Question to the Department for Education:

To ask Her Majesty's Government what assessment they have made of the report by the National Day Nurseries Association Early Years Funding 2019/20: Underspends and contingency budgets one year on, published in February; and in particular, its finding that over the last two years there has been a £1.5 billion underspend by local education authorities across early entitlement funding and Tax Free Childcare.

The setting of local provider funding rates is a decision for local authorities in consultation with their schools forum. The free childcare offers for 2, 3 and 4-year-olds are demand-led and local authorities will see an underspend in their funding if take-up of any of the entitlements has not been as high as the authority had forecast at the start of the year. Any underspend from a local authority’s early years budget is carried forward to the next financial year, and must remain within the education budget, as set out in guidance which can be found here: https://www.gov.uk/government/publications/dedicated-schools-grant-dsg-2021-to-2022/dsg-conditions-of-grant-2021-to-2022. Local authorities must also consult with their schools forum on the use of their underspend, as is set out in guidance which can be found here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/945784/Schools_Operational_guide_2021_to_2022_V4_.pdf.

The government recognises that take up of Tax-Free Childcare (TFC) has been below expectations, particularly for school-aged children. For this reason, at the March 2020 Budget we announced a measure that will make TFC payments compatible with school payment agents, allowing up to 500,000 eligible children to access TFC for the first time.

The department is in regular contact with the early years sector and we have discussed this report and the findings with the National Day Nurseries Association.