Local Authority Early Years Entitlement – underspends and overspends

Currently in England, all three and four-year-olds are entitled to 15 hours of funded early education for 38 weeks of the year. Eligible three and four-year-olds are entitled to an additional 15 hours per week

Since April 2024, two-year-old children of working families have also been eligible for 15 hours of funded childcare. This was extended to children from nine months old in September 2024, and from September 2025 all these eligible children from working families have been entitled to 30 hours of funded childcare during term time.

NDNA has been investigating whether all this money reaches providers since 2020 (looking at the previous year’s budget 2018 – 2019 onwards).

Our latest report which will be released later this month (April 2025) looks at how the early years entitlement was spent during 2024-25 in each local authority who responded to our Freedom of Information (FOI) request. This is the first year in which councils have been given funding for places for two year olds then later, nine month olds from working families.

NDNA’s investigation discovered that councils across England underspent their early years funding by £115m during 2024-25. These figures are the largest underspend recorded in seven years of NDNA annual reports. Our full report will be out soon.

This is the seventh year running that NDNA has reported on how councils in England distribute their allocated early years funding. Cumulative underspends from 2018 to 2025 amount to at least £372 million.

Underspends in 2023-24:

The previous year, NDNA discovered that more than £65 million was underspent across 132 local authorities with only 4% passing any of this unspent funding to providers. A total of 19 councils reported underspends of more than £1m and five councils that held onto more than £2m. Out of those councils who underspent, 50% retained their money in reserves or carried forward to the 2024/25 budget.

Read 2023-24 full press release

Underspends in 2021/22

For 2021-22, NDNA discovered £45.8m was not spent on early years places during that year, in addition a net amount of £59.3m went back to the DfE.

Download

Webinar: Council underspends could you increase your local funding rate

The webinar includes:

The latest figures from the NDNA investigations team showing the national picture of how much funding has been left unspent and areas where overspends have happened
Information on how you can access data for your local council area
Hear from NDNA members who have used this data to get changes in local funding rates and approaches
How you can challenge your local authority if they reported underspends and did not use any of this money to support childcare provider.

This webinar was kindly sponsored by Hope.

Watch the webinar

Further background regarding Early Years Entitlement funding:

Funding for these places is provided by the Department for Education to Local Education Authorities through the Dedicated Schools Grant.

The early years funding for each LEA is set by the DfE using the Early Years National Funding Formula (EYNFF), which provides each council with an hourly rate of funding per child. Budgets are then set based on the expected number of children entitled to access funded childcare through census data. Local authorities must decide how to allocate this funding to early years providers through an hourly ‘base rate’ with additional hourly supplements for local priorities. This could take account of accessibility, Special Educational Needs and Disability (SEND), children from areas of deprivation or the quality of provision all taken from this one hourly rate. LEAs need to show that early years providers receive 95% of the total early years funding, leaving up to 5% that can be retained for central administration of the scheme and other early years priorities for the local council.

From 2019 to 2022, NDNA discovered that large amounts of funding, earmarked for children’s early education and care, was left unspent in LEA schools budgets. Some was reported as being channelled into other areas of education spending. The investigation focused on funding for early entitlement places for three and four-year-olds including the 15 universal hours and the additional 15 hours for eligible children of working parents. This year we looked at funding for 2021/22 in the early years block overall and asked about adjustments made to early years budgets by the Department for Education (DfE).