A report released today by YMCA revealed that the Early Years Funding Formula (EYNFF)* 2023/24 falls far short of the support needed for providers to deliver the Government’s free childcare scheme, as inflation and National Living Wage effectively outstrip any increase across England.


YMCA found that the funding rate for three and four-year-old early years education has increased by an average of 3.2%, and 4.4% for two-year-olds in 2023/24. However, one-third (33.8%) of local authorities received a funding increase of just 2% or less for three and four-year-olds, and nearly half (47.7%) received 2% or less for two-year-olds.


Comparing these figures to increases of 10.1% in inflation and 9.7% in National Living Wage, this leaves a 7% shortfall in funding for three and four-year-olds and 5.7% for two-year-olds. This funding gap delivers a particularly hard blow given that wages account for around 70% of early years setting expenditure.


All of this combined means that providers like YMCA are now having to make difficult decisions about their early years settings, with one local YMCA forced to close four nurseries as they were simply no longer viable, leaving 145 children seeking a new early years placement.


Furthermore, current government policy penalises settings in the most deprived areas. Many YMCAs work in the most disadvantaged communities where there is less funding available due to families being unable to afford additional non-government funded hours, which in more affluent areas is often used to offset the low national funding rate.


YMCA research has also shown that deprived settings often experience a higher level of additional need, SEND and children with protection plans, further adding to already strained resources.


Denise Hatton, Chief Executive of YMCA England & Wales, said:


“Looking at the current picture of funding for early years settings against a backdrop of colossal inflation rates, ongoing cost of living and a full blown recruitment crisis, it is little wonder that providers are buckling under the strain.


“This comes on top of years of underfunding, with 80% of YMCA childcare settings stating prior to the 2023/24 Early Years National Funding Formula announcement that they cannot deliver childcare at the funding rate provided by their local authority.


“We know that offering the right early years support gives children the greatest chance of reaching their potential than at any other stage of their life, and yet settings are essentially being forced into extinction due to drastic underfunding. The current model simply does not work. Government must invest in early years provision before it is too late.”


YMCA is calling on the Department for Education to reconsider its funding allocations for 2023/24 and for them to fully take into account rising rates of inflation and the National Living Wage. A particular focus on financial support is also needed for those settings operating in the most deprived areas of the country.


YMCA works with more than 166,000 children, young people, parents and carers to provide the best possible start in life, offering support into teenage years and beyond.