Almost half (48%) of councils decreased base rate funding for two-year-old places from April 2024, according to National Day Nurseries Association research.

In an analysis of 119 local authority base rates for the two, three and four-year-old funded places, NDNA found that 57 councils’ base rate funding for two-year-old places was lower from April 2024 than it had been in September 2023. However, only 20 councils had their funding rates reduced centrally by the Department for Education (DfE).

The research also found that in more than half (55%) of local authorities the increase in funding given to providers for three- and four-year-old places was lower than the uplift provided to the council by the Department for Education (DfE).

On average providers received 90.3% of three- and four-year-old funding provided to councils by the DfE, ranging from 76.7% in Hammersmith and Fulham to over 98% in Lancashire and Warrington.

Councils can currently retain up to 5% of the hourly rates for children in their area to fund the administration of the policy and give extra support to providers. They can also create additional budgets for supplements which give top-up payments for children in areas of deprivation, children with SEND and elements such as provider quality.

Purnima Tanuku, NDNA chief executive, said: “While extra money is good news for parents and a welcome investment in children’s early learning, these figures show that it is not all reaching the front line.”

She added: “Councils and providers face a very complex and outdated funding system that doesn’t mean money to fund early education and care reaches the providers who are working with our youngest children.”