Millions in early years funding not reaching providers - NDNA investigation reveals


Three-quarters of local education authorities (LEAs) in England underspent their childcare funding for three and four-year-old places, says NDNA, short changing children and leaving providers out of pocket.

Millions of pounds of government money for early years places are being used to offset overspends in other parts of the education budget, according to NDNA’s analysis of local authority data released today - see download below for full report. 

And about half of LEAs retain large contingency budgets, many of which roll on to the following year, while providers are struggling to remain sustainable on an average funding rates of £4.25 an hour to deliver high quality care.

Following a Freedom of Information (FOI) act request to all English LEAs, NDNA received responses from 130 LEAs across England which revealed:

95 LEAs (74% of those who submitted clear responses) reported an underspend for 2018/19 totalling £63.527m 
15 LEAs reported underspends of more than £1m – with Surrey County Council reporting an enormous £5m underspend
Only one in five LEAs said they used any of this underspent money to increase the rate for providers 
42% of LEAs kept £18.882m underspends in their reserves
Ten LEAs used £8.661m to offset overspends in their High Needs Block which covers children aged 0 - 25
72 LEAs reported contingencies for 2018/19 totalling £32.013m
68 LEAs reporting contingencies for 2019/20 totalling £26.436m
Nine LEAs reported contingency budgets of more than £1m in 2018/19 
24 LEAs have not decided what to do with £7.823m of contingency money if unspent

Purnima Tanuku, Chief Executive of NDNA, said: “Our analysis shows an alarming discrepancy in the way that early years funding for three and four-year-olds is being used and how much is not reaching providers across the country.

“We have unravelled the true scale of the disastrous funding system which, if not addressed urgently by the Department for Education, will create a further crisis within early years.
“Contingencies have a role to play due to fluctuations in take up. But we have seen large scale contingencies that go unspent which must be challenged as they take funding away from the frontline.

“The government announced it is investing £3.6bn to support its funded places in 2020/21 but it appears that a significant proportion of that will not reach the actual providers. Our figures of £63.5m underspent and contingency budgets of £26m are likely to be much higher because 21 councils did not submit their responses at all.

“We know that council budgets are stretched to capacity, especially around High Needs and SEND support - but this robbing Peter to pay Paul approach is recklessly short-sighted. It damages the quality of care children and families receive. 

“Early years has been chronically underfunded for years now, and yet this is the place where investment in education can make the biggest difference. Due to government policy, nurseries and other providers have had to absorb rising costs, especially 6% increases in minimum wages and inflated business rates, while their funding rates have stagnated or been reduced. It’s no wonder that more nurseries are forced to close their doors and qualified staff are leaving the sector to work in supermarkets for better pay and conditions.

“We call on the Minister Nick Gibb and Chancellor to act ahead of the Budget - not with any more sticking plasters, but with a meaningful overhaul of the funding system which ensures nurseries are not penalised for delivering funded early education on behalf of the government.” 

NDNA received responses from 130 LEAs across England, two of which were unclear so have not been analysed. A total of 21 LEAs did not submit a response. Download the full report below.

In September 2019 NDNA released research that showed nursery closures in England had jumped by 153% since the Government’s 30 hours policy had been fully rolled out in September 2017.

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