Guidance

2023 to 2024 Early years funding formulae: technical note

Updated 19 June 2023

Applies to England

1. Introduction

This technical note describes the detailed methodology for the early years national funding formula (EYNFF) that has been used to calculate final hourly rates and indicative allocations for the 3 and 4-year-old entitlements for financial year 2023 to 2024. This includes the updates and changes that we have made, as confirmed in the government response to the consultation on the early years funding formulae. It specifically covers:

• 3 and 4-year-old universal 15 hours entitlement
• 3 and 4-year-old additional 15 hours entitlement for eligible children of working parents
• the rolling in of the early years element of the teachers’ pay grant and teachers’ pension employer contribution (TPPG)

This document also covers the detailed methodology for calculating the final hourly funding rate and allocation calculations for the 2-year-old entitlement, supplementary funding for maintained nursery schools (MNS), showing the impact of our reforms. It also presents the funding rate uplifts for the early years pupil premium (EYPP) and disability access fund (DAF).

The document accompanies the early years funding rates and step-by-step calculation: 2023 to 2024 funding output tables which include:

• a ‘national details’ tab showing indicative national allocation funding totals for the EYNFF, 2-year-old formula and MNS supplementary funding and how the formula factor rates have been derived

• a ‘EYNFF 2023 to 2024 rates’ tab showing final 2023 to 2024 hourly rates for 3 and 4-year-olds for each local authority and comparisons with 2022 to 2023 hourly rates plus TPPG hourly uplifts

• a ‘2-year-old 2022 to 2023 rates’ tab that shows final 2023 to 2024 hourly rates for 2-year-olds for each local authority, and comparisons with 2022 to 2023 hourly rates

• a step-by-step table showing how each local authority’s 3 and 4-year-old hourly funding rates and indicative allocations have been derived

• a step-by-step table showing how each local authority’s 2-year-old hourly funding rates and indicative allocations have been derived

• a table showing how each local authority’s hourly MNS supplementary funding rates and indicative allocations have been derived

• several additional tabs providing further detail, such as how we are proposing to incorporate TPPG in the baseline and formula factor data

The Isles of Scilly and City of London have been excluded from these allocations, as these local authorities will receive a central grant from the government which will include funding for early years.

Indicative allocations for the early years block have been announced in the dedicated schools grant (DSG) allocations table, published in tandem.

2. Differences between 2022 to 2023 and 2023 to 2024

The EYNFF used for calculating 3 and 4-year-old hourly rates in 2023 to 2024 remains similar to the formula that was introduced and used directly between 2017 to 2018 and 2019 to 2020 and then used as the starting point for consecutive pence uplifts to hourly rates in 2020 to 2021, 2021 to 2022 and 2022 to 2023. However, as outlined in the consultation response we can confirm that the following changes have been made to the early years funding formulae for 2023 to 2024:

• the starting point hourly rates for each EYNFF formula factor have been updated for the first time since 2017 to 2018 (see table 2) based on the increased funding secured for 2023 to 2024 in the Spending Review, additional funding to reflect the recently announced National Living Wage increases and the majority of the money that has previously been paid through the early years element of the TPPG

• the additional needs formula factors have been calculated using more up-to-date part-time equivalent (PTE) volumes and pupil characteristic data, for example, January 2022 censuses. The definition of the disability living allowance (DLA) factor has been changed to better align with other funding formulae

• the area cost adjustment (ACA) factors have been updated for new data, where possible, and improved, for example the methodology for calculating the proxy factor for premises costs has been extended to better reflect the provider composition differences between local authorities

• year-to-year protections and funding floors have been revised for 2023 to 2024, for example, the loss cap protection has been removed and a new +1% year-to-year protection and +4.9% gains cap has been introduced. These are applied before rounding the hourly funding rates to the nearest penny

Several changes have been made to the 2-year-old entitlement formula:

• the base rate for the formula has been updated for the first time since 2015 to 2016 based on the increased funding secured for 2023 to 2024 in the Spending Review and additional funding to reflect the recently announced National Living Wage increases

• the base rate calculations for 2023 to 2024 are now based on the most up-to-date data available, for example, January 2022 censuses

• the ACA factor has been updated and improved, for example, the general labour market (GLM) data has been updated, and a proxy factor for premises costs has been introduced to align the method with the ACA used in the EYNFF

• a new +1% year-to-year protection and +10.0% gains cap has been introduced for 2023 to 2024. These are applied before rounding the hourly funding rates to the nearest penny

Following the outcome of the consultation the 2023 to 2024 calculations for supplementary funding for maintained nursery schools have also been changed:

• all local authorities’ hourly supplementary funding rates have been increased in line with funding secured in the Spending Review and additional funding to reflect the recently announced National Living Wage increases

• teachers’ pay grant and teachers’ pension employer contribution (TPPG) funding has been rolled in

• a minimum funding floor and cap have been applied to create a fairer distribution of this funding

3. Funding for 3 and 4-year-old universal entitlement

3.1 Background on previous 3 and 4-year-old funding rates

In December 2016, we published the 2017 to 2018 EYNFF hourly rates and allocations, with and without protections and capping, together with a step-by-step guide on how they were derived.

The EYNFF rates for 2018 to 2019 and 2019 to 2020 are also available on 2017 to 2018 EYNFF hourly rates and allocations along with step-by-step guides. Further information on 2020 to 2021 rates and step-by-step guides and 2021 to 2022 EYNFF rates and step-by-step guides.

When the EYNFF was introduced, a loss cap protection was applied to ensure that no area could lose more than 10% from their 2016 to 2017 funding baseline, and a minimum funding floor was also applied to ensure that no areas saw less than £4.30 per hour.

Between 2017 to 2018 and 2019 to 2020 no significant changes were made to the EYNFF. Local authorities protected by protections saw those protections unwind, whilst rates remained the same for other local authorities.

In 2020 to 2021, almost all local authorities had an 8 pence uplift to their rates and the minimum funding floor was increased to £4.38. Local authorities who were on the loss cap had their 2019 to 2020 hourly funding rates maintained in 2020 to 2021.

In 2021 to 2022, almost all local authorities had a 6 pence uplift to their rates and the minimum funding floor was increased to £4.44. Local authorities who were on the loss cap had their 2020 to 2021 hourly funding rates maintained in 2021 to 2022.

In 2022 to 2023, almost all local authorities had a 17 pence uplift to their rates and the minimum funding floor was increased to £4.61. Local authorities who were on the loss cap had their 2021 to 2022 hourly funding rates maintained in 2022 to 2023.

3.2 2023 to 2024 universal entitlement funding total

This subsection sets out the national funding allocations total for the 3 and 4-year-old universal entitlement. This will total £2.37 billion in 2023 to 2024 which is based on the department’s SR21 settlement and January 2022 part-time equivalents (PTEs) explained in pupil counts for 3 and 4-year-old universal entitlement section. It includes additional funding to reflect the recently announced National Living Wage increases.

For 2023 to 2024, the majority of the funding currently allocated through the TPPG will be rolled into the EYNFF. This adds £49 million into the EYNFF which has been calculated by multiplying eligible 2 to 4-year-old pupil numbers (maintained nursery schools excluded), as published in the TPPG September 2022 to March 2023 allocations by a combined yearly TPPG rate^{[footnote 1] [footnote 2]}.

Dividing this total allocation by total universal and additional hours January 2022 PTEs and by 15 hours and 38 weeks gives a pence uplift which can then be multiplied by universal hours only PTEs to give the TPPG funding being added to the 2023 to 2024 universal hours entitlement allocations total (£35 million).

See ‘TPPG baseline uplift’ tab of the early years funding rates and step-by-step calculations: 2023 to 2024 spreadsheet for more details.

3.3 Pupil counts for 3 and 4-year-old universal entitlement

The EYNFF allocations are calculated using PTE pupil numbers. One PTE is defined as a child taking up 15 hours per week over 38 weeks. Therefore, a child taking up 12 hours per week is counted as 0.8 PTE.

PTE pupil counts from the January 2022 school, early years and alternative provision censuses are used to calculate illustrative universal entitlement funding allocations.

From the January 2022 school census:

• all PTE pupils in maintained nurseries, maintained schools, and all academies, aged 3 at 31 December 2021, aged 3 at 31 August 2021 but 4 by 31 December 2021, or in national curriculum year groups N1, N2, E1 and E2 and aged 4 at 31 August 2021

• all PTE pupils in maintained nurseries, maintained schools, and all academies, whose national curriculum year group is missing or ‘X’ and aged three at 31 August 2021

From the January 2022 early years census:

• all 3 and 4-year-old PTEs at 31 December 2021

From the January 2022 alternative provision census:

• all pupils in independent schools without a statement of special educational needs (SEN) aged 3 at 31 December 2021

• all pupils in independent schools without a statement of SEN aged 3 at 31 August 2021 but 4 by 31 December 2021

The total pupil count this data specification produces for the EYNFF allocations for the universal entitlement is 793,311.55 PTE.

3.4 Calculation of universal hours funding formula factor allocations

This subsection describes how local authorities’ universal entitlement formula factor allocations are derived from the 2023 to 2024 indicative allocations total, which includes TPPG as described above.

The amount of the total funding allocated to each local authority is determined by the EYNFF. This is made up of the following 4 factors:

a. First, a base rate of funding for each local authorities for 3 and 4-year-olds.

b. Second, funding based on a proxy indicator for the number of 3 and 4-year-olds eligible for free school meals (FSM), which reflects the additional costs of providing childcare for children with disadvantage or low SEN.

c. Third, funding based on a proxy indicator for the number of 3 and 4-year-olds that have English as an additional language (EAL), which reflects the costs of additional support for children who do not have English as a first language.

d. Fourth, funding based on a proxy for the number of 3 and 4-years-old children who are entitled to DLA, which reflects the costs for children with more complex special educational needs and disabilities (SEND).

The indicative allocations funding total is broken down to the 4 component factors in the following way, using the same formula factor weightings as were used when the formula was introduced in 2017 to 2018, giving a funding total for each factor^{[footnote 3] [footnote 4]}.

• 89.5% of the allocations total is used for the universal base rate

• 8% for FSM funding

• 1.5% for EAL funding

• 1% for DLA funding

The first step in applying the EYNFF is to determine the pupil count to be used for each factor.

For the universal base rate factor, the count is the PTE number of 3 and 4-year-old pupils recorded on the January 2022 census, as described in the previous subsection.

As there is currently no comprehensive FSM data available for children across all early years settings, the FSM factor instead uses a proxy indicator based on full-time older children who are known to be eligible for free school meals in nursery and primary schools, which is used for FSM in performance tables. We have used the most recently published dataset to update the FSM proxy indicator^{[footnote 5]}. The assumed number of eligible FSM 3 and 4-year-olds in each local authority is calculated by:

• the proxy FSM proportion × the total number of 3 and 4-year-olds (PTE) in the local authorities

A proxy indicator is also used for the EAL factor. Here, we use a proxy indicator based on the proportion of key stage 1 and key stage 2 EAL pupils. From the January 2022 school census, the proportion is calculated as the number of pupils whose first language is not English divided by the total number of key stage 1 and key stage 2 pupils in the local authority. The assumed number of eligible EAL 3 and 4-year-olds in each local authority is calculated by:

• the proxy EAL proportion × the total number of 3 and 4-year-olds (PTE) in the local authority

For the DLA factor, the data used is from the Department for Work and Pensions (DWP) and recorded on their Stat-Xplore system^{[footnote 6]}. The data used relates to the number of 3 and 4-year old children that are entitled to DLA in February 2020. A proportion is then calculated using the 2020 mid-year Office for National Statistics (ONS) population estimates. The assumed number of eligible DLA 3 and 4-year-olds in each local authority is calculated by:

• the DLA proportion × the total number of 3 and 4-year-olds PTE in the local authority

Having determined these pupil counts, the next step is to calculate starting point hourly rates for each factor. For each factor, the starting point hourly rate is calculated as:

national funding total for the factor

divided by

the national sum of local authority’s pupil count for the factor × 15 hours × 38 weeks × local authority’s ACA.

The ACAs used in this calculation step is explained in more detail in the area cost adjustments paragraph below.

The resulting starting point hourly rates for each factor are shown in table 2^{[footnote 7]}.

Table 2: Starting point hourly rates

Funding factor	Updated starting point hourly rate (£/hour unrounded and shown to 2 decimal places)
Universal base rate	£4.21
Free school meals (FSM)	£1.61
English as an additional language (EAL)	£0.32
Disability living allowance	£1.72

Then, each local authority’s EYNFF universal entitlement funding allocation for each factor is given by:

Starting point hourly rate for the factor (see table 2) × local authority’s pupil count for the factor × 15 hours × 38 weeks × local authority’s ACA

Each local authority’s total universal entitlement funding allocation is the sum of their allocations for each of the 4 factors.

To derive the local authority’s formula-driven EYNFF hourly rate, this is then divided by the local authority’s 3 and 4-year-old PTE count × 15 hours × 38 weeks

See ‘3 and 4-year-olds 2023 to 2024 step-by-step’ tab of the early years funding rates and step-by-step calculation: 2023 to 2024 spreadsheet for each local authority’s formula-driven EYNFF hourly rate broken down by factor.

Area cost adjustments: As explained above, the calculation applies ACA to take account of the relative difference in costs in different areas of the country. An ACA value between 1 and 1.51 is calculated for each local authority, as a weighted combination of 2 other ACAs calculated for their local authority, which reflect the variation in staff costs and premises related costs. One is the general labour market (GLM) cost adjustment by geographical area calculated for 2013 to 2014 by what is now the Department for Levelling Up, Housing and Communities (DLUHC), see DLUHC and GLM paragraphs below, and the other is a new nursery, infant and primary rates cost adjustment (see NIPRCA paragraph below) based on Valuation Office Agency data on rateable values and floor space of nursery, infant and primary school premises^{[footnote 8]}:

• general labour market (GLM) ACA to reflect staff costs: weighted 80%

• nursery, infant and primary rates cost adjustment (NIPRCA) ACA to reflect premises costs: weighted 10%

• the remaining 10% of costs are assumed not to vary from authority to authority

Each local authority’s ACA factor is calculated as a weighed sum of their GLM and NIPRCA factors using the following formula:

80% × GLM + 10% × NIPRCA + 10%

DLUHC published updated 2021 GLM data on 29 March 2022. However, we are not using these figures for the 2023 to 2024 NFFs and are instead continuing to use the previously available GLM data for 2013 to 2014. The method of compiling the recent GLM data was different compared to the 2013 to 2014 figures, and the new data is not compatible with the existing ACA methodology in the NFFs.

GLM values for Buckinghamshire, Essex, Hertfordshire, Kent and West Sussex have been recalculated based on the average of their fringe and non-fringe 2013 to 2014 GLM values, weighted together by the proportions of 3 and 4-year-old universal hours January 2022 PTEs delivered in the respective districts. These local authorities had previously been assigned their 2013 to 2014 GLM fringe value alone and we have therefore revised our approach to align with how the GLM values for part-fringe local authorities are calculated in the other NFFs.

NIPRCA factor: As outlined in the consultation response we can confirm that the following changes have been made to the rates costs adjustment factor, previously known as NRCA, to better reflect the differences in provider composition and size between local authorities.

The first change made has been to use the latest available valuation data to update the measure. The NRCA factor was based on rateable valuation data from 2015. There has been the 2017 full property revaluation since then, and smaller annual updates, with the latest years data being for 2022.

A second change made has been to move to using a valuation per metre-squared measure, to better reflect the differences in size of provider between local authorities.

The third change made is to calculate the rates cost adjustment measure(s) for the latest 3 years and then take an average of these, which is primarily to smooth out the impact of future full revaluations that happen on a periodic basis.

The fourth change made is to broaden the scope of rates cost adjustment factor to include a school rateable valuation data-based measure, that is, the IPRCA, which is then combined with the updated NRCA factor as a weighted average at local authority level; reflecting the variation in delivery models for the 3 and 4-year-old entitlements between local authorities^{[footnote 9]}.

Each local authority’s 3 and 4-year-old NIPRCA factor is calculated as a weighted sum of their NRCA and IPRCA factors as follows:

(1 – % of 3 and 4-year-old PTEs in schools) × NRCA + (% of 3 and 4-year-old PTEs in schools) × IPRCA

We have also continued to work with the Valuation Office Agency (VOA) to refine the school and nursery rateable value and floor space data used to calculate NIPRCA since the illustrative consultation modelling was produced (see table 1 in annex A).

See ‘ACA’ tab of the early years funding rates and step-by-step calculations: 2023 to 2024 spreadsheet for more details on this calculation.

3.5 Loss cap

For 2023 to 2024 we have removed the current loss cap and replaced it with the alternative protections set out below.

3.6 Minimum funding floor

The next step in the calculation of local authorities’ universal entitlement allocations is to apply the minimum funding floor as an hourly rate. The minimum funding rate means that no local authority has a funding hourly rate for their universal hours and additional hours entitlement which is lower than £4.87.

The minimum funding floor was calculated by increasing the 2022 to 2023 minimum funding floor (£4.61) in line with the expected increase in the national average funding rate as well as the impact of rolling in TPPG funding. Although updated modelling suggested the minimum funding floor would have dropped slightly compared to the illustrative modelling set out in the consultation, we have confirmed we will protect the minimum funding floor at the level set out in the consultation.

3.7 Protections and capped gains

For 2023 to 2024, protections will be introduced to ensure all local authorities see an increase in the hourly funding rate that they receive. Year-to-year protections are based on local authorities’ overall universal entitlement hourly rate rather than their universal entitlement funding allocation total. The minimum increase local authorities can see in their overall universal entitlement hourly rate in 2023 to 2024, compared with their 2022 to 2023 baseline rate is +1%, which is applied before rounding the hourly rate to the nearest penny^{[footnote 10]}. Local authorities receiving lower amounts under the formula calculation described above will receive additional funding to ensure these thresholds are achieved.

Local authorities’ 2022 to 2023 universal entitlement hourly rate baselines are used to calculate year-to-year protections. These baselines have been calculated based on local authorities’ 2022 to 2023 hourly rates plus an TPPG hourly rate uplift. See ‘TPPG baseline uplift’ tab in the early years funding rates and step-by-step calculation: 2023 to 2024 spreadsheet for more details.

To pay for the year-to-year protections, a cap has been introduced on the gains that any local authority can see. The cap has been designed to ensure that all local authorities see an increase in their hourly rate in 2023 to 2024 and the total allocations meet the available budget leadng to a gains cap of 4.9%. This limit does not apply to local authorities seeing increases to ensure they receive the £4.87 minimum funding hourly rate.

4. Funding for 3 and 4-year-old additional hours for working parents

4.1 2023 to 2024 additional hours funding total

This subsection sets out the national funding allocations total for the 3 and 4-year-old additional hours entitlement. This will total £925 million in 2023 to 2024 which is based on the department’s SR21 settlement and the January 2022 PTEs. It includes additional funding to reflect the recently announced National Living Wage increases.

A further £13 million is added to the 2023 to 2024 additional hours entitlement allocations total due to TPPG. This is calculated in the same way as for the universal hours entitlement. See ‘TPPG baseline uplift’ tab of the early years funding rates and step-by-step calculations: 2023 to 2024 spreadsheet for more details on this calculation.

4.2 Pupil counts for 3 and 4-year-old additional hours

PTE pupil counts from the January 2022 school, early years and alternative provision censuses are used to calculate additional hours entitlement funding allocations.

From the January 2022 school census:

• all PTE pupils in maintained nurseries, maintained schools and all academies, aged 3 at 31 December 2021, aged 3 at 31 August 2021 but 4 by 31 December 2021, or in national curriculum year groups N1, N2, E1 and E2 and aged 4 at 31 August 2021

• all PTE pupils in maintained nurseries, maintained schools, and all academies, whose national curriculum year group is missing or ‘X’ and aged 3 at 31 August 2021

From the January 2022 early years census:

• all 3 and 4-year-old PTEs as at 31 December 2021

From the January 2022 alternative provision census:

• all pupils in independent schools without a statement of SEN aged 3 at 31 December 2021

• all pupils in independent schools without a statement of SEN aged 3 at 31 August 2021 but 4 by 31 December 2021

The total pupil count this data specification produces for the EYNFF allocations for the additional hours entitlement is 315,112.32 PTE.

4.3 Calculation of additional hours funding allocations to local authorities

The EYNFF uses the same local authority hourly rates for universal entitlement and additional hours entitlement. See calculation of universal hours funding formula factor allocation section for more details.

The allocations for each local authority are calculated as:

local authority’s hourly rate × total additional hours PTE number of 3 and 4-year-olds captured on the January 2022 census × 15 hours × 38 weeks.

5. Funding for 2-year-old entitlement funding

5.1 Background on previous 2-year-old funding rates

In October 2016, we published the 2015 to 2016 2-year-old hourly rates.

In 2017 to 2018, all local authorities had a 7.14% increase to their 2-year-old-hourly rates.

In 2018 to 2019 and 2019 to 2020 there were no changes made to hourly funding rates.

In 2020 to 2021, all local authorities had an 8 pence uplift to their hourly funding rates.

In 2021 to 2022, all local authorities had an 8 pence uplift to their hourly funding rates.

In 2022 to 2023, all local authorities had a 21 pence uplift to their hourly funding rates.

5.2 2023 to 2024 2-year-old funding total

This subsection sets out the national funding allocations total for the 2-year-old entitlement. This will total £451 million in 2023 to 2024 which is based on the department’s SR21 settlement and the January 2022 PTEs It includes additional funding to reflect the recently announced National Living Wage increases.

5.3 Pupil counts for 2-year-old entitlement

The pupil numbers that are used to determine the allocations for 2-year-old funding are:

1. From the January 2022 school census:

   • all PTE pupils in maintained nurseries, maintained schools, and all academies, in national curriculum year groups N1, N2, E1 and E2 aged 2 at 31 December 2021

   • all PTE pupils in maintained nurseries, maintained schools, and all academies, whose national curriculum year group is missing or ‘X’ and aged 2 at 31 December 2021

2. From the January 2022 early years census:

   • all eligible 2-year-old PTEs aged 2 at 31 December 2021

• from the January 2022 alternative provision census:

  • all eligible pupils in independent schools without a statement of SEN aged 2 at 31 December 2021

The total pupil count this data specification produces for the 2-year-old entitlement allocations is 131,829.26 PTE.

5.4 Calculation of 2-year-old funding formula base rate

This subsection describes how local authorities’ 2-year-old formula factor base rate has been derived from the 2023 to 2024 indicative allocations total for the 2-year-old entitlement.

The amount of the total funding which is allocated to each local authority is determined by the 2-year-old funding formula, which is made up of a base rate multiplied by an area cost adjustment factor for each local authority.

For the 2-year-old base rate factor, the count is the PTE number of 2-year-old pupils recorded on the January 2022 censuses.

Having determined the pupil count, the base rate is calculated as:

funding total for the base rate

divided by

the national sum of local authority’s pupil count for the factor × 15 hours × 38 weeks × local authority’s ACA.

This results in a 2-year-old base rate of £5.36^{[footnote 11]}. See ‘national details’ tab in the early years funding rates and step-by-step calculation: 2023 to 2024 spreadsheet for more detail.

Each local authority’s 2-year-old hourly funding rate is then given by 2-year-old base rate × local authority’s ACA.

ACAs: As explained in the 3 and 4-year old subsections above, the calculation applies ACAs to take account of the relative difference in costs in different areas of the country. Following the outcome of the early years funding formulae consultation the following changes have been made to the ACA factor in the 2-year-old formula for 2023 to 2024:

• the GLM factor has been aligned to the EYNFF (to use 2013 to 2014 data)

• the GLM values for part-fringe local authorities are now based on the average of their fringe and non-fringe 2013 to 2014 GLM values, weighted together by the proportions of 2-year-old entitlement January 2022 PTEs delivered in the respective districts

• a premises related factor has been introduced in the 2-year-old ACA for the first time (see NIPRCA paragraph below)

• the weightings used to construct the 2-year-old ACA have been updated to allow for the new NIPRCA factor to be incorporated and to align with the EYNFF: 80% for GLM, 10% for NIPRCA and the remaining 10% are assumed not to vary across the country between local authorities

NIPRCA factor: This new factor is calculated using different weights to the EYNFF to reflect that schools have a lower market share for the 2-year-old entitlement, which uses 2-year-old PTE based weightings to combine each local authorities NRCA and IPRCA factors as follows:

(1 – % of 2-year-old PTEs in schools) × NRCA + (% of 2-year-old PTEs in schools) × IPRCA

See the ‘ACA’ tab in the early years funding rates and step-by-step calculations: 2023 to 2024 spreadsheet for more details.

The allocations for each local authority are calculated as:

local authority’s hourly rate × total PTE number of 2-year-olds captured on the January 2022 census × 15 hours × 38 weeks.

5.5 Protection and capped gains

For 2023 to 2024 protections will be introduced to ensure all local authorities see an increase in the hourly funding rate that they receive. Year-to-year protections are based on local authorities’ overall 2-year-old entitlement hourly rate from 2022 to 2023, rather than their total 2-year-old entitlement funding allocation total. The minimum increase local authorities can see in their overall 2-year-old entitlement hourly rate in 2023 to 2024, compared with their 2022 to 2023 baseline rate is +1%, which is applied before rounding the hourly rate to the nearest penny^{[footnote 12]}. Local authorities receiving lower amounts under the formula calculation described above will receive additional funding to ensure these thresholds are achieved.

To pay for the year-to-year protections, a cap has been introduced on the gains that any local authority can see. The cap has been designed to ensure that all local authorities see an increase in their hourly rate in 2023 to 2024 and the total allocations meet the available budget leading to a gains cap of 10.0%.

6. Maintained nursery school (MNS) supplementary funding

6.1 Background on previous MNS supplementary funding

Since the introduction of the EYNFF, local authorities have received supplementary funding for MNS in addition to their EYNFF allocation, to protect their MNS funding at their 2016 to 2017 level for the universal 15 hours.

In December 2016, we published the 2017 to 2018 EYNFF technical note which detailed how the MNS supplementary funding would be calculated. This involved subtracting a local authority’s 2017 to 2018 provider equivalent hourly rate from their 2016 to 2017 MNS hourly rate. If the differential was positive then the local authority received supplementary funding, if zero or negative then the local authority received no supplementary funding.

In 2018 to 2019, the same process of comparing a local authority’s 2016 to 2017 MNS hourly rate with their updated 2018 to 2019 provider equivalent hourly rate was used to derive rates. See 2018 to 2019 EYNFF technical note for more detail.

In 2019 to 2020, the same process of comparing a local authority’s 2016 to 2017 MNS hourly rate with their updated 2019 to 2020 provider equivalent hourly rate was used to derive rates. See 2019 to 2020 EYNFF technical note for more detail.

In 2020 to 2021, all local authorities’ rates remained the same as in 2019 to 2020.

In 2021 to 2022, all local authorities’ rates remained the same as in 2019 to 2020.

In 2022 to 2023, all local authorities’ 2021 to 2022 rates were uplifted by 3.5%, which was equivalent to the increase in the 3 and 4-year-old hourly funding rates.

6.2 2023 to 2024 MNS supplementary funding

The government will provide supplementary funding of £71 million to local authorities for MNSs in 2023 to 2024.

This is made up of:

a. 2023 to 2024 MNS pre-reform funding is £53 million

b. MNSs’ share of TPPG funding is £8 million

c. Additional funding being invested into supplementary funding from 2023 to 2024 is £10 million.

6.3 2023 to 2024 MNS funding total

This subsection sets out the national funding total for supplementary MNS funding. This will total £53 million in 2023 to 2024 which is based on the department’s SR21 settlement and the total MNS pupil count for January 2022 which is 28,513.39 PTEs.

For 2023 to 2024 the MNS portion of the funding currently allocated through the TPPG will be rolled into MNS supplementary funding. This has been calculated using 2022 to 2023 grant funding and adds an additional £8 million to the pre-reform funding total that is £61 million. See ‘TPPG baseline uplift’ tab of the early years funding rates and step-by-step calculation: 2023 to 2024 spreadsheet for more details on this calculation.

An additional £10 million is being invested into MNS supplementary funding from 2023 to 2024 and this has been used to uplift the lowest funded areas and to create a fairer distribution of the funding across all local authorities with MNSs. See ‘MNS 2023 to 2024’ tab of the early years funding rates and step-by-step calculations: 2023 to 2024 spreadsheet for more details.

6.4 Minimum funding rate and cap

For 2023 to 2024 a minimum supplementary funding hourly rate that local authorities can receive for their MNSs has been introduced at £3.80. This has been calculated as the highest affordable rate after the addition of TPPG and the additional £10 million of funding to the 2023 to 2024 MNS pre-reform funding.

To correct some of the most extreme outliers in the current distribution of MNS supplementary funding a cap of £10 per hour has been introduced.

Considering responses to the consultation, we have smoothed Westminster’s transition onto the cap, to limit the extent of year-to-year changes in their MNS hourly rate.

The allocations for each local authority are calculated as:

local authority’s hourly rate × total MNS universal hours PTEs captured on the January 2022 census × 15 hours × 38 weeks.

6.5 2023 to 2024 average hourly funding rates

1. The table below summarises the national average funding rates for each entitlement based on the total 2023 to 2024 indicative allocations for each entitlement and their respective January 2022 PTEs^{[footnote 13]}. See ‘national details’ tab of the early years funding rates and step-by-step calculation: 2023 to 2024 spreadsheet for more details on these calculations.

Table 3: 2023 to 2024 average hourly funding rates

Entitlement/funding stream	Average hourly rate (based on January 2022 part-time equivalents (PTEs))
Early years national funding formula (EYNFF) 3 and 4-year-old entitlements - combined average for universal hours and additional hours	£5.29 [footnote 14]
2-year-old entitlement	£6.00
MNS supplementary funding	£4.39

7. 2023 to 2024 EYPP and DAF national funding rates

The national funding rate for EYPP will increase by 2 pence, from 60 pence to 62 pence per eligible child per hour.

The national funding rate for DAF will increase by £28, from £800 to £828 per eligible child per year.

Table 4: 2023 to 2024 national funding rates

Entitlement/funding stream	National funding rate
Early years pupil premium - hourly funding rate	£0.62
Disability access fund - yearly funding rate	£828

8. Annex A: Data for consultation and final rate modelling

The tables below summarise the data that has previously been used in the formula up until now, the data that was used in the consultation modelling and the data that has been used to calculate the final hourly funding rates for 2023 to 2024.

Table 1: Data sources for early years national funding formula (EYNFF)

Data	Source of data	Date of data used in formula prior to 2023 to 2024	Date of data used in illustrative consultation modelling	Date of data used for final rates
Part-time equivalents (PTEs)	Department for Education (DfE) annual school, early years and alternative provision censuses	January 2021	January 2021	January 2022
Free school meals ( FSM)	DfE annual school census[footnote 15]	January 2016 (performance tables measure)	January 2021 (headline measure)	January 2022 (performance tables measure)
English as an additional language (EAL)	DfE annual school census	January 2016	January 2021	January 2022
Disability living allowance (DLA)	Department for Work and Pensions (DWP)	August 2015	February 2020	February 2020[footnote 16]
Office for National Statistics (ONS) mid-year population estimates	Office for National Statistics (ONS)	N/A	Mid 2020	Mid 2020
Nursery rates cost adjustment (NRCA)[footnote 17][footnote 18][footnote 19][footnote 20]	Valuation Office Agency (VOA)	2015	Average of 2019, 2020 and 2021	Average of 2020, 2021 and 2022
Infant and primary rates cost adjustment (IPRCA)[footnote 21][footnote 22][footnote 23]	Valuation Office Agency (VOA)	N/A	Average of 2019, 2020 and 2021	Average of 2020, 2021 and 2022
General labour market (GLM)	Department for Levelling Up, Housing and Communities (DLUHC)	2013 to 2014	2013 to 2014[footnote 24]	2013 to 2014
Teacher’s pay and pension grant (TPPG)	Education and Skills Funding Agency (ESFA)	N/A	2021 to 2022	2022 to 2023

Table 2: Data sources for 2-year-old funding formula

Data	Source of data	Date of data used in formula prior to 2023 to 2024	Date of data used in illustrative consultation modelling	Date of data used for final rates
Part-time equivalents (PTEs)	Department for Education (DfE) annual school, early years and alternative provision censuses	January 2021	January 2021	January 2022
Nursery rates cost adjustment (NRCA)	Valuation Office Agency (VOA)	N/A	Average of 2019, 2020 and 2021	Average of 2020, 2021 and 2022
Infant and primary rates cost adjustment (IPRCA)	Valuation Office Agency (VOA)	N/A	Average of 2019, 2020 and 2021	Average of 2020, 2021 and 2022
General labour market (GLM)	Department for Levelling Up, Housing and Communities (DLUHC)	2011 to 2012	2013 to 2014	2013 to 2014

Table 3: Data sources for MNS supplementary funding formula

Data	Source of data	Date of data used in formula prior to 2023 to 2024	Date of data used in illustrative consultation modelling	Date of data used for final rates
Part-time equivalents (PTEs)	Department for Education (DfE) annual school, early years and alternative provision censuses	January 2021	January 2021	January 2022
Teacher’s pay and pension grant (TPPG)	Education and Skills Funding Agency (ESFA)	N/A	2021 to 2022	2022 to 2023

1. TPPG funding is calculated using 2 to 4-year-old headcount. TPPG funding has been rolled into the 3 and 4-year-old entitlement funding, rather than separating out an element for the 2-year-old entitlement, because the quantum for just 2-year-olds would be very small (as there are very few 2-year-olds taking up entitlements in school-based nurseries). ↩

2. Up until now TPPG funding has been allocated as separate grants for pay and pension with two payments covering April to August and September to March. These have been combined to give a whole year rate for cover both elements. ↩

3. A small fraction of this allocation total is set aside to pay for the £4.87 minimum funding floor. ↩

4. A small zero-sum adjustment is applied to the universal hours and additional hours allocations totals to ensure that the updated EYNFF hourly funding rates are affordable and all the EYNFF indicative allocations total is spent. ↩

5. The FSM and EAL data used is taken from the department’s statistical release Schools, pupils and their characteristics: January 2022 ↩

6. The data used is taken from the DWP stat-xplore system: benefit claimants eligible for disability living allowance in February 2020. ↩

7. See table 2 of the 2017 to 2018 technical note for the original 2017 to 2018 starting point hourly rates. ↩

8. The data supplied by Valuation Office Agency (VOA) was derived from the datasets used in their official statistics release Non-domestic rating: stock of properties including business floor space 2022 - see annex A for more details. ↩

9. PTEs in schools is defined as the total number of universal and additional entitlement PTEs recorded on the school census divided by the total number of universal hours and additional entitlement PTEs recorded on the school and early years censuses for each local authority. ↩

10. Rounding to the nearest penny means that some local authorities will see their hourly funding rate rounded down and therefore receive slightly less than a 1% increase. ↩

11. The 2-year-old base rate is unrounded and is shown to 2 decimal places for presentational purposes only. ↩

12. Rounding to the nearest penny means that some local authorities will see their hourly funding rate rounded down and therefore receive slightly less than a 1% increase ↩

13. National average hourly funding rates are subject to change when allocations are updated to make use of January 2023 PTEs and January 2024 PTEs, that is, if these have different PTE distributions between local authorities. ↩

14. The 3 and 4-year-old entitlement average funding rate is made up from a universal hours average of £5.31 and an additional hours average of £5.23. Both these entitlements are funded on the same EYNFF funding rates at local authority level, but they have different PTE distributions between local authorities, for example, universal hours has a higher proportion of total PTEs in London local authorities, which leads to different national averages. ↩

15. The FSM and EAL data used is taken from the department’s statistical release Schools, pupils and their characteristics: January 2022 ↩

16. The DLA data has not been updated since the consultation due to a delay in the publication of the mid-year 2021 ONS population estimates. ↩

17. The DLA data has not been updated since the consultation due to a delay in the publication of the mid-year 2021 ONS population estimates. ↩

18. NRCA dataset is based on special category (085) Day Nurseries / Play Schools. ↩

19. The NRCA floorspace measure is based on net internal area (NIA) where available else gross internal area (GIA). ↩

20. Maintained nursery schools that have been identified in the NRCA data have been removed and added to the IPRCA dataset. ↩

21. IPRCA dataset is based on special category (159) local authority schools with secondary and independent schools filtered out. VOA have made use of additional floor space data that is not yet published in their official statistics release. ↩

22. The IPRCA floor space measure is based on GIA where available, else NIA. The illustrative consultation modelling was based on a total area measure but following further work with VOA we are now predominantly using GIA as this is the most complete floor space measure available for schools. ↩

23. Properties that have no floor space data or zero rateable value are filtered out of IPRCA (and NRCA) datasets. ↩

24. DLUHC published updated 2021 GLM data on 29 March 2022. However, we are not using these figures for the 2023 to 2024 NFFs and are instead continuing to use the previously available GLM data for 2013 to 2014. The method of compiling the recent GLM data was different compared to the 2013 to 2014 figures and the new data is not compatible with the existing ACA methodology in the NFFs. ↩