Increase funding for early years settings

We believe Government funding for early years settings is too low, and making it difficult to keep these settings open. This will only be more difficult with the increase in minimum wage. Everyone wants childcare standards high, but we believe more funding is needed to achieve this.

Some early years settings, especially in deprived areas, rely on early years funding to pay staff, bills and maintain high standards and with the increase in minimum wage some of these businesses may struggle to remain open.

Additional Government funding for early years settings should help reduce the pressures on these settings, and we believe is desperately needed.

The Government understands that hard-working parents rely on childcare to help them balance their home and work commitments. We can rightly be proud of our childcare sector. 96% of childcare settings in England are now rated good or outstanding by Ofsted, an increase from 74% in 2012. Ofsted data also shows that the number of childcare places available has remained broadly stable since August 2015.

The Government already provides a significant package of childcare support to parents and carers and over one million children every year are now benefitting from our record investment in early years education entitlements. These include 15 hours of free childcare a week for 3- and 4-year-olds and a further 15 hours a week for 3- and 4-year-olds with working parents, also known as 30 hours free childcare, which can help save families up to £6,000 per child per year. 15 hours a week of free early education is also available for disadvantaged 2-year-olds.

We know the sector is facing economic challenges, similar to the challenges being faced across the economy. We have already announced additional funding of £160 million in 2022–23, £180 million in 2023–24 and £170 million in 2024–25, compared to the 2021–22 financial year, for local authorities to increase hourly rates paid to childcare providers. Improving the cost, choice and availability of childcare for working parents is important for this government.

For 2022-23 we have increased the hourly funding rates for all local authorities by 21p an hour for the 2-year-old entitlement and, for the vast majority of areas, by 17p an hour for the 3 and 4-year-old entitlement. We have also increased the minimum funding floor – meaning no council can receive less than £4.61 per hour for the 3 and 4-year-old entitlements.

For 2023-24, we are investing an additional £20 million into the early years entitlements. This is on top of the additional £180m for 2023-24 announced at the Spending Review. Taken together, this will help support early years providers at a national level with the additional National Living Wage costs associated with delivering the free childcare entitlements next year.

Local authorities are set to receive average funding increases of 3.4% for the 3- and 4-year-old free childcare entitlements and 4% for the 2- year-old entitlement in 2023-24, compared to their 2022-23 rates. All local authorities will benefit from at least a 1% increase in their funding rates in 2023-24, with increases for some up to 4.9% for 3- 4-year-olds, and up to 10% for 2-year-olds.

We will also be investing an additional £10 million into maintained nursery school (MNS) supplementary funding from 2023-24; this is on top of the increase in 2022-23, where we have increased the supplementary funding hourly rate by 3.5% - equivalent to the increase in the 3 and 4-year-old hourly funding rates. We have also confirmed the continuation of MNS supplementary funding throughout the spending review period, providing the sector with long-term certainty.

The Government remains committed to the future of the early years education sector. We continue to monitor the market closely through a range of research projects, including our annual Childcare and Early Years Providers Survey which gives the government robust evidence on the provider market. The most recent survey was published 9th December 2021 and the latest was published on 15th December 2022. We are also in regular contact with early years sector stakeholders through meetings and working groups and we feed their messages right into the heart of government..

Department for Education