POLICY
Early entitlement funding and the new offers: your questions answered
Shannon Pite, director of communications and external affairs at the Alliance, walks us through your questions about upcoming early years funding changes
Shannon is responsible for campaigns and lobbying, press and policy work and wider communications at the Alliance.
With just a few months to go until the first phase of the extended entitlement offer, the government has released further details of how the new – and existing – schemes will be funded.
So how exactly are funding rates calculated? Why do some areas get more funding than others? And how much funding are local authorities allowed to hold back? We answer your most common questions below…
When are the new early entitlement offers coming into effect?
The government has confirmed that:
- from April 2024, all eligible working parents of two-year-olds will be able to access funding for 15 hours per week of education and care
- from September 2024, all eligible working parents of children aged nine months up to three years old will be able to access funding for 15 hours per week of education and care
- from September 2025, all eligible working parents of children aged nine months up to three years old will be able to access funding for 30 hours per week of education and care
All entitlements apply over 38 weeks of the year.
What are the eligibility criteria for the new offers?
The government has confirmed that the new offers are for working families only and that the eligibility criteria will be the same as for the existing 30-hours for three and four-year-olds.
This means that parents or carers will need to earn at least the equivalent of 16 hours at the minimum or living wage but no more than £100,000. This applies to each parent in dual-parent households, though there are exceptions where one parent is in receipt of Incapacity Benefit, Severe Disablement Allowance, Carer’s Allowance, Limited Capability for Work Benefit, or contribution based Employment and Support Allowance, providing their partner is working.
How soon after will children be able to access the new early entitlements once they have reached the relevant age?
Eligible working parents of two-year-olds will be able to access the entitlement from the term after their child’s second birthday, while as of September 2024, eligible working parents of children aged nine months and above will be able to access funded places from the term after their child turns nine months.
How much funding will local authorities receive?
The DfE has confirmed that local authorities will receive an average three- and four-year-old funding rate of £5.88 from April 2024, an average increase of 4.7% compared to September 2023. Individual local authority rates – which range from £5.47 to £9.04 – are available at: bit.ly/LArates3and4YO.
Under both formulas, every local authority receives the same ‘base rate’ of funding from government.
For two-year-old funding, local authorities will receive an average rate of £8.28 from April 2024, with individual rates ranging from £6.98 to £11.88. This applies to both the new offer for two-year-olds from eligible working families and the existing offer for two-year-olds from disadvantaged backgrounds. Individual council rates are available at: bit.ly/LArates2YO.
For under-twos funding, local authorities will receive an average rate of £11.22, ranging authorities are required to pass on 95% of funding on average to providers. from £9.45 to £16.21. Individual council rates are available at: bit.ly/LAratesunder2.
Why don’t all areas receive the same funding rate?
The funding formula used to determine local authority rates for the two-year-old and under-two offers is very similar to the three- and four-year-old formula.
Under both formulas, every local authority receives the same ‘base rate’ of funding from government. On top of this, they receive extra funding to reflect the cost of providing care for children with additional needs (i.e. children who are economically disadvantaged, speak English as an additional language or have special educational needs and/ or disabilities), called an additional needs factor.
Once funding for additional needs has been added in, the hourly rate is multiplied by what is called an area cost adjustment rating, which is intended to reflect the costs to providers of operating in a particular local authority, and is based on both staffing costs and premises costs.
This is how the funding rate that local authorities should receive is calculated. The government also has the option of implementing a minimum funding rate (a minimum rate that any council can receive), a year-on-year protection (a guarantee that all local authority rates will increase by a set percentage) and a gains cap (a limit to how much council rates can increase year on year).
How much each individual provider will get will depend on how much they receive through supplements.
How much funding will providers receive and when will I find out my funding rate?
Final funding rates for frontline providers will be confirmed by individual local authorities. Councils are required to confirm these rates to providers by 31 March 2024. This includes final funding rates for children aged nine months to two years old for the offer coming into effect in September 2024. The DfE has said that it “encourage[s] local authorities to complete this process as far ahead of the deadline as possible, to give providers sufficient time for business planning”.
Local authorities are required to pass on 95% of funding on average to providers, unless a council makes a disapplication request (i.e. a request not to have to adhere to the 95% rule) that is approved by the DfE.
I don’t get 95% of my local authority’s funding rate. Why is that?
Councils are only required to pass on 95% of their funding rate on average. How much each individual provider will get will depend on how much they receive through supplements: a provider who receives few to no supplements may receive less than 95% of the local authority rate, while another provider in the same area may receive more than 95%.
In addition, included within this 95% are other streams of funding, including lump-sum funding for maintained nursery schools (applying to three- and four-yearold funding only); special educational needs inclusion funding (SENIF); and contingency funding.
We know that as the implementation of the new offers nears, further questions are likely to arise. If you have any queries about your own funding rate or the wider offer, please contact our policy team on feedback@eyalliance.org.uk.