Childcare: Finance
The question
To ask the Secretary of State for Education, what discussions she has had with the Chancellor of the Exchequer on the potential merits of increasing the 3- and 4-year-old childcare funded hours rate.
Answered by Olivia Bailey
The department will provide over £9.5 billion for the early years entitlements in 2026/27. This will fund a full year of the expanded entitlements and an above inflation increase to funding rates. This increase ensures funding for the entitlements reflects forecasts of average earnings and inflation next year, and the national living wage announced at the Autumn Budget. On average, nationally, we are increasing the 3- and 4-year-old hourly funding rate by 4.95%.
Since the introduction of the Early Years National Funding Formula in 2017, the national average funding rate to local authorities for 2-year-olds has been higher than that for 3-4-year-olds. We know, from listening to the sector and from our own regular research, that the cost of delivery is highest for younger children due to tighter staffing ratios and, consequently, higher staff costs, as staffing makes up the most significant proportion of provider costs. Our funding rates are set to reflect this.
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