At least £70m of early years entitlement funding underspent in council budgets

An investigation into ’free’ childcare funding for two to four-year-olds across England has uncovered record levels of underspends, according to National Day Nurseries Association (NDNA).

The survey found that 104 out of the 137 who responded to NDNA’s Freedom of Information (FOI) request local authorities reported an underspend, equating to 76% of councils. In total, at least £70m of early years entitlement funding was underspent in council budgets and not spent on places during the financial year 2022-23.

Only 12% of councils, said they later passed any of their leftover budget to providers to help with underfunding with the others either putting it into reserves or using it to offset other deficits within the Designated Schools Grant (DSG).

Purnima Tanuku OBE, Chief Executive of National Day Nurseries Association (NDNA) said: “These shocking findings really emphasise that the current way of funding early education and care places is not fit for purpose. The system is too complex for parents, providers and local authorities. It is the children who lose out when funding doesn’t reach the front line.

Providers are under even more pressure with the vast majority telling us that current funding rates do not cover their costs. NDNA has been calling for the DfE to ringfence this money which is meant for providers to deliver high quality early education and care to all children who need it. The current situation means that any left-over funds are used to bolster other areas within the schools grant which is unfair. This practice must end.”