An extra £30m has been found in the Department for Education’s budget to support the introduction of this floor rate.
In effect this means that providers will receive minimum of at least £4 an hour to offer the Government’s 30-hour offer of free childcare for working parents of three- and four-year-olds from September 2017.
The new early years national funding formula aims to end historic disparities in early years funding around the country and make the distribution of early years funding to providers fairer.
The plans are set out in the Government's response to the consultation carried out in the summer.
Early years minister Caroline Dinenage, said, 'Education lies at the heart of this Government’s ambition to make this a country that works for everyone – and today we are reaffirming our commitment by announcing this new, fairer way of funding our early years.
'It will ensure the dedicated individuals caring for our children have the support they need to give every child the best start, especially when looking after those who are most in need.
'We have listened to the many views shared in our consultation, and these have played a pivotal role in shaping our final proposals which aim to make our education system sustainable, transparent, and above all, fair for everyone.'
The Government will allocate funding to local authorities for the existing entitlement for all three- and four-year-olds and the extra 15 hours for three- and four-year-olds of eligible working parents.
It will mean that a child attending a private or voluntary setting will receive the same basic level of funding as a child in a nursery class in a primary school.
The funding will be made up of a base rate, plus an uplift for additional needs, based on measures for free school meals; disability living allowance and English as an additional language.
The disability access fund will provide £615 a year for every eligible child.
On top of this there will be an area cost adjustment to reflect the different costs of providing childcare in different parts of the country.
Average hourly funding rates will rise from £4.56 to £4.94 for three- and four-year-olds.
Local authorities will be required to pass on a minimum of 93 per cent of this funding to providers in 2017-18, rising to 95 per cent thereafter.
The Government will regulate to ensure that local authorities comply with the policy.
The DfE says that 80 per cent of local authorities will receive an increase to their hourly funding rates, and no local authority will receive a cut of more than 10 per cent.
More than 3,000 nurseries, pre-schools and childminders took part in the Department for Education’s consultation on plans to change the way early years funding works.
There was overwhelming support for introducing an early years formula, which was backed by 73 per cent of respondents.
In response to concerns about the loss of a quality supplement to fund workforce qualifications, the DfE has agreed that councils can offer a discretionary quality supplement. A supplement for English as an additional language will also be allowed on a discretionary basis. The deprivation supplement remains mandatory.
However, it is not going ahead with the proposed efficiency supplement or the supplement for delivery of the extra 15 hours.
Three-quarters of respondents were in favour of the use of supplements, and the DfE will bring in a 10 per cent cap on funding that authorities can allocate to providers through supplements.
Maintained nursery schools - of which around 400 remain, mostly in disadvantaged areas - had initially been promised £55m of extra funding a year to support them to transition to the new formula for two years, but the Government has confirmed that this will be extended until the end of this parliament.
There will also be a planned consultation on their future shortly.
- For more on this story see the 12 December issue of Nursery World.