a consultation in 2022, the department updated the funding formulae to ensure the funding system remains fair, effective and responsive to changing levels of need across different local authorities.

On 7 July the department announced that the additional £204 million funding for early years in 2023/24, announced at the Spring Budget in March, will be distributed to local authorities via a standalone Early Years Supplementary Grant (EYSG) from September 2023.

To recognise cost variations between local authority areas, we have used the existing funding formulae for 2, 3 and 4-year-olds (and using the same underlying weightings and data that were used to calculate the 2023/24 hourly funding rates) to determine the EYSG rates for each individual local authority.

With the introduction of the new entitlements for working parents of children aged 9 months to 2 years from 2024/25, we have recently finished consulting on our proposed funding formula for distributing funding to local authorities, along with the accompanying local rules for local authorities to follow when passing on this funding to early years providers. That consultation closed on 8 September and we will announce our response and confirm the final hourly funding rates for 2024/25 in the autumn.

We will ensure a phased implementation of the free hours offers, to allow the market to develop the necessary capacity as well as continuing to explore how we can support the sector to deliver the additional places that will be required.

We will work closely with local authorities and providers to identify what needs to be in place to support this significant expansion in childcare provision including capital requirements as well as workforce.