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Decision to revert to census-based funding in spring will impact on EY sector

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Friday, 18 December, 2020

DfE have today announced that the £44m increase in early years entitlement funding announced in the Spending Review will translate as an 8p per hour increase for the 2-year-old rate and a 6p per hour increase for most 3- and 4-year-old entitlements, with a minimum funding floor for local authorities rising to £4.44ph.  DfE believe this is sufficient to cover the rise in the National Minimum Wage, but in the context of the many other funding pressures and the impact of the pandemic, this seems to leave the sector potentially still facing huge funding challenges.

DfE have also confirmed that they are going ahead with calculating spring term funding on the basis of January 2021 census numbers, not continuing with the last two terms' model of basing funding on pre-pandemic numbers.  The only exception will be for local authorites where attendance is less than 85% of 2020 levels at the time of the census but increases during the course of the term, in which case a top up will be provided up to a cap of 85%.  This is disappointing news, as we know that so many providers are already struggling, and that in many cases attendances are far from recovering to pre-pandemic levels. We believe it is based on flawed assumptions about the rate at which children will return to settings and the number of hours they will take up.

The decision is surprising in the light of their own newly published evidence showing that providers are still seeing significant impact on income from parent-paid fees.

Maintained nursery school funding 2021-22

DfE have also published details of maintained nursery school funding in the Dedicated Schools Grant (DSG) funding allocations for 2021-22.  As ministers have not yet announced their intentions as to how nursery school funding will be allocated in future to achieve a sustainable long-term solution, the allocations data reflects the c.£60m supplementary funding allocations with the comment "The allocation for September 2021 to March 2022 is conditional and may change".  This is because:

  • Summer term funding 2021 will be based on the current formula (the £23m previously announced)
  • Autumn term 2021 and Spring 2022 funding is provisionally allocated as per the current formula (the balance of the £60m announced in the Spending Review) but the allocation of this funding could change following any ministerial announcements.

We urge ministers to make an announcement about their plans for future maintained nursery school funding as soon as possible to remove the uncertainty currently hanging over the sector.  Given the growing number of schools whose finances have been pushed into deficit by the pandemic, certainty about future funding is more vital than ever..

We welcome Ministers' reiterated commitment to a long-term funding solution for maintained nursery schools and we hope local authorities will hold off on decisions about the future of their nursery schools until full details of a future funding formula are available.