Budget 2024 – future funding increases to be linked to rising costs
Chancellor Jeremy Hunt announced in his Budget today (6 March) that he will be boosting the funding for the early years entitlement in line with inflation and staffing costs from April 2025.
He confirmed that for the next two years, the hourly rate paid to providers will increase in line with the metric used at Spring Budget 2023 which will include the Consumer Price Index, average earnings data and the national living wage.
This guarantee recognises that staffing costs are the most significant costs that providers face.
The Government will also make sure that councils pass through at least 97% of funding rather than the current 95% and councils will need to confirm their funding rates to providers eight weeks after the central government rates are announced.
Purnima Tanuku OBE, Chief Executive of National Day Nurseries Association (NDNA) said: “NDNA has been calling for the Government to use annual reviews to address the gap in funding, particularly in relation to inflation and minimum wage increases. In the current financial climate we welcome the fact that the Chancellor has listened and committed to additional funding indexed to rising costs for 2025/26 and the year after.
“We hope the Government continues to listen to the sector about the challenges providers are facing. The increase in the pass-through of funding is a welcome step and the Government must ensure that all local authorities are passing all the required funding to those providers delivering high-quality early education and care.”
However, there is no boost to funding rates for this year, no support for paying business rates and no additional capital investment for nurseries to be able to physically expand their buildings.
Purnima Tanuku OBE continued saying: “We would have liked to have seen some immediate support to providers with their current three and four-year old funding. Our recent survey showed that 83% say funding doesn’t cover their costs and 73% expect to make a loss overall or just break even. The Government must continue to work with the sector to ensure parents and families are able to access the expanded offer and providers can deliver this sustainably.
“It’s very disappointing that the Chancellor didn’t extend the business rates discount to the childcare sector where it is desperately needed.”
In the Budget Mr Hunt also announced:
- Inflation, which was 11% in Autumn 2022, has fallen to 4% now and is forecast is to go below 2% in the second quarter of this year.
- Child benefit threshold changes will apply from April and increase from £50,000 to £60,000. This is estimated to help half a million families and the Treasury expects they will increase their income by £1,300 per household.
- The Recovery Loan Scheme has been renamed as the Growth Guarantee Scheme and extended until the end of March 2026. The scheme offers a 70% government guarantee on loans to SMEs of up to £2 million in Great Britain and £1 million in Northern Ireland.
- Public spending changes would increase the national budgets for Wales by an additional £170m and Scotland by £300m under the Barnet formula
- Business rates relief for were maintained for pubs and hospitality venues and a 40% relief was introduced for film studios
- National Insurance for employees cut from 10% to 8%
A Summary from DfE: Education and social care
In his speech, the Chancellor commented:
“A year ago, I also announced the biggest ever expansion of childcare… this will mean an extra 60,000 parents enter the workforce in the next four years – a tremendous achievement for the Education Secretary.
“Today, in order to support the childcare sector make the new investments it now needs, I am guaranteeing the rates that will be paid to childcare providers to deliver our landmark offer for children over 9 months old for the next two years.
“More people in work and more jobs, sticking to our plan in a long-term Budget for Growth.”
The Chancellor announced:
- Nurseries and preschools will be protected from rising costs through a guarantee that future funding will rise with a combination of inflation, earnings and the National Living Wage – certainty the sector needs to expand and deliver the rollout, which will save some parents using the full 30 hours up to £6,500 a year
- £105 million over four years for a further wave of 15 new special free schools, creating over 2,000 more places for children with special educational needs and disabilities (SEND).
- £45 million of match funding to local authorities to build an additional 200 open children’s home placements, and £120 million to fund the maintenance of the existing secure children’s home estate
- To further support those in work, from April 2024 the government will raise the threshold for High Income Child Benefit Charge (HICBC) to £60,000 taking 170,000 families out of paying this tax. The rate of the charge will also be halved so that Child Benefit is not repaid in full until you earn £80,000.
- Longer-term, the government is committed to removing the unfairness of the HICBC system towards single-earner families. The government will move to a system based on household rather than individual incomes by April 2026, and will consult in due course.
- England
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