Of the 132 local authorities who responded to the NDNA’s Freedom of Information (FOI) request, 75 per cent (99 local authorities) had underspends at the end of 2023/24. Of these, 19 had underspends of more than £1m, while five councils held onto more than £2m.
Essex County Council reported the largest underspend of £10.3 million, however NDNA understands the local authority expected a ‘large proportion’ of this to be adjusted after the end of the financial year – data was collected before this point.
In total, the councils' underspends amounted to more than £65 million.
Source: NDNA
The figures are based on the local authorities that responded to the FOI and on funding for two- to five-year-olds only.
Of the 129 councils who responded to a question regarding actions agreed as a result of under or overspends, just 4 per cent said they redistributed funds to early years providers. These included Hampshire, Suffolk and Nottinghamshire.
Half said the money was either being retained in reserves or carried forward to the 2024/25 budget. A further 24 per cent of councils used the underspends to offset deficits, of which 15 per cent were specially used for the SEND high needs block.
Out of the remaining respondents, ten local authorities balanced their budgets and two reported overspends but did not confirm the amount (Croydon and Wandsworth).
This is the sixth year running the NDNA has carried out research into how councils in England distribute their allocated early years funding. It says that cumulative underspends from 2018 to 2024 amount to almost £357 million.
Source: NDNA
Essex County Council expected a large portion of this to be adjusted after the end of the financial year.
* LEAs reported underspends of over £1m in one previous year since 2018
** LEAs reported underspends of over £1m in two previous years since 2018
*** LEAs reported underspends of over £1m in three or more previous years since 2018
Overspends
NDNA’s figures also reveal that 21 councils had overspends amounting to £7m. This figure is slightly lower than in 2022-23, at £7.4m. Where councils overspend, they must recover funding from future years meaning funding rates to providers can be lower.
According to the data, the average pass-through rate was reported to be 96 per cent across the 134 councils who responded to the question. Of these, 45 said they passed through exactly 95 per cent and 86 passed above 95 per cent. Two councils reported a pass-through rate below 95 per cent, West Northamptonshire (93.1 per cent) and Hartlepool (92.4 per cent). One local authority did not provide an answer.
NDNA’s executive chair Purnima Tanuku, said, ‘We are committed to looking at local authority budgets every year because we keep finding money allocated for children’s funded places, not being spent for that purpose.
‘This time it was almost a 100 local authorities telling us they had money left over from the 2023-24 budget. This is early years money which is crucial at this extremely challenging time for providers and parents. These are resources that must be used to provide high-quality education and care to our youngest children.
‘Private and voluntary nurseries are being asked to find more money for NICs, rising business rates bills and getting mixed messages on charging policies. At the same time, school- based nurseries are reimbursed for NIC costs and business rates and are receiving additional funding from the Government, it risks creating a two-tier system.
‘Every day we are hearing from nurseries who are worried about how they can remain open and how they will deliver more hours on the funding rates they currently receive. At this crucial time the Government should be working with local authorities to ensure every penny supports the front line.’
Teachers’ Pay and Pensions Grant
During the financial year 2023/24 the TPPG (Teachers Pay and Pensions Grant) was added to early years budgets for the first time.
NDNA’s FOI also asked local authorities how much additional funding they received in the early years block and what decisions were made about how the TPPG funding uplift was distributed.
Where local authorities were able to provide this information, only 40 per cent said they made TPPG funding available to all PVI providers, adding it to the three- and four-year-olds hourly rate.
A further 36 per cent said that no PVIs were eligible for TPPG and that it went to schools and maintained academies. Only 22 per cent of councils distributed the TPPG funding uplift to those providers with teachers and 2 per cent of councils did not have the information.
Purnima Tanuku added, ‘The approaches from local authorities have created a real postcode lottery for providers. This grant was supposed to boost funding rates which could support providers to recruit more qualified staff.
‘What we have seen is a completely mixed picture leaving some PVI providers with teachers completely excluded from any additional support via this grant.’
