Local authorities with declining childcare places will be 'hit hardest' by proposed funding changes

The findings are according to new analysis by the Early Years Alliance (EYA) into the impact of planned changes to the early years funding formula, currently being consulted on, whereby the more expensive it is for childcare settings to operate, the more funding local authorities in England will receive.

The Department for Education (DfE) is also looking at setting new fixed minimum and maximum increases to funding rates between 2022/23 and 2023/24 – what it calls ‘year-to-year protections’. The EYA says that these ‘protections’ would see rates for some councils rise by just 1 per cent for deprived two-year-olds and three and four-year-olds.

The DfE has published estimates showing how much of an increase each local authority in England is likely to receive in 2023-24 based on its current funding formula proposals, which has been analysed by the EYA and finds:

• There are 20 local authorities that the DfE expects to receive the minimum possible increases (see below table), 16 of which are in the north-east, north-west or Yorkshire and the Humber. 
• These 20 areas have already seen an average drop in early years places of 1.6 per cent, with some areas seeing declines of more than 10 per cent over the past five years.

The figures have been calculated using Ofsted data on the number of places in each local authority in England in March 2017 and in March 2022.

The 20 local authorities include:

• Sunderland
• Halton
• Stockton-on-Tees
• Gateshead
• Leicester

At the other end of the spectrum, funding for those local authorities deemed as expensive operating areas could see their funding increase by up to around 8.6 per cent for eligible two-year-olds and around 4.5 per cent for three and four-year-olds.

There are 19 local authorities (see below table) the DfE expects to receive the maximum possible increases, all of which are in London and the south-east. The EYA says that these areas have already seen an average increase in places of 4.6 per cent with one area, Hackney, seeing an increase of over 24 per cent over the last five years.

The 19 local authorities include:

• Hackney
• Bromley
• Wokingham
• Bexley
• West Sussex

'Until there is enough money in the early years funding pot to begin with, there will always be areas that lose out.'

Chief executive of the Early Years Alliance Neil Leitch said it is ‘incredibly concerning that so many areas already seeing a decline in early years places are set to receive such miniscule increases in funding.’

He said, ‘Let’s be clear, a 1 per cent increase in early years funding at a time when inflation rates are at record highs, energy costs are soaring and the national minimum and living wages are continuing to rise is simply not sustainable – and the likelihood is that many of the nurseries, pre-schools and childminding settings operating in these areas are very likely to struggle to remain afloat for much longer. 

‘The Government’s insistence on focusing on national statistics when talking about the availability of early years places completely ignores the huge regional discrepancies that have emerged over recent years. What use is it telling a parent that there are plenty of places available across the country if there are none in their local area? 

‘Ultimately, until there is enough money in the early years funding pot to begin with, there will always be areas that lose out, no matter how it is distributed. The government simply must commit to investing what our vital sector needs to remain viable. Ignoring this problem will not make it go away.’