The government has revealed its proposed average funding rate for the expansion of funded childcare to younger children.

The Department for Education (DfE) is proposing an average rate of £8.17 an hour for two-year-olds and £11.06 an hour for under-twos.

The DfE says it came up with the new funding formula after researching the costs early years providers face when delivering places for different age-groups across the country.

The proposed formula, now out for consultation, will provide additional funding for areas of deprivation. It will also extend eligibility for additional disability funding and for the early years pupil premium down to nine months old.

Under the government’s new funded childcare offer, which was announced in March, eligible working parents will receive 15 funded childcare hours for two-year-olds from April 2024. From September 2024, 15 funded 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.

Claire Coutinho, minister for children, families and wellbeing, said: “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.”

Neil Leitch, chief executive of the Early Years Alliance, said the sector welcomed further detail on how the offer would be funded, but expressed concern about funding levels. “With estimates from the Women’s Budget Group suggesting that the government has significantly underestimated the level of funding needed for both the new and existing offers, we remain deeply concerned that, regardless of what funding formula is used, the decision to extend the early entitlement scheme will only serve to place even greater pressure on an already-struggling sector,” he said.

He added: “It is also incredibly worrying that in the face of sharply rising delivery costs, under the government’s proposals, the introduction of this new formula will result in some local authorities seeing their funding rates for two-year-olds actually fall in April 2024 compared to September 2023.”

Purnima Tanuku, chief executive of National Day Nurseries Association said: “It’s important for the sector to examine the full details of this consultation when it’s published. Some of these funding rates have already been announced as part of the Spring Budget. 

“We know the government tried to get the funding rates right for providers, but appears to be focusing on the two-year-old and under rates rather than making sure the investment for three and four-year-olds is sufficient to keep nurseries sustainable. Currently nurseries have around ten times more three and four-year-old children, so these are the rates that make the biggest difference to the sector.”

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