Guidance

Early years budget grant (EYBG) 2024 to 2025: methodology and operational guidance

Updated 9 October 2024

Applies to England

1. Overview

We are providing £34 million in additional funding to local authorities in 2024 to 2025 to support early years providers with their costs, following the recent teacher pay award. This funding is part of the almost £1.2 billion announced by the department following confirmation of the 2024 teachers’ pay award.

This funding will be distributed via the early years budget grant (EYBG). The EYBG will be paid to local authorities to cover the 7-month period between 1 September 2024 and 31 March 2025.

This guide explains how we have distributed EYBG funding to individual local authorities.

2. Eligibility for the grant

All local authorities in England that fund early years provision are eligible to receive the EYBG.

However, one local authority, South Gloucestershire has not received an EYBG allocation, this is because this local authority did not receive a large enough portion of pay grant funding to deliver a 1 pence uplift through ‘core’ EYBG rates.

The Isle of Scilly and City of London are excluded from these allocations.

All local authorities in receipt of the EYBG will be required to pay their early years providers in accordance with EYBG conditions of grant.

3. Funding rates methodology

As far as possible, the approach we have taken to calculate EYBG hourly rates is in line with the way we incorporated the historic teachers’ pay grant (TPG) into core funding arrangements in 2023 to 2024. For more information on how we roll in pay funding, see the 2024 to 2025 early years funding formula technical note.

This approach seeks to target funding towards areas that have more school-based provision and therefore have more providers likely to incur specific costs related to teachers’ pay. We will also direct a portion of this funding to maintained nursery schools (MNS) supplementary funding to reflect the historic approach we have taken in recognising that, for MNS, teachers’ pay costs will represent a greater proportion of their overall budget.

We have notionally apportioned the £34 million funding between the 3‑ and 4-year-old early years national funding formula (EYNFF) entitlement and MNS supplementary funding in the same proportions as was applied with roll-in of the historic TPG. We have therefore added £29.2 million to the notional EYNFF envelope for 2024 to 2025, and £4.8 million to the amount notionally available for MNS supplementary funding.

The amount of EYBG funding that local authorities therefore receive will be calculated using 2 hourly rates:

1. a ‘core’ EYBG hourly rate and

2. an MNS EYBG hourly rate

Each rate is multiplied by seven-twelfths of a local authority’s part-time equivalents (PTE) count, based on January 2024 universal and additional hours (for the ‘core’ rate) PTEs and January 2024 MNS universal hours (for the MNS rate), to produce each authority’s total allocation under the grant.

4. Calculating ‘core’ EYBG rates

Core EYBG rates have been calculated using the 3- and 4-year-old formula, including the formulae weightings and factors used to calculate the original 2024 to 2025 rates for the early years block of the dedicated schools grant (DSG), with the same data sources, but with a few changes which are detailed below.

Change 1: creating a new baseline.

EYBG rates have been derived by first calculating a notional amount that each local authority would receive if the additional funding for 2024 to 2025 were spread across local authorities in the same proportion as when the historic pay grants were rolled into core funding arrangements.

For example, in 2024 to 2025, if a local authority received 1% of the money that was being rolled-in in respect from the historic TPG, under the EYBG that local authority would be notionally apportioned 1% of the additional funding available.

We divide this notional local authority level amount by their universal and additional hours January 2023 PTEs (as used for the final 2023 to 2024 EY DSG allocations) and by 15 hours and 38 weeks, then, to ensure local authorities’ allocations are affordable from within the given budget, round down to the nearest penny, giving a pence uplift that we add to each authority’s baseline to create a new baseline.

Change 2: Minimum funding floor (MFF)

To reflect the additional funding available as a result of the EYBG, we have also updated the MFF for 2024 to 2025. The MFF means that with the addition of EYBG funding, no local authority sees a funding rate for September 2024 to March 2025 lower than £5.54. The MFF has been increased in line with the rounded down pence increase to the universal hours average rate, based on the notional EYBG rates.

EYBG hourly amounts

The additional EYBG funding is then distributed using the 3- and 4-year-old EYNFF to determine each local authority’s hourly rate, using the new baseline and the new MFF. The rates the 3- and 4-year-old formula produces are inclusive of local authorities’ EYBG rate and their 2024 to 2025 DSG rate. To calculate a local authority’s final core EYBG rate, we therefore deduct their DSG rate from the model output.

Core EYBG hourly rates provide an uplift for local authorities that is either the uplift given by the new MFF or the uplift given by their new/revised baseline hourly rate.

There is one local authority, South Gloucestershire, who is not on the minimum funding floor, and historically, did not attract a large portion of TPG funding. In this case, the notional amount added to their baseline is insufficient to provide a EYBG rate uplift. This local authority will not receive an allocation through the ‘core’ EYBG rate.

5. Maintained nursery school EYBG rate

To determine the MNS EYBG rate, we have applied a similar method used in calculating ‘core’ EYBG rates.

We have calculated local authority level notional EYBG allocations for MNS supplementary funding by distributing the £4.8 million to local authorities according to the proportion of the historic pay grant each authority received when we rolled in the historic TPG into MNS supplementary funding in 2023 to 2024.

We divide this total by MNS universal hours January 2023 PTEs, and by 15 hours and 38 weeks, then to ensure local authorities’ allocations are affordable from within the given budget, round down to the nearest penny. This gives a pence uplift that we then add to each local authority’s MNS supplementary funding pre-protection baseline to create a new baseline.

We then apply an updated minimum MNS supplementary funding rate of £5.14. This increase has been calculated by taking the difference between the current minimum funding rate of £4.64, and the average rate of the new baseline rates created above and again rounding down, to ensure affordability.

We then apply the MNS supplementary funding cap of £10 per hour or the transitional arrangement for 2024 to 2025, meaning that two local authorities (Westminster and Hampshire) with funding rates at this level will not see an uplift via the MNS EYBG rate. Haringey will see an uplift lower than their EYBG notional rate as this additional funding brings them onto the cap.

MNS EYBG hourly amounts

The rates produced are inclusive of local authorities’ 2024 to 2025 DSG MNS rates and their MNS EYBG rate. To calculate a local authority’s final MNS EYBG rate we therefore deduct their 2024 to 2025 DSG rate from this rate.

MNS EYBG hourly rates provide an uplift for local authorities with MNSs that is either the uplift given by the new MFF, or the uplift given by their new baseline hourly rate, excluding those authorities affected by the cap.

6. Paying the grant

Local authorities in England will receive allocations under the EYBG to cover the period 1 September 2024 to 31 March 2025.

Local authorities will receive their payments for 2024 to 2025 in a single payment on 29 November 2024.

7. Allocations

Allocations for the EYBG will be paid based on PTE data from the January 2024 early years, schools and alternative provision censuses.

There will not be any further adjustment to the EYBG allocations.

8. Local authority funding to providers

We are providing local authorities with the flexibility to determine the most appropriate way of allocating EYBG funding locally. Local authorities should refer to the EYBG conditions of grant which set out the permitted use of EYBG and detail how the funding should be passed on to providers.

9. Conditions of grant

The EYBG is subject to our conditions of grant.