Agenda item

Following the confirmation of the provisional DSG Early Years’ (EY) Block funding for Brent, this report seeks Schools Forum endorsement of the local EY Funding Formula for 2025/26.

(Agenda republished to include this item on 21 January 2025)

Folake Olufeko (Head of Finance, Brent Council) introduced a report, seeking Schools Forum endorsement of the Early Years (EY) Funding Formula for 2025/26 with the following key points highlighted as part of the update provided:

·       The 2025-26 EY Block funding for Brent was £41.4m, an increase of £7.1m from 2024-25 allocations.  This included:

Ø  a universal base rate for Brent providers for 3 and 4-year-old funding of £5.76 per hour.

Ø  an allocation for deprivation supplement of 10% from the 3 and 4-year-old funding allocation and a discontinuation of the 2% quality supplement as agreed by the EY Subgroup of the Forum 2 years ago.

Ø  a base rate of £9.77 to pay Brent providers for the additional support (formerly known as the disadvantaged) 2-year-old entitlement.  This represented a 2.4% increase of £0.23 from £9.54 in 2024/25.

Ø  a reduction from 5% to 4% centrally retained funding by the local authority from 3 and 4-year-old funding, following the DfE’s mandatory requirement to pass through a minimum of 96% of this funding to early years providers.

Ø  an introduction of a 2% centrally retained funding by the local authority from 9-months old to 2-year-old working parents with no central expenditure deductions from the 2-year-old additional support entitlement to support the uptake of provision for this cohort.

Ø  an allocation of £0.587m for special educational needs inclusion funds (SENIF), in line with the DfE’s expectation that local authorities earmarked this funding for children with special educational needs (SEN) eligible for or taking up the new and existing entitlements.

·       The expectation that local authorities would announce their funding rates to childcare providers by 28 February 2025, which the government intends to mandate as a requirement in the regulations from the financial year 2026-27.

·       In the summer of 2023, the previous government consulted on the minimum pass-through requirement and outlined its intention to increase this from 95% to 97% once the new entitlements were sufficiently embedded.  That change had now been introduced with a minimum pass-through requirement for local authorities increased from 95% to 96% for 2025/26.  This new requirement would apply separately to all early years’ entitlements from 9 months to 4 years old.  Whilst the increased pass-through rate had resulted in a reduction of £0.2m from the previously allocated central spend that was deducted from the 3 and 4-year-old funding, this impact had been mitigated by a 2% deduction from the under 2- to 3-year-old working parent entitlement, resulting in an increased allocation of £17k for central expenditure from 2024/25. 

·       In line with the DfE’s expectation that local authorities have SENIFs for all children with SEN eligible for or taking up the new and existing entitlements, it was proposed to include a contribution from the new free entitlements for children of working parents aged 9 months to 3-years-old, at the same rate of £0.13p which equates to £141k.

·       Local authorities with MNS will continue to receive supplementary funding for the 2025/26 financial year.  The provisional allocation for Brent is £1.0m compared to £0.886m in 2024/25.  This represented an increase of 12.9%.

·       On January 7, 2025, a discussion was held with the EY sub-group of the Schools Forum to review the proposed hourly rates, central retention percentages from the EY funding allocation, and the SENIF allocations for the upcoming financial year.  These considerations were made in considerations of the DfE’s requirements stemming from the expansion of Early Years entitlements.  Members of the sub-group expressed their agreement with the proposals to retain 4% of the funding allocation for 3- and 4-year-olds and 2% of the funding allocation for under-twos and 2-year-olds.

·       The group engaged in a detailed discussion about the 2% quality supplement that was introduced in 2023/24 as a mechanism to distribute the Teachers’ Pay Additional Grant across the sector.  Members highlighted that, historically, the PVI sector had been encouraged to upskill staff with qualifications such as Early Years Professional Status but had not received additional funding to offset the costs associated with employing more highly qualified staff.

·       It was also agreed that the hourly rate for the 2-year entitlement for families in receipt of additional support would remain higher compared to the 2-year-olds from working families as a financial incentive for providers supporting the most vulnerable 2-year-olds in the borough.

·       The group was consulted as on the requirement within the Statutory guidance and members had voted unanimously to retain the existing system.  It was discussed that the requirement to offer monthly payments to providers who wished this remains and therefore this is a decision that will need to be reviewed regularly.

The Chair thanked Folake Olufeko for her report and then invited comments on the report with the following issues covered:

·       Nisha Lingam highlighted that there were a lot of changes for EY to navigate.  It was positive that there was work being done around inclusion funding especially given the increasing cost of providers.  It was essential to maintain a good service and she was looking forward to implementing the changes.

With no further comments raised, and in view of the support expressed the Schools Forum RESOLVED to:

(1)       Note the requirement for local authorities to have an additional support 2-year-old rate that was at least equal to the rate for 2-year-old children of working parents.

(2)       Endorse Brent’s EY Funding Formula for 2025-26, as supported by the EY Funding Subgroup based on the following updates applied to the Early Years National Funding Formula (EYNFF):

a)         A universal base rate for Brent providers for 3 and 4-year-old funding of £5.76 per hour. This represents a 6.7% increase of £0.36p from £5.39 in 2024/25.

b)         An allocation for deprivation supplement of 10% from the 3 and 4-year-old funding allocation and a discontinuation of the 2% quality supplement as agreed by the EY Subgroup of this forum.

c)         A base rate of £9.77 to pay Brent providers for the additional support (formerly known as the disadvantaged) 2-year-old entitlement. This represents a 2.4% increase of £0.23 from £9.54 in 2024/25.

d)         A base rate of £9.44 to pay Brent providers for the 2-year-old working parent entitlement. This represents a 0.3% increase of £0.03 from £9.41 in 2024/25.

e)         A base rate of £12.92 to pay Brent providers for children aged 9 months up to 2 years. This represents a 0.4% increase of £0.05 from £12.87 in 2024/25.

f)           A reduction from 5% to 4% centrally retained funding by the local authority from 3 and 4-year-old funding, following the DfE’s mandatory requirement to pass through a minimum of 96% of this funding to early years providers.

g)         An introduction of a 2% centrally retained funding by the local authority from 9-months old to 2-year-old working parents with no central expenditure deductions from the 2-year-old additional support entitlement to support the uptake of provision for this cohort.

h)         An allocation of £0.587m for special educational needs inclusion funds (SENIF), in line with the DfE’s expectation that local authorities earmark this funding for children with special educational needs (SEN) eligible for or taking up the new and existing entitlements, regardless of the number of hours taken and based on local eligibility. This funding will be allocated by the Under 5s Nursery Panel, and both PVI and maintained providers can apply for this to ensure the funding continues to be targeted at vulnerable children.

(3)       Note an expectation that local authorities will announce their funding rates to childcare providers by 28 February 2025.  The government intends to mandate this as a requirement in the regulations from the financial year 2026/27.