The Department for Education (DfE) has today published the new funding rates for early years providers to deliver the funded offer for 2025-26. They include the Early Years Pupil Premium (EYPP) rate, which has risen by 45 per cent, an ‘unprecedented amount’, meaning settings will receive around £570 per eligible child, per year. The EYPP rate still remains below the amount schools receive, however.
The Sutton Trust welcomed the uplift in the EYPP, but said ‘much more is needed to level the playing field’.
It’s chief executive Nick Harrison added, ‘The Government should now set out how and when it will end the travesty of better off children receiving at least double the early years education that children from poorer homes are entitled to.’
It has also announced a new £75 million expansion grant for early years settings (see below).
While the new rates for the funded offer have also increased, sector organisations have warned they have not risen enough to cover the increase to employer National Insurance contributions (NICs) from next year and the national minimum wage. This is despite promises from the Government that funding will rise to cover additional costs.
According to the DfE, on average, funding rates will rise to:
- £11.54 for under 2s, a rise of 3.4 per cent on the current rate.
- £8.53 for two-year-olds, a rise of 3.3 per cent
- £6.12 for three and four-year-olds, a rise of 4.1 per cent.
It says as usual, hourly funding rates for providers will vary between local authorities to reflect local circumstances.
'These new funding rates make it clear the Treasury does not appreciate the contribution the PVI sector makes to enhance children's life chances'.
Sector organisations have said that the new rates aren’t enough to cover the increased costs faced by providers, meaning they will be forced to raise parent fees or shut completely.
Purnima Tanuku, chief executive of the National Day Nurseries Association (NDNA), explained, ‘These new funding rates and the announcement today makes it clear that the Treasury does not appreciate the contribution which the private and voluntary early years sector makes to both enhance the life chances of our youngest children and to grow the economy.
‘For nurseries in England, National Insurance Contributions and salary increases will add £2,600 a year per employee, £47,000 on average per nursery and 11 per cent increase to overall staffing costs.
‘Public sector providers will get reimbursed for their National Insurance Contributions increase, but the private and voluntary sector – which delivers three quarters of funded places – will not be helped at all.’
'Providers needed a commitment to mitigate the impact of the National Insurance changes'.
Neil Leitch, chief executive of the Early Years Alliance, commented, ‘With our own research showing the National Insurance changes will cost settings more than £18,000 a year what providers needed was a commitment to mitigate the impact of these changes. Yet in reality, by not accounting for these changes in next year's rates countless nurseries, pre-schools and childminders will be left with no option but to raise costs, reduce places or simply close their doors completely.
‘The Treasury may claim that the rates announced today take into account the upcoming rises to the National and Living wages, but we know it will do little – if anything at all – to support settings to meet these increases and ensure wage differentials between junior and senior staff. As such, not only will it place even more financial pressure on settings but it is likely to make the sector’s ongoing staffing crisis even worse.
‘Today was an opportunity for the Treasury to show it recognises the catastrophic impact that the National Insurance and wage changes will have on the sector. Not only has it turned a blind eye to this, but it will have clear repercussions on families expecting to take advantage of the ongoing expansion.’
Expansion grant
In total, the DfE claims early years providers are set to benefit from over £2 billion extra investment compared to last year, to support the rollout of 30 hours of Government-funded early education from next September.
It says this forms part of the Government’s mission to ‘break the unfair link between background and opportunity’, increasing access to affordable and high-quality early education so tens of thousands more children will be ‘school ready’ at age 5 by the end of the parliament.
The Government has also announced today a new £75 million expansion grant to support nurseries, childminders and other providers to deliver the 35,000 additional staff and 70,000 places required to meet the full rollout of the expanded offer from next September. The grant will be allocated later this year.
The DfE confirmed to Nursery World the grant will be allocated later on in the 'funding year', and they 'll be 'working at pace alongside the sector and local authorities to distribute the funding.'
'The early years has been my priority from day one'.
The education secretary Bridget Phillipson said, ‘High quality early education is the cornerstone of our promise to ensure tens of thousands of children are school ready every year, as part of the Government’s Plan for Change.
‘Despite the inherited challenges we face, this Government will invest in our children’s future to break the link between background and success and build a system that gives every child the best start in life.
‘The early years has been my priority from day one, because by giving more children.’
