National Day Nurseries Association (NDNA) has updated its report into underspend funding for three and four-year old childcare places by local education authorities (LEAs) in England as all but five councils have now replied.

The total of unspent money has increased from £55.5 million to £62 million for 2019/20, with a higher proportion of LEAs (74% totalling 107 councils) reporting underspends.

A lot more LEAs put their underspends into their reserves – 55 which is 51% of those who reported an underspend – totalling £30m and more councils used their unspent funding to offset deficits elsewhere, up from a quarter to a third.

Millions of pounds of early education money is still not reaching providers, despite this issue being raised a year ago to the Treasury and the Department for Education.

Only a fifth of councils gave any of their underspent funding (now totalling £12.97m) back to providers.

Out of the 19 LEAs who reported underspends of more than £1million for 2019/20, seven of these were in a similar position the year before. And Surrey Council has now reported an underspend of £3.7m, the highest for the year.

Purnima Tanuku OBE, chief executive of NDNA, said:

‘With almost all local authorities now reporting back to us on their early years spending we have seen some alarming levels of underspent budgets at the end of 2019/20, just as the pandemic was really hitting.

‘We have now seen that underspend figure rise to above £62m with only a limited number of councils setting out plans to use this to support providers.

‘There are a number of issues with the way early years funding works, from the spring funding decision to historic underfunding of the rates themselves. More than ever it is crucial that funding for the sector reaches providers as they struggle to keep their businesses sustainable.

‘The Government must simplify the way it funds early education and childcare places. We have repeatedly recommended a single childcare account for families under our Childcare Passport proposal as part of this solution. It would reduce red tape and administration and ensure funding for a child follows that child wherever they take up a place.’

Purnima added 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.

‘We have seen recent reports on the costs of childcare to parents and the precarious position nurseries are in. With millions still not reaching the front line this situation will only be getting worse until the system is fixed.’

NDNA put out a Freedom of Information request in November 2020 to 149 English local education authorities and have now received responses from 144 which revealed:

• 107 LEAs (74% of those who responded) reported an underspend for 2019/20
• Total underspends where LEAs gave a figure was £62 million
• 19 LEAs underspent by more than £1m each – see table in the report – Surrey Council reported a £3.732m underspend, their response arrived too late for the initial report
• 7 of these LEAs also made the £1m underspend list for the previous year
• Only a fifth (22 LEAs or 20%) of LEAs gave any of this underspent funds to providers (£12.976m)
• 55 LEAs (51%) put their underspent money (£30.228) into their reserves or rolled it forwards within their Designated Schools Grant budget (DSG)
• 36 LEAs (34% of those with an underspend) used their underspent funding to offset deficits elsewhere in their DSG budget (£14.234m)
• 57 LEAs (39%) reported contingency budgets for 2020/21 totalling £18.274m 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
• 26 LEAs reported an overspend for 2019/20 totalling £9.256m
• 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
• 5 LEAs have not responded to the FOI: Bury, Leeds, Lewisham, Croydon and Medway and 10 responses from the 144 were unclear or incomplete.

NDNA has updated its summary spreadsheet where anyone can see the situation in their own local authority area along with their funding rates. The full list of responses from local authorities is available here.

See the original report and press release here.