Guidance

2024 to 2025 early years national funding formulae: technical note

Updated 24 January 2024

Applies to England

1. Introduction

This technical note describes the detailed methodology for the early years funding formulae that have been used to calculate final hourly rates and illustrative allocations for the 3 and 4-year-old and 2-year-old and under entitlements for financial year 2024 to 2025. It specifically covers the following:

a. 3 and 4-year-old universal 15 hours entitlement.

b. 3 and 4-year-old additional 15 hours entitlement for eligible children of working parents.

c. The rolling in of the early years element of the teachers’ pay and teachers’ pension employer contribution (TP&P).

d. Existing 2-year-old entitlement to 15 hours of free childcare for eligible children of disadvantaged parents.

e. New 2-year-old and under entitlement to 15 hours of free childcare for eligible children of working parents starting from April 2024 for 2-year-olds and September 2024 for children aged between 9 months and 2 years old, but not including 2-year-olds which from here on will be referred to as under 2s.

This document also covers the detailed methodology for calculating the final hourly funding rate and illustrative allocation calculations for the supplementary funding for maintained nursery schools (MNS). In addition, this document presents the funding rates for the early years pupil premium (EYPP) and disability access fund (DAF), which are being extended to cover the 2-year-old and under entitlement group.

The document accompanies the early years funding rates and step-by-step calculation: 2024 to 2025 funding output tables which include:

a. A ‘national details’ tab showing illustrative national allocation funding totals for the 3 and 4-year-old formula, 2-year-old and under formula and MNS supplementary funding and how the formula factor rates have been derived.

b. A ‘3 and 4-year-old 2024 to 2025 rates’ tab showing final 2024 to 2025 hourly rates for 3 and 4-year-olds for each local authority.

c. A ‘2-year-old 2024 to 2025 rates’ tab showing final 2024 to 2025 hourly rates for 2-year-olds for each local authority.

d. An ‘under 2s 2024 to 2025 rates’ tab showing final 2024 to 2025 hourly rates for under 2s for each local authority.

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

f. A step-by-step table showing how each local authority’s final 2-year-old hourly funding rates and illustrative allocations have been derived.

g. A step-by-step table showing how each local authority’s final under 2s hourly funding rate and illustrative allocation has been derived.

h. A table showing how each local authority’s hourly MNS supplementary funding rate and illustrative allocation has been derived.

i. Several additional tabs providing further details on the area cost adjustment (ACA), formula factor data and how we are incorporating TP&P funding.

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 will be announced in the dedicated schools grant (DSG) allocations table in December 2023.

2. Differences between 2023 to 2024 and 2024 to 2025

The formula used for calculating 3 and 4-year-old hourly rates in 2024 to 2025 remains the same as used for 2023 to 2024. We have previously referred to this as the early years national funding formula (EYNFF) but going forward this will be referred to as the 3 and 4-year-old formula. The following changes have been made to the formula for 2023 to 2024:

• the hourly rates for each 3 and 4-year-old formula factor have been updated (see table 1) based on updated data (see annex B: data used for 2024 to 2025 final rate modelling) in addition to the increased funding secured for 2024 to 2025 in the Spring Budget, and additional funding to reflect teachers’ pay and pensions and National Living Wage (NLW) increases

• the ACA factors have been updated for new data, where possible

• year-to-year protections and funding floors have been updated for 2024 to 2025, a +1% year-to-year protection and +5.0% gains cap have been applied before rounding the hourly funding rates to the nearest penny

We are introducing a new national funding formula for children aged 9 months up to (and including) 2-year-olds because we do not think that the previous formula for the 2-year-old disadvantaged entitlement is suitable for the new working parent entitlements:

• this new formula includes an additional needs factor using the same proxy measures as the current 3 and 4-year-old formula, with the addition of an additional proxy measure derived from the income deprivation affecting children index (IDACI) which, along with free school meals (FSM) data, is used to reflect the different levels of deprivation across the country

We are also extending EYPP and DAF to cover eligible children aged 9 months up to (and including) 2-year-olds, regardless of which entitlement they are accessing.

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 3 and 4-year-old 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 is available on 2020 to 2021 rates and step-by-step guides and 2021 to 2022 EYNFF rates and step-by-step guides.

More information about the mid-year uplift we delivered to local authority hourly rates in 2023 to 2024 can be found in Early years supplementary grant 2023 to 2024: methodology.

When the 3 and 4-year-old formula 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 3 and 4-year-old formula. 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.

In 2023 to 2024, the 3 and 4-year-old formula factors were updated for new data for the first time since 2017 to 2018, and improved where possible, for example the methodology for calculating the proxy factor for premises costs. The majority of the money that had previously been paid through the early years element of the teachers’ pay and pension grant (TPPG) was also rolled in, and the loss cap protection was replaced with a +1% year-to-year protection and a gains cap to pay for this. The 3 and 4-year-old combined average funding rate was £5.29 and the minimum funding floor was increased to £4.87.

From September 2023, we increased the funding rate to reflect the additional Spring Budget resource allocations for financial year 2023 and 2024. This increased the 3 and 4-year-old effective combined average funding rate to £5.62 and the minimum floor to £5.20.

In November 2023, we published the early years teachers’ pay additional grant (EY TPAG), which will distribute the £12.5 million funding provided to local authorities to support early years providers meet the cost of increasing teachers’ pay from September 2023. We are also providing funding for increased TP&P costs from 2024 to 2025, which will be included in 3- and 4-year-old entitlement hourly rates and MNS supplementary funding.

3.2 2024 to 2025 universal entitlement funding total

This subsection sets out the national funding illustrative allocations total for the 3 and 4-year-old universal entitlement. This will total £2.6 billion in 2024 to 2025 which is based on the department’s Spending Review 2021 (SR21) settlement and Spring Budget 2023 resource allocations for financial year 2024 to 2025 and the January 2023 part-time equivalents (PTEs) explained in pupil counts for 3 and 4-year-old universal entitlement section. It includes additional funding to reflect NLW increases.

For 2024 to 2025, the majority of the funding that has been secured for TP&P will be rolled into the 3 and 4-year-old entitlements funding. Overall, this has added £49 million into the quantum for the 3 and 4-year-old entitlements which has been calculated by separating out the total TP&P funding between the 3 and 4-year-old entitlement funding and MNS supplementary funding in the same proportion as used to roll in TPPG funding in 2023 to 2024.

Dividing this total allocation by total universal and additional hours January 2023 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 TP&P funding being added to the 2024 to 2025 universal hours entitlement allocations total (£35 million).

See ‘TP&P notional rates’ tab of the early years funding rates and step-by-step calculations: 2024 to 2025 spreadsheet for more details.

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

The 3 and 4-year-old allocations are calculated using part-time equivalent (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 2023 school, early years and alternative provision censuses are used to calculate illustrative universal entitlement funding allocations.

From the January 2023 school census:

• all PTE pupils in maintained nurseries, maintained schools, and all academies, aged 3 at 31 December 2022, aged 3 at 31 August 2022 but 4 by 31 December 2022, or in national curriculum year groups N1, N2, E1 and E2 and aged 4 at 31 August 2022

• 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 2022

From the January 2023 early years census:

• all 3 and 4-year-old PTEs at 31 December 2022

From the January 2023 alternative provision census:

• all pupils in independent schools without a statement of special educational needs (SEN) aged 3 at 31 December 2022

• all pupils in independent schools without a statement of SEN aged 3 at 31 August 2022 but 4 by 31 December 2022

The total pupil count that this data specification produces for the 3 and 4-year-old allocations for the universal entitlement is 784,144.44 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 2024 to 2025 illustrative allocations total, which includes TP&P as described above.

The total funding allocated to each local authority is determined by the 3 and 4-year-old formula, which is made up of the following 4 factors:

a. First, a base rate of funding for each local authority 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 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-year-old children who are entitled to Disability Living Allowance (DLA), which reflects the costs of additional support for children with more complex special educational needs and disabilities (SEND).

The illustrative allocations funding total ^{[footnote 1] [footnote 2]} is broken down to the 4 component factors in the following way, giving a funding total for each factor:

• 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 3 and 4-year-old formula 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 2023 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 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 3]}. The estimated 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 authority

A proxy indicator is also used for the EAL factor. Here, we use a proxy indicator based on primary pupils from the January 2023 school census. The proportion of children with EAL is calculated as the number of pupils whose first language is not English divided by the total number of primary pupils in the local authority. The estimated 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 4]}. The data used relates to the number of 3 and 4-year-old children that are entitled to DLA in February 2021. A proportion is then calculated using the 2021 mid-year Office for National Statistics (ONS) population estimates. The estimated 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 formula factor hourly rates for each factor calculated as:

national funding total for the factor

divided by

the national sum of each 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 formula factor hourly rates for each factor are shown in table 1 ^{[footnote 5]}.

Table 1: 3 and 4-year-old formula factor hourly rates

Funding factor	Hourly rate (£/hour) [footnote 6]
Universal base rate	£4.68
FSM	£1.72
EAL	£0.34
DLA	£1.81

Then, each local authority’s 3 and 4-year-old universal entitlement funding allocation for each factor is given by:

• formula factor hourly rate (see table 1) × 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 3 and 4-year-old hourly rate, the total universal entitlement funding allocation is then divided by the local authority’s 3 and 4-year-old PTE count × 15 hours × 38 weeks.

See ‘3-4YO 2024 to 2025 step-by-step’ tab of the early years funding rates and step-by-step calculation: 2024 to 2025 spreadsheet for each local authority’s formula-driven 3 and 4-year-old hourly rate broken down by factor.

Area cost adjustments: As explained above, the calculation applies ACAs to take account of the relative difference in costs in different areas of the country. An ACA value between 1 and 1.52 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 nursery, infant and primary rates cost adjustment (NIPRCA) (see NIPRCA paragraph below) based on Valuation Office Agency (VOA) data ^{[footnote 7]} on rateable values and floor space of nursery, infant and primary school premises:

• GLM ACA to reflect staff costs: weighted 80%

• NIPRCA ACA to reflect premises costs: weighted 10%

• the remaining costs are assumed not to vary from authority to authority and are weighted at 10%

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

• (80% × GLM) + (10% × NIPRCA) + (10% × 1)

DLUHC published updated 2021 GLM data on 29 March 2022. However, we are not using these figures for the 2024 to 2025 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 from that used for the 2013 to 2014 figures, and the new data are not compatible with the existing ACA methodology in the NFFs. We are continuing to consider the 2021 GLM data to determine how best to make it compatible with the existing ACA methodology in the NFFs going forward, given the change in methodology.

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 2023 PTEs delivered in the respective districts.

Each local authority’s 3 and 4-year-old NIPRCA factor is calculated as a weighted sum of their nursery rates cost adjustment (NRCA) and infant and primary rates cost adjustment (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

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.

See ‘ACA’ tab of the early years funding rates and step-by-step calculations: 2024 to 2025 spreadsheet for more details on this calculation.

3.5 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 £5.47.

The minimum funding floor was calculated by increasing the 2023 to 2024 effective combined rate minimum funding floor (£5.20) in line with the expected pence increase in the national average universal hours funding rate, including the impact of rolling in TP&P funding.

3.6 Protections and capped gains

For 2024 to 2025, a year-to-year protection will continue to be in place to ensure all local authorities see an increase in their hourly funding rate. Local authorities are protected against their 2023 to 2024 effective combined rate, uplifted by +1%, plus their notional 2024 to 2025 TP&P rate. For example, if a local authority received a 2023 to 2024 effective combined rate of £5.45, and their 3 and 4-year-old 2024 to 2025 notional TP&P rate is £0.09, this local authority would not be able to receive a rate lower than £5.59 (calculated as [£5.45 x 101%] + £0.09).

In line with the method used for 2023 to 2024, a cap has been applied to the gains that any local authority can see, to pay for the year-to-year protection. This cap has been applied in the same way as the year-to-year protection. Local authorities cannot see a rate higher than their 2023 to 2024 effective combined rate, uplifted by +5.0%, plus their notional 2024 to 2025 TP&P rate. This method of including TP&P means that some local authorities will see increases greater than +5.0% when compared to their 2023 to 2024 effective combined rate, because the +5.0% cap is not applied to the notional TP&P rate. For example, if a local authority received a 2023 to 2024 effective combined rate of £5.45, and their 3 and 4-year-old 2024 to 2025 notional TP&P rate is £0.09, this local authority would not be able to receive a rate higher than £5.81 (calculated as [£5.45 x 105%] + £0.09). This limit does not apply to local authorities seeing increases to ensure they receive the £5.47 minimum funding hourly rate.

See ‘TP&P notional rates’ tab in the early years funding rates and 3 and 4-year-old step-by-step calculation: 2024 to 2025 spreadsheet for more details.

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

4.1 2024 to 2025 additional hours funding total

This subsection sets out the national funding illustrative allocations total for the 3 and 4-year-old additional hours entitlement. This will total £1.1 billion in 2024 to 2025 which is based on the department’s SR21 settlement and Spring Budget 2023 resource allocations for financial year 2024 to 2025 and the January 2023 PTEs. It includes additional funding to reflect the NLW increases.

The 2024 to 2025 additional hours entitlement illustrative allocations total also includes £14 million due to TP&P. This is calculated in the same way as for the universal hours entitlement.

See ‘TP&P notional rates’ tab of the early years funding rates and step-by-step calculations: 2024 to 2025 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 2023 school, early years and alternative provision censuses are used to calculate additional hours entitlement funding allocations.

From the January 2023 school census:

• all PTE pupils in maintained nurseries, maintained schools and all academies, aged 3 at 31 December 2022, aged 3 at 31 August 2022 but 4 by 31 December 2022, or in national curriculum year groups N1, N2, E1 and E2 and aged 4 at 31 August 2022

• 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 2022

From the January 2023 early years census:

• all 3 and 4-year-old PTEs as at 31 December 2022

From the January 2023 alternative provision census:

• all pupils in independent schools without a statement of SEN aged 3 at 31 December 2022

• all pupils in independent schools without a statement of SEN aged 3 at 31 August 2022 but 4 by 31 December 2022

The total pupil count that this data specification produces for the 3 and 4-year-old allocations for the additional hours entitlement is 328,422.88 PTE.

4.3 Calculation of additional hours funding allocations to local authorities

The 3 and 4-year-old formula 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 × additional hours PTE number of 3 and 4-year-olds captured on the January 2023 census × 15 hours × 38 weeks

5. Funding for 2-year-old entitlements

5.1 2024 to 2025 2-year-old entitlements funding total

The illustrative national funding allocations total is £1.5 billion in 2024 to 2025 which is based on the department’s SR21 and Spring Budget 2023 resource allocations for financial year 2024 to 2025 and the PTEs total explained in pupil counts for 2-year-old entitlements section. It includes additional funding to reflect the NLW increases.

5.2 Pupil counts for 2-year-old entitlements

The 2-year-old illustrative 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.

The pupil counts for the 2-year-old disadvantage and working parent entitlements are added together to create the 2-year-old entitlements pupil count for each local authority. The national total pupil count for the 2-year-old entitlements is 321,334.57 PTEs.

Pupil count for 2-year-old entitlement for disadvantaged families

PTE pupil counts from the January 2023 school, early years and alternative provision censuses are used for the existing 2-year-old disadvantage entitlement.

From the January 2023 school census:

• all eligible 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 2022

• all eligible 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 2022

From the January 2023 early years census:

• all eligible 2-year-old PTEs aged 2 at 31 December 2022

From the January 2023 alternative provision census:

• all eligible pupils in independent schools without a statement of SEN aged 2 at 31 December 2022

The total pupil count that this data specification produces for the 2-year-old entitlement for disadvantaged families is 120,764.00 PTEs.

Pupil count assumption for 2-year-old entitlement for working parents from April 2024

For the purpose of calculating the illustrative national allocations total in 2024 to 2025, we will use the estimated number of 2-year-old children of working parents who are eligible to take-up 15 hours of free childcare while actual take-up is unknown. Further details about this national estimate and the updates made since the consultation modelling can be found in annex A: further details on new entitlement volumes estimates.

The total pupil count from these calculations for the 2-year-old entitlement for working parents is 200,570.57 PTEs. This national estimate is inherently uncertain as it relies on an estimate of the national average take-up rate that is difficult to predict and is based on assumptions.

This national estimate is then split into estimates for each individual local authority. The January 2023 PTEs for the 3 and 4-year-old additional hours entitlement for working parents are used to calculate each local authority’s proportion of the national total PTEs. Multiplying a local authority’s proportion by the national estimate of 2-year-old entitlement for working parents PTEs gives the local authority’s estimated pupil count.

5.3 Calculation of 2-year-old funding formula factor allocations

The calculations are very similar to those used for the 3 and 4-year-old entitlements but are implemented using a different illustrative funding total and pupil count, which results in different formula factor rates. This subsection therefore gives a slightly abbreviated description of how local authorities’ 2-year-old entitlements formula factor allocations are derived from the 2024 to 2025 illustrative allocations total.

The amount of the total funding allocated to each local authority is determined by the 2-year-old and under funding formula, which is an extension of the formula used for the 3 and 4-year-old entitlements. This is made of the following 5 factors:

a. First, a base rate of funding for each local authority for 2-year-olds.

b. Second, funding based on a proxy indicator for the number of 2-year-olds eligible for 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 2-year-olds living in deprived areas (IDACI), which together with FSM, reflects the additional costs of providing childcare for children with disadvantage or low SEN.

d. Fourth, funding based on a proxy indicator for the number of 2-year-olds that have EAL, which reflects the costs of additional support for children who do not have English as a first language.

e. Fifth, funding based on a proxy for the number of 2-year-old children who are entitled to the DLA, which reflects the costs for children with more complex SEND.

The illustrative allocations funding total is broken down to the 5 component factors in the following way, using the same formula factor weightings as used in the 3 and 4-year-old formula with the addition of IDACI, giving a funding total for each factor:

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

• 4% for FSM funding

• 4% for IDACI funding

• 1.5% for EAL funding

• 1% for DLA funding

For the IDACI factor, the 4% combined total is split between IDACI bands A to F in the following proportions:

• band A, 0.53%

• band B, 0.77%

• band C, 0.70%

• band D, 0.63%

• band E, 0.76%

• band F, 0.60%

• for further details of how the IDACI factor and weightings are calculated, see annex C: IDACI factor weightings and factor rates

The first step in applying the 2-year-old and under entitlements formula is to determine the pupil count to be used for each factor.

For the universal base rate factor, we use the total number of 2-year-old entitlements PTEs in each local authority, that is, the sum of the recorded 2-year-old disadvantage entitlement PTEs and estimated 2-year-old working parent entitlement PTEs as described in the previous subsection.

For the FSM factor, we use the same proxy indicator as used in the 3 and 4-year-old formula, based on full-time older children who are known to be eligible for FSM in nursery and primary schools, which is used for FSM in performance tables. We have used the published January 2023 census dataset to calculate the FSM proxy indicator ^{[footnote 8]} . The estimated number of FSM eligible 2-year-old entitlement PTEs in each local authority is calculated as:

• the proxy FSM proportion × the total number of 2-year-old entitlements PTEs in the local authority

For the IDACI factor we use proxy indicators based on the proportions of all children aged 0 to 4 living in each of the IDACI bands within each local authority (see annex C: IDACI factor weightings and factor rates) for more details on how IDACI bands are calculated). The estimated number of 2-year-old entitlement PTEs in each IDACI band in each local authority is calculated as:

• the proxy IDACI band proportion [A to F] × the total number of 2-year-olds entitlements PTEs in the local authority (the calculation is followed separately for each band A to F)

For the EAL factor, we use the same proxy indicator as is used in the 3 and 4-year-old formula for the EAL factor. From the January 2023 school census, the proportion is calculated as the number of pupils whose first language is not English divided by the total number of primary pupils in the local authority. The estimated number of eligible EAL 2-year-old entitlements PTEs in each local authority is calculated by:

• the proxy EAL proportion × the total number of 2-year-old entitlements PTEs in the local authority

For the DLA factor, we use a variant of the proxy indicator that is used in the 3 and 4-year-old formula, based on data from DWP which is recorded on their Stat-Xplore system ^{[footnote 9]}. The data used relates to the number of 0 to 4-year-old children that are entitled to DLA in February 2021. A proportion is then calculated using the 2021 mid-year ONS population estimates. The estimated number of eligible DLA 2-year-old entitlements PTEs in each local authority is calculated by:

• the proxy DLA proportion × the total number of 2-year-old entitlements PTEs in the local authority

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

national funding total for the factor

divided by

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

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

The resulting hourly rates for each formula factor are shown in table 2.

Table 2: 2-year-old formula factor hourly rates

Funding factor	Hourly rate (£/hour) [footnote 10]
Universal base rate	£6.63
FSM	£1.20
EAL	£0.51
DLA	£4.44
IDACI band A	£1.18
IDACI band B	£0.89
IDACI band C	£0.84
IDACI band D	£0.77
IDACI band E	£0.49
IDACI band F	£0.41

Then, each local authority’s 2-year-old entitlements funding allocation for each factor is given by:

• hourly rate for the factor (see table 2) × local authority’s pupil count for the factor × 15 hours × 38 weeks × local authority’s ACA (this calculation is followed separately for each IDACI band A to F)

Each local authority’s total 2-year-old entitlements funding allocation is the sum of their allocations for each of the 5 factors.

To derive the local authority’s 2-year-old hourly rate, the total funding allocation is divided by the local authority’s 2-year-old entitlements PTE count × 15 hours × 38 weeks.

See ‘2YO 2024 to 2025 step-by-step’ tab of the early years funding rates and step-by-step calculation: 2024 to 2025 spreadsheet for each local authority’s formula-driven hourly rate broken down by factor.

Area cost adjustments: are calculated using very similar GLM and NIPRCA proxy indicators to those used in the ACA for the 3 and 4-year-old entitlements and are combined using the same 80%, 10% and 10% weightings as used in the 3 and 4-year-old formula. The resulting ACA values are between 1 and 1.54, which is a slightly larger range than the 3 and 4-year-old formula ACA due to the 2-year-old specific weightings explained below.

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 2-year-old disadvantaged January 2023 PTEs delivered in the respective districts. Each local authority’s 2-year-old NIPRCA factor is calculated as a weighted sum of their NRCA and infant and primary rates cost adjustment (IPRCA) factors as follows:

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

Given we only have estimates for national and local authority-level PTE data for the new 2-year-old entitlement for working parents we have initially calculated the percentage in schools weighting based on the recorded 2-year-old disadvantaged entitlement PTEs data. We will keep this under review once the new entitlement has been fully rolled out.

See ‘ACA’ tab of the early years funding rates and step-by-step calculations: 2024 to 2025 spreadsheet for more details on this calculation.

6. Funding for under 2s entitlement for working parents

6.1 2024 to 2025 under 2s entitlement funding total

The illustrative national funding allocations total is £650 million in 2024 to 2025 which is based on the department’s Spring Budget 2023 resource allocations for financial year 2024 to 2025 and the PTEs total explained in pupil counts for under 2s entitlements section. It includes additional funding to reflect the NLW increase.

6.2 Pupil count for under 2s entitlement

For the purposes of calculating the illustrative national allocations total in 2024 to 2025, we will use the estimated number of children aged 9 months up to, but not including, 2-year-olds of working parents who are eligible to take-up 15 hours of free childcare while actual take-up is unknown. Further details about this national estimate and the updates made since the consultation took place can be found in annex A: further details on new entitlement volumes estimates.

The total pupil count from these calculations for the under 2s entitlement for working parents is 101,620.29 PTEs. This assumes that all eligible children will take up their full entitlement of 15 hours per week for 22 weeks in financial year 2024 to 2025, based on a later September 2024 start date ^{[footnote 11]}. This national estimate is inherently uncertain as it relies on an estimate of the national average take-up rate that is difficult to predict and based on assumptions.

The national estimate has been split into estimates for each individual local authority using the same method as used for the 2-year-old working parent entitlement, that is, using the January 2023 PTEs for the 3 and 4-year-old additional hours entitlement for working parents to calculate each local authority’s proportion of the national total PTEs. Multiplying a local authority’s proportion by the national estimate of under 2s entitlement for working parents PTEs gives the local authority’s estimated pupil count.

6.3 Calculation of under 2s funding formula factor allocations

The calculations are the same as used for the 2-year-old entitlements but are implemented using a different illustrative funding total and pupil count, which results in different formula factor rates. This subsection therefore gives an abbreviated description of how local authorities’ under 2s entitlement formula factor allocations are derived from the 2024 to 2025 illustrative allocations total.

The amount of the total funding allocated to each local authority is determined by the same formula as used for 2-year-old children (the 2-year-old and under funding formula) meaning a base rate factor and 4 additional needs factors constructed using the same FSM, EAL, IDACI and DLA proxy indicator data.

The illustrative allocations funding total is broken down to the 5 component factors using the same method and formula factor weightings as used for the 2-year-old entitlements, so 89.5% of the allocation is used for the universal base rate and 10.5% is then split between the 4 additional needs factors. The only exception is the IDACI band weightings, see annex C: IDACI factor weightings and factor rates for more detail.

The universal base rate factor is calculated using the total number of under 2s entitlement PTEs in each local authority as described in the previous subsection.

The FSM factor is calculated using the same proxy indicator as is used for the 2-year-old entitlements, based on full-time older children who are known to be eligible for FSM in nursery and primary schools. The estimated number of FSM eligible under 2s entitlement PTEs in each local authority is calculated as:

• the proxy FSM proportion × the total number of under 2s entitlement PTEs in the local authority

For the IDACI factor we use the same proxy indicators as used for the 2-year-old entitlements. The estimated number of under 2s entitlement PTEs in each IDACI band in each local authority is calculated as:

• the proxy IDACI band proportion [A to F] × the total number of under 2s entitlement PTEs in the local authority (the calculation is followed separately for each band A to F)

For the EAL factor, we use the same proxy indicator as used for the 2-year-old entitlements. The estimated number of eligible EAL under 2s entitlement PTEs in each local authority is calculated by:

• the proxy EAL proportion × the total number of under 2s entitlement PTEs in the local authority

For the DLA factor, we use the same proxy indicator as used for the 2-year-old entitlements. The estimated number of eligible DLA under 2 entitlement PTEs in each local authority is calculated by:

• the proxy DLA proportion × the total number of under 2 entitlement PTEs in the local authority

The next step is to calculate hourly rates for each factor. For each factor, the hourly rate is calculated as:

national funding total for the factor

divided by

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

The ACAs used in this calculation step are the same as used for the 2-year-old entitlements. For example, we are initially using the actual PTE data from the 2-year-old disadvantaged entitlement to calculate the schools weighting that is used to calculate the NIPRCA factor. We will keep this under review once the new entitlement has been fully rolled out.

The resulting hourly rates for each formula factor are shown in table 3.

Table 3: under 2s formula factor hourly rates

Funding factor	Hourly rate (£/hour) [footnote 12]
Universal base rate	£8.97
FSM	£1.69
EAL	£0.73
DLA	£6.11
IDACI band A	£1.72
IDACI band B	£1.30
IDACI band C	£1.23
IDACI band D	£1.13
IDACI band E	£0.72
IDACI band F	£0.60

Then, each local authority’s under 2s entitlement funding allocation for each factor is given by:

• hourly rate for the factor (see table 3) × local authority’s pupil count for the factor × 15 hours × 38 weeks × local authority’s ACA (this calculation is followed separately for each IDACI band A to F)

Each local authority’s total under 2s entitlement funding allocation is the sum of their allocations for each of the 5 factors.

To derive the local authority’s formula-driven under 2s hourly rate, the total funding allocation is then divided by the local authority’s Under 2s entitlement PTE count × 15 hours × 38 weeks.

See ‘Under 2s 2024 to 2025 step-by-step’ tab of the early years funding rates and step-by-step calculation: 2024 to 2025 spreadsheet for each local authority’s formula-driven hourly rate broken down by factor.

7. Maintained nursery school (MNS) supplementary funding

7.1 Background on previous MNS supplementary funding

Since the introduction of the 3 and 4-year-old formula, local authorities have received supplementary funding for MNS in addition to their 3 and 4-year-old 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.

In 2023 to 2024, we invested an additional £10 million into MNS supplementary funding and introduced reforms to create a fairer distribution of the funding across all local authorities with MNSs. We introduced a minimum supplementary funding hourly rate, set at £3.80 in 2023 to 2024, and a maximum cap of £10 per hour, with transitional arrangements for the most affected local authority. Local authorities not affected by the minimum or maximum rate had their supplementary funding rates uplifted by 3.4%.

From September 2023, we have increased the funding rate to reflect the additional Spring Budget resource allocations for financial year 2023 and 2024. These increase the MNS effective combined average funding rate to £4.63 and the minimum floor to £4.01.

In November 2023, we published the early years teachers’ pay additional grant (EY TPAG), which will distribute the £12.5 million funding provided to local authorities to support early years providers meet the cost of increasing teachers’ pay from September 2023. This included £1.75 million additional funding for maintained nursery schools.

7.2 2024 to 2025 MNS supplementary funding total

This subsection sets out the national funding total for supplementary MNS funding. This will total £85 million in 2024 to 2025 which is based on the department’s SR21 settlement, Spring Budget 2023 resource allocations for financial year 2024 to 2025, the additional TP&P secured for 2024 to 2025, and the total MNS pupil count for January 2023 which is 28,139.24 PTEs.

For 2024 to 2025 £8 million of TP&P funding has been added into the total quantum available for MNS supplementary funding.

See ‘TP&P notional rates’ tab of the early years funding rates and step-by-step calculation: 2024 to 2025 spreadsheet for more details on this calculation.

7.3 Minimum funding rate and cap

For 2024 to 2025 the minimum supplementary funding hourly rate that local authorities can receive for their MNSs has been increased to £4.64. This has been calculated by uplifting the 2023 to 2024 effective combined MNS minimum funding hourly rate (£4.01) by the increase in average pre-protection rate, after TP&P notional rates have been added on.

To correct some of the most extreme outliers in the distribution of MNS supplementary funding a cap of £10 per hour was introduced in 2023 to 2024. The cap will remain at £10 per hour in 2024 to 2025.

We are continuing to smooth Westminster’s transition onto the cap, to limit the extent of year-to-year changes in their MNS hourly rate. Their rate will be £11 per hour for 2024 to 2025.

The allocations for each local authority are calculated as:

• local authority’s hourly rate × MNS universal hours PTEs captured on the January 2023 census × 15 hours × 38 weeks

7.4 2024 to 2025 average hourly funding rates

Table 4 below summarises the national average funding rates for each entitlement based on the total 2024 to 2025 illustrative allocations for each entitlement and their respective PTEs.

See ‘national details’ tab of the early years funding rates and step-by-step calculation: 2024 to 2025 spreadsheet for more details on these calculations.

Table 4: 2024 to 2025 average hourly funding rates

Entitlement/funding stream	Average hourly rate [footnote 13]
3 and 4-year-old entitlements - combined average for universal hours and additional hours	£5.88 [footnote 14]
2-year-old entitlements (combined)	£8.28 [footnote 15]
Under 2-year-old entitlement	£11.22
MNS supplementary funding	£5.27

8. 2024 to 2025 EYPP and DAF national funding rates

In 2024 to 2025 EYPP and DAF eligibility will be extended to eligible 2-year-olds and under 2s accessing the entitlements. The rates will be the same for all eligible children across all age groups.

We have uplifted EYPP and DAF in line with the increases to the 3 and 4-year-old entitlements and then rounded to the nearest penny and pound respectively.

The national funding rate for EYPP will be 68 pence per eligible child per hour.

The national funding rate for DAF will be £910 per eligible child per year in 2024 to 2025.

Table 5: 2024 to 2025 national funding rates

Entitlement/funding stream	National funding rate
EYPP - hourly funding rate	£0.68
DAF - yearly funding rate	£910

9. Annex A: Further detail on new entitlement volumes estimates

9.1 Background

To inform the Spring Budget 2023 announcement, the department estimated the number of children aged 9 months to 2-years-old of working parents who will be eligible for and take up the new 15 hours of free childcare entitlement. The details of this estimate were published in the Spring Budget 2023 Childcare Expansion Policy costing information note, which should be used as a reference point for the original methodology. ^{[footnote 16]}.

We have refined these estimates to take account of new data or to update the methodology where this was deemed to improve our understanding of likely volumes for the financial year 2024 to 2025. These changes are detailed below.

9.2 Population

The population projections are now based on the ONS’s 2020-based interim national population projections (year ending June 2022 estimated international migration variant) ^{[footnote 17]}. These have been adjusted for estimated deviations from birth projections up to August 2022, and then converted for use on a financial year basis.

Table A1 – 2024 to 2045 financial year early years population projections

Age group	2024 to 2025
9-month-olds to 12-month-olds	145,000
One-year-olds	584,000
2-year-olds	600,000

9.3 Eligibility Rates

Historical estimates of eligibility are made using the methodology previously outlined but using a 3-year average approach to account for variation in the data.  A forecast model has then been set up to forecast how we expect eligibility rates to change in line with Office for Budget Responsibility (OBR) employment rates forecasts.

The forecast eligibility rate for the new entitlements remains at around half of the eligible population for 2024 to 2025 and future years considered.

9.4 Take-up Rates

For our steady state (long-term) forecasts, we have continued to use the same methodology and sources, except we have used take-up rates for the existing entitlements from January 2023 (rather than January 2022) as a reference point.  We are still considering a range of between around 30% and 90%. Our long-term forecasts for take-up rate are:

a. 2-year-olds at the higher end of the range (around 80%).

b. One-year-olds in the middle of this range (around 60%).

c. 9 to 12-month-olds at lower end of the range (around 35%).

We have introduced a trajectory (increasing take-up rates) for the first 3 years of the entitlements, informed by increases in take-up rates in the first 3 years of the 2-year-old disadvantage entitlement and additional hours.  As a result, our forecasts for take-up rate for 2024 to 2025 are as follows:

a. 2-year-olds remain at the higher end of the range (around 70%).

b. One-year-olds remain in the middle of this range (around 55%).

c. 9 to 12-month-olds remain at the lower end of the range (around 30%).

9.5 Hours Taken

No change.

10. Annex B: Data used for 2024 to 2025 final rate modelling

The table below summarises the data that has been used previously used and the data that is now being used to calculate the final hourly funding rates for 2024 to 2025 in the autumn.

Table B1: Data sources for 3 and 4-year-old formula

Data	Source of data	Date of data used in 2023 to 2024 DSG and effective combined rate (ECR) modelling	Date of data used for final rates
PTEs	DfE annual school, early years and alternative provision censuses	January 2022	January 2023
FSM	DfE annual school census [footnote 18]	January 2022 (performance tables measure)	January 2023 (performance tables measure)
EAL	DfE annual school census	January 2022	January 2023
DLA [footnote 19]	DWP	February 2020	February 2021
ONS mid-year population estimates	ONS	Mid 2020	Mid 2021
NRCA [footnote 20][footnote 21][footnote 22][footnote 23]	VOA	Average of 2020, 2021 and 2022	Average of 2021, 2022 and 2023
IPRCA [footnote 24][footnote 25][footnote 26]	VOA	Average of 2020, 2021 and 2022	Average of 2021, 2022 and 2023
GLM	DLUHC	2013 to 2014 [footnote 27]	2013 to 2014
TPPG distribution	ESFA	2022 to 2023	2022 to 2023

Table B2: Data sources for 2-year-old and under entitlements

Data	Source of data	Date of data used in illustrative consultation modelling	Date of data used for final rates
9 month to 2-year-old working parent entitlement PTEs	DfE	National take up estimate from September 2024 (as at Spring Budget 2023) (local authority level take up – estimated using January 2022 3 to 4-year old additional hours PTEs distribution)	National take up estimate from September 2024 (updated, see annex A) (local authority level take up – estimated using January 2023 3 to 4-year-old additional hours PTEs distribution)
2-year-old entitlement for working parents (PTEs)	DfE	National take up estimate from April 2024 (as at Spring Budget 2023) (local authority level take up – estimated using January 2022 3 to 4-year-old additional hours PTEs distribution)	National take up estimate from April 2024 (updated, see annex A) (local authority level take up – estimated using January 2023 3 to 4-year-old additional hours PTEs distribution)
2-year-old entitlement for disadvantaged families (PTEs)	DfE annual school, early years, and alternative provision censuses	Actual take up January 2022	Actual take up January 2023
FSM	DfE annual school census [footnote 28]	January 2022 (performance tables measure)	January 2023 (performance tables measure)
EAL	DfE annual school census	January 2022	January 2023
DLA	DWP	February 2020	February 2021
IDACI	DLUHC	2019	2019 [footnote 29]
ONS Local authority level mid-year population estimates	ONS	Mid-2020	Mid-2021
ONS lower layer super output area (LSOA) level mid-year population estimates	ONS	Mid-2020	Mid-2020 [footnote 30]
Schools block NFF, IDACI, primary unit values	DfE	2023 to 2024	2024 to 2025
NRCA	VOA	Average of 2020, 2021 and 2022	Average of 2021, 2022 and 2023
IPRCA	VOA	Average of 2020, 2021 and 2022	Average of 2021, 2022 and 2023
% of PTEs in schools weighting used to calculate NIPRCA [footnote 31]	DfE annual school and early years censuses	January 2022	January 2023
GLM	DLUHC	2013 to 2014	2013 to 2014

Table B3: Data sources for MNS supplementary funding

Data	Source of data	Date of data used in illustrative consultation modelling	Date of data used for final rates
PTEs	DfE annual school, early years and alternative provision censuses	January 2022	January 2023
TPPG distribution	ESFA	2022 to 2023	2022 to 2023

11. Annex C: IDACI factor weightings and factor rates

The IDACI factor is one of two deprivation factors used in the 2-year-old and under formula (the FSM factor being the other). These factors target more deprived local authorities, assuming additional needs costs are greater in these areas.

The IDACI element of the deprivation factor is based on the IDACI dataset for 2019, which is published by DLUHC. IDACI is a relative measure of socio-economic deprivation: an IDACI ‘score’ is calculated for a LSOA (an area with typically about 1,500 residents) based on the characteristics of households in that area.

The IDACI score of a given area does not mean that every child living in that area has particular deprivation characteristics: it is a measure of the likelihood that a child is in a household experiencing relative socio-economic deprivation. LSOAs are ranked by score, from the most deprived LSOA, with the highest score, to the least deprived LSOA.

For funding purposes, the new 2024 to 2025 formula for 2-year-olds and under uses IDACI ranks to group LSOAs into 7 bands of decreasing deprivation; for example, Band A comprises the most deprived 2.5% of LSOAs. Table C1 shows the 6 bands that attract funding.

Table C1 : Percentile limits of IDACI bands A – G

Factor	Ranks	Band
Pupils in the most deprived 2.5% of LSOAs	1 to 821	A
Pupils in the next 5% most deprived LSOAs	822 to 2463	B
Pupils in the next 5% most deprived LSOAs	2464 to 4105	C
Pupils in the next 5% most deprived LSOAs	4106 to 5747	D
Pupils in the next 10% most deprived LSOAs	5748 to 9032	E
Pupils in the next 10% most deprived LSOAs	9033 to 12316	F

For the new 2-year-old and under formula, we determine the number of children aged 0 to 4 in each LSOA, according to the mid-2020 ONS population estimates. We then aggregate to local authority level to determine the number of children aged 0 to 4 in each band within each local authority.

The percentage of children aged 0 to 4 in each band within each local authority is then calculated and these percentages are applied to the 2-year-old PTEs for each local authority  to create an estimated number of 2-year-olds living within each IDACI band, within each local authority. (This calculation is followed separately for under 2s using under 2s PTEs).

The new 2-year-old and under formula is designed so that the unit funding for each band increases from F to A in the same proportions as the per-pupil primary school unit values in the calculation for the IDACI factor in the schools block national funding formula.

To allocate the funding for the IDACI factor:

a. IDACI is split into 6 separate factors, which cover the bands A to F as explained above. The differences in the primary unit costs used within the schools block IDACI factor for each band, together with the estimated 2-year-old PTE population estimates within each band are used to produce these splits as described below and set out in table C2.

b. The relative increase of each schools block primary unit value for each band from the schools block band F primary unit value is calculated.

c. For each band, these relative increases are weighted by the corresponding ACA weighted 2-year-old PTE population per band figures. This gives the relative funding required for each band. From this, the percentage of total IDACI funding for each band is then calculated. (This calculation is followed separately for under 2s using ACA weighted under 2s PTEs).

d. Finally, this percentage is multiplied by 4%, which is the weighting of the total IDACI factor.

e. The full calculation for 2-year-olds is set out in table C2 below and for under 2s in table C4.

Table C2: 2-year-old entitlements IDACI band calculations

		Band A	Band B	Band C	Band D	Band E	Band F
[a] Schools block 2024 to 2025 NFF primary unit values		£680	£515	£485	£445	£285	£235
[b] = Relative increase from band F	[b] = band rate ÷ band F rate	2.894	2.191	2.064	1.894	1.213	1.000
[c] = ACA weighted estimated 2-year-old PTEs per band [footnote 32]		11,911	22,977	22,351	21,835	41,270	39,436
[d] = Population per band uplifted by relative increase from F	[d] = [b] × [c]	34,467	50,353	46,130	41,347	50,051	39,436
[e] = Weighting to apply	[e] = [d] ÷ total of row [d]	13.17%	19.23%	17.62%	15.79%	19.12%	15.06%
Factor weight	[f] = [e] × 4% (IDACI total weighting)	0.53%	0.77%	0.70%	0.63%	0.76%	0.60%

Table C3: 2-year-old entitlements IDACI factor rates

		Band A	Band B	Band C	Band D	Band E	Band F
Factor total allocation	[g] = [f] × total IDACI allocation	£8.0m	£11.7m	£10.7m	£9.6m	£11.6m	£9.1m
Factor rate	[h] = [g] ÷ ACA weighted PTEs for each band ÷ 15 ÷38	£1.18	£0.89	£0.84	£0.77	£0.49	£0.41

Table C4: Under 2s entitlement IDACI band calculations

		Band A	Band B	Band C	Band D	Band E	Band F
[a] Schools block 2024 to 2025 NFF primary unit values		£680	£515	£485	£445	£285	£235
[b] = Relative increase from band F	[b] = band rate ÷ band F rate	2.894	2.191	2.064	1.894	1.213	1.000
[c] = ACA weighted estimated under 2s PTEs per band [footnote 33]		3,308	6,564	6,381	6,411	12,431	12,263
[d] = Population per band uplifted by relative increase from F	[d] = [b] × [c]	9,572	14,385	13,169	12,141	15,076	12,263
[e] = Weighting to apply	[e] = [d] ÷ total of row [d]	12.49%	18.78%	17.19%	15.85%	19.68%	16.01%
Factor weight	[f] = [e] × 4% (IDACI total weighting)	0.50%	0.75%	0.69%	0.63%	0.79%	0.64%

Table C5: Under 2s entitlement IDACI factor rates

		Band A	Band B	Band C	Band D	Band E	Band F
Factor total allocation	[g] = [f] × total IDACI allocation	£3.2m	£4.9m	£4.5m	£4.1m	£5.1m	£4.2m
Factor rate	[h] = [g] ÷ ACA weighted PTEs for each band ÷ 15 ÷38	£1.72	£1.30	£1.23	£1.13	£0.72	£0.60

1. A small fraction of this allocation total is set aside to pay for the £5.47 minimum funding floor. ↩

2. A small zero-sum adjustment is applied to the universal hours and additional hours allocations totals to ensure that the updated 3 and 4-year-old hourly funding rates are affordable and all the 3 and 4-year-old indicative allocations total is spent. ↩

3. The FSM and EAL data used is taken from the department’s statistical release Schools, pupils and their characteristics: January 2023 ↩

4. The data used is taken from the DWP stat-xplore system: benefit claimants eligible for disability living allowance in February 2021. ↩

5. See table 2 of the 2023 to 2024 technical note for the original 2023 to 2024 starting point hourly rates. ↩

6. The formula factor hourly rates are unrounded and shown to 2 decimal places for presentational purposes only. ↩

7. The data supplied by VOA was derived from the datasets used in their official statistics release Non-domestic rating: stock of properties including business floor space 2023 - see annex A: further details on new entitlement volumes estimates, for more details. ↩

8. The FSM and EAL data used is taken from the department’s statistical release schools, pupils and their characteristics: January 2023 ↩

9. The data used are taken from the DWP stat-xplore system: benefit claimants eligible for disability living allowance in February 2021. These data are subject to statistical disclosure control, which is applied, by DWP, to all Stat-Xplore data. ↩

10. The formula factor hourly rates are unrounded and shown to 2 decimal places for presentational purposes only. ↩

11. One PTE is defined as a child taking up 15 hours per week over 38 weeks. The later start date for the under 2s entitlement has been reflected in the calculation of the number of PTEs. ↩

12. The formula factor hourly rates are unrounded and shown to 2 decimal places for presentational purposes only. ↩

13. National average hourly funding rates are subject to change when allocations are updated to make use of January 2024 PTEs and January 2025 PTEs for 3 and 4-year-old entitlements and MNS supplementary funding. For the 2-year-old and under 2-year-old entitlement, national average hourly funding rates are subject to change when allocations are updated to make use of PTEs collected through 2 additional headcounts we will ask local authorities to undertake in the 2024 summer and autumn terms and the January 2025 census. This change will likely be more significant for the new entitlements due to the use of estimated local authority-level PTEs to calculate these illustrative average funding rates. ↩

14. The 3 and 4-year-old entitlement combined average funding rate comprises the universal hours average of £5.91 and the additional hours average of £5.83. Both of these entitlements are funded on the same 3 and 4-year-old 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 2-year-old entitlements (combined) average hourly rate is calculated from sum of the 2-year-old disadvantaged and 2-year-old working parents illustrative allocations. Both of these entitlements are funded using the same 2-year-old funding rates at local authority level, but they will have slightly different national average hourly rates if calculated separately due to having different local authority level PTE distributions. ↩

16. Spring Budget 2023 Childcare Expansion Policy costing information note (publishing.service.gov.uk). ↩

17. 2020-based interim national population projections: year ending June 2022 estimated international migration variant - ONS. ↩

18. The FSM and EAL data used is taken from the department’s statistical release schools, pupils and their characteristics: January 2023. ↩

19. The data used are taken from the DWP Stat-Xplore system: benefit claimants eligible for disability living allowance in February 2021. These data are subject to statistical disclosure control, which is applied, by DWP, to all Stat-Xplore data. ↩

20. The data supplied by VOA is derived from the datasets used in their official statistics release Non-domestic rating: stock of properties including business floor space 2023. ↩

21. The sub-national aggregate data supplied by VOA also includes unpublished floorspace data and school type classifications that are based on information held on VOA systems. ↩

22. NRCA dataset is based on special category (085) day nurseries / play schools with any maintained schools that can be identified filtered out added to the IPRCA dataset. ↩

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

24. IPRCA dataset is based on special category (159) local authority schools with secondary and independent schools filtered out. ↩

25. The IPRCA floor space measure is based on GIA where available, else NIA. ↩

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

27. DLUHC published updated 2021 GLM data on 29 March 2022. However, we are not using these figures for the 2024 to 2025 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. ↩

28. The FSM and EAL data used are taken from the department’s statistical release schools, pupils and their characteristics: January 2023. ↩

29. IDACI ranks are updated roughly every 3 to 5 years. ↩

30. The mid-2020 LSOA level ONS population estimates remain the latest published and therefore have not been updated since the consultation modelling. ↩

31. PTEs in schools is defined as the total number of 2-year-old disadvantage entitlement PTEs recorded on the school census divided by the total number of 2-year-old entitlement PTEs recorded on the school and early years censuses for each local authority. ↩

32. Calculated by applying the ACA to the estimated number of 2-year-old entitlements PTEs in each IDACI band for each local authority. ↩

33. Calculated by applying the ACA to the estimated number of under 2s entitlement PTEs in each IDACI band for each local authority. ↩