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Childcare minister Caroline Dinenage has announced a minimum rate of £4.30 per hour for early years providers, as part of a ‘fairer funding system’.
The new funding rate means early years providers receive a minimum of at least £4 per hour to deliver the three-and four-year-old places for the Government's 30-hour free childcare policy from September 2017.
The Department of Education (DfE) has said the ‘new formula brings to an end the current postcode lottery’ that means providers can receive unfair levels of funding with some areas receiving as much as £1.60 per hour more, instead of according to the costs of providing childcare.
The minister said councils will legally have to pass on 95 per cent of funding to nursery providers ‘on the frontline’ in an effort to deliver increases in funding levels.
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 received more than 3,000 responses from nurseries, preschools, childminders and parents to its consultation on funding with the majority supporting the introduction of a funding formula (73 per cent). To see the funding consultation response visit: https://www.gov.uk/government/consultations/early-years-funding-changes-to-funding-for-3-and-4-year-olds
’Don’t confuse more money with enough money’
Neil Leitch, chief executive of Pre-school Learning Alliance, said: "We warmly welcome the news of additional early years funding for the introduction of a minimum hourly funding rate, and are pleased that the government is listening to the Alliance's concerns on this issue.
“As such, while increased funding is undoubtedly welcome, it is important not to confuse 'more money' with 'enough money'. For many providers, the difference between the cost of delivering 'free entitlement' places and the funding received from government remains significant, and unless this gap is closed - as opposed to narrowed - the problems facing the sector will remain.”
Sector leaders say the early years funding rates that local councils will receive next year will remain stagnant until 2020, while business costs will continue to rise. They argue this is not sustainable and must be addressed if the government is to ensure the sector can survive in the long term.
’Anything above basic childcare offer should be chargeable’
The National Day Nurseries Association (NDNA) highlighted that the DfE minimum rate and funding allocations are set to flatline from 2017 - not rising year on year with inflation, while nurseries are facing above-inflation wage increases, driven by the National Living Wage.
Early years providers also have the financial pressure of business rates rises averaging 30 to 40 per cent next year.
Purnima Tanuku, chief executive of NDNA said: “NDNA is clear that if enough funding can’t be found to plug the gap, then nurseries must be allowed to treat government funding as a contribution to the cost of a place with parents able to make up the difference at their chosen childcare provider. Anything over and above a basic childcare offer should be chargeable.
“We urge DfE to ensure that the new statutory guidance for delivery of funded hours, due out soon, enables all providers to take part in 30 funded hours by making it clear that charges can be made to cover the gap between the hourly rate and the cost of a place.”
The minister also said early years providers will get extra money to help with the costs of caring for children with disabilities. The increased support for children with disabilities through the introduction of a Disability Access Fund, will provide £615 per year for each eligible child.
The DfE has also confirmed it will invest £55m per year in maintained nursery schools, which often care for some of the most disadvantaged in this country, up until the end of this Parliament. The announcement of investment in Maintained Nurseries comes ahead of a planned consultation on their future.
This week, the DfE published resources to help nurseries. These resources include guidance for providers on how to manage demand, understand costs and forward plan effectively, case studies on good business practice from successful childcare providers and a directory of organisations businesses can contact for support.