Councils have millions in unspent early years funding, investigation reveals

Catherine Gaunt
Tuesday, February 2, 2021

Early years settings in England are missing out on more than £55m in Government funding for childcare places, according to a Freedom of Information investigation by the National Day Nurseries Association.

Local authorities kept back more than £55m in early education funding in 2019/20, according to the FOI findings
Local authorities kept back more than £55m in early education funding in 2019/20, according to the FOI findings

Three-quarters of local authorities in England have reported underspending for funded childcare places, suggesting that the full amount of funding for the 15- and 30-hours entitlements is not reaching early years providers.

The NDNA’s findings follow a similar investigation last year, but this time 17 local authorities were reporting that they had more than £1m in unspent funding for early education and childcare, a higher number than a year ago.

Purnima Tanuku, chief executive of the National Day Nurseries Association (NDNA), said they had been 'shocked' to find very similar results to their previous investigation.

‘To discover so much money, allocated for early education and childcare, still not reaching providers is totally unacceptable given the recommendations we made last year. This must not be allowed to happen again and an urgent full review of early years funding is needed.’

The period covered by the research was just before the Covid-19 pandemic hit the UK.

The findings come from Freedom of Information requests made by the NDNA to 149 local education authorities last November, with responses received from 128, which asked about underspends for money allocated for childcare places in the 2019/20 financial year.

The NDNA said that the result of less money reaching childcare providers was that they could only afford to offer families fewer places.

If money earmarked for childcare places is not being converted into creating places, children and families will suffer, particularly in areas of deprivation, it said.

Ms Tanuku added, ‘Over the years we have repeatedly asked the Government to ring-fence this money within the schools grant so that it can only be spent on funded places for three- and four-year-olds. These places have been underfunded for years. Despite our ground-breaking report on this a year ago, lessons have not been learned and vital cash is still sitting in council coffers or being moved to pay for deficits in other areas.

‘More than ever, it is crucial that funding for the sector reaches providers as they struggle to keep their businesses sustainable in the face of rising costs and lower demand due to the pandemic.

‘The way early years are funded is incredibly complicated for parents, providers, councils and nationally. This is public money intended to support children, but these findings suggest the full amount for each child is not getting to providers.

‘The Government must simplify the way it funds early education and childcare places.

‘We welcome the fact that some local authorities have been using contingency funds to support providers during the past year as they struggle with all the pandemic has thrown at them. But it’s a postcode lottery with many nurseries on the brink of collapse.'

The NDNA is advocating a Childcare Passport approach, an online account for each child which parents can use to pay the provider of their choice directly. They say this would cut out any administration and ensure funding for a child follows that child wherever they take up a place.

Ms Tanuku added, ‘This is just another example of where the Government has failed in its ambitions to level up. Giving all children a good early years education is the single most important step to take, which is why it’s crucial that funding rates are reviewed and that all this money actually pays for delivery of high quality places.’


  • 94 LEAs (73 per cent of those that responded) reported an underspend for 2019/20
  • Total underspends where LEAs gave a figure was £55.527 million (2 figures were missing)
  • 17 LEAs underspent by more than £1m each – see table in the report
  • 6 of these LEAs also made the £1m underspend list for the previous year
  • Only a fifth (21 per cent) of LEAs gave any of this underspent funds to providers (£11.747m)
  • 45 LEAs put their underspent money (£24.944m) into their reserves or rolled it forwards within their Designated Schools Grant budget (DSG)
  • 30 LEAs used their underspent funding to offset deficits elsewhere in their DSG budget (£13.546m)
  • 52 LEAs reported contingency budgets for 2020/21 totalling £31.893m although 7 LEAs gave no information about contingencies
  • 1 LEA (Essex) reported  a contingency budget of more than £1m; a further 9 reported contingencies of more than £0.5m
  • 25 LEAs reported an overspend for 2019/20 totalling £9.210m
  • 2 LEAs (Barking and Dagenham and Central Bedfordshire) overspent their budgets by more than £1m
  • 8 LEAs said they had balanced their books perfectly, left with neither an overspend nor an underspend
  • 21 LEAs didn’t respond to the FOI and 8 responses from the 128 were unclear or incomplete.

NDNA has put a summary spreadsheet where anyone can see the situation in their own local authority area along with their funding rates. Go to

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