Nurseries and childminders are a step closer today to rolling out the government’s largest ever expansion of free childcare, as a fair funding formula is set out for the extension of free childcare to cover all ages from nine months to the start of school.

The new formula reflects extensive data gathering on the costs early years providers face in offering places for different age groups and how those costs vary across the country. It builds on the existing formula for three- and four-year-olds, where eligible working parents already receive 30 hours of free childcare a week and all parents receive 15 hours.

The proposed formula, now out for consultation, provides additional funding for areas of deprivation, helping to support families by making sure all children get the best start in life no matter where they live.

It also extends eligibility for additional disability funding and for the early years pupil premium down to nine months old, so providers will be able to access these funding streams for every eligible child receiving free government childcare hours.

The historic increase in funding announced by the Chancellor at Spring Budget has allowed the expected average rate paid to local authorities for 2024/25 to be set at £8.17 for two-year-olds and £11.06 for under twos. This makes the government rate for under twos almost double the average hourly fee of £5.68 charged to parents.

It comes as radically expanded free childcare offers are being rolled out. On top of the existing offers, from April 2024, eligible working parents will get 15 free hours for two-year-olds, from September 2024, 15 free hours will be available from nine months, and from September 2025, 30 free hours will be available from nine months until the start of school.

The offers will help more parents to increase their hours or return to work, as part of wider government support to families to help with rising prices.

Minister for Children, Families and Wellbeing, Claire Coutinho said:

The Education Secretary, Gillian Keegan, just announced increases to the amount we pay nurseries and childminders to offer free hours to two-year-olds. Today we’re giving providers further confidence that the largest ever expansion of free hours over the coming months and years will be properly and fairly funded.

Working parents can start getting ready for a helping hand with costs from the end of maternity leave right up until the end of primary school, with average savings of £6,500 a year if they use the full 30 free hours for their children.

The increased rates will help childcare providers invest in training and development opportunities for their staff, building on the up to £180 million package of learning and qualifications the government is providing to the sector to support the development of the youngest and most disadvantaged children.

As part of the consultation, illustrative local authority hourly funding rates for 2-year-olds and under twos have been set out so that local authorities and childcare providers can see what the proposals will mean for them.

Final 2024-25 hourly funding rates for local authorities for all age groups will be confirmed in the autumn.