Underfunded and Overstretched:
The Real Cost of ‘Free’ Childcare
Millions in Childcare Funding Left Unspent by Local Councils
While parents across England are grappling with the rising cost of childcare, new figures reveal that more than £65 million in early years education funding went unspent by local councils during the 2023-2024 financial year.
According to research by the National Day Nurseries Association (NDNA), 132 councils failed to use their full budget allocation, despite many early years providers being under extreme financial pressure.
Key Findings
- £65 million underspend across 132 local authorities
- 19 councils held back over £ 1 million each
- 5 councils retained more than £2 million each
- Only 4% redistributed any funds to early years providers
- 50% Carried funds forward or placed them in reserve
- Total underspend since 2018 is now over £357 million
Funding Doesn’t Reach Providers
Despite promises of increased childcare funding from central government, many local councils fail to pass the full amount on to early years providers. This shortfall leaves nurseries, preschools, and childminders struggling to meet rising costs while delivering more “free” hour
Staff Shortages & Burnout
Low pay, increased paperwork, and unmanageable workloads are driving skilled staff out of the sector. With fewer qualified professionals, remaining teams face burnout, high stress levels, and limited capacity to give children the attention they need.
Reduced Availability of Places
With fewer staff and squeezed budgets, many settings are forced to reduce the number of children they can take. Parents face longer waiting lists, limited session times, and fewer flexible options, putting pressure on working families.
Closures of Nurseries and Childminders
As financial pressure mounts, some providers are left with no choice but to close their doors. Small, community-based nurseries and independent childminders are most at risk, leaving early years deserts in some areas and deepening inequality.
Every unspent pound is a missed opportunity to support early years education.Parents, providers, and the wider community must come together to demand better.
The Government knew it was underfunded.
A two-and-a-half-year Freedom of information (FOI) battle has revealed what many parents and early years professionals feared: the UK government knew it was underfunding it’s “free childcare” policy, and chose to roll it out anyway.
The Early Years Alliance obtained internal government documents showing that ministers were aware the funding wouldn’t cover the actual cost of delivering early education. Despite this, they proceeded with the 30-hour offer, placing additional pressure on nurseries, preschools, childminders and families.
What Did the Government Know?
- The real cost to deliver a funded was estimated at £7.49 per hour by 2020-21
- Local Authorities were only funding £4.89 per hour on average – a £2.60 shortfall.
- Ministers were warned that this gap would lead to higher costs for parents and pressures on quality.
- Providers were expected to operate at maximum legal child-to-staff ratios to break even.
The ‘Free Childcare’ offer isn’t truly free. Parents are often charged extra for meals, activities, or additional hours to make up for the underfunding – especially for children under 3.
Meanwhile, many providers are struggling to stay open, cutting back staff or reducing availability, all of which affect the quality and accessibility of care.
For real change to happen, the funding must match the true cost of early years education. Until then the ‘free’ offer will continue to come at a hidden cost.
Millions in Childcare Funding Left Unspent by Local Councils
While parents across England are grappling with the rising cost of childcare, new figures reveal that more than £65 million in early years education funding went unspent by local councils during the 2023-2024 financial year.
According to research by the National Day Nurseries Association (NDNA), 132 councils failed to use their full budget allocation, despite many early years providers being under extreme financial pressure.
Key Findings
- £65 million underspend across 132 local authorities
- 19 councils held back over £ 1 million each
- 5 councils retained more than £2 million each
- Only 4% redistributed any funds to early years providers
- 50% Carried funds forward or placed them in reserve
- Total underspend since 2018 is now over £357 million
Funding Doesn’t Reach Providers
Despite promises of increased childcare funding from central government, many local councils fail to pass the full amount on to early years providers. This shortfall leaves nurseries, preschools, and childminders struggling to meet rising costs while delivering more “free” hour
Staff Shortages & Burnout
Low pay, increased paperwork, and unmanageable workloads are driving skilled staff out of the sector. With fewer qualified professionals, remaining teams face burnout, high stress levels, and limited capacity to give children the attention they need.
Reduced Availability of Places
With fewer staff and squeezed budgets, many settings are forced to reduce the number of children they can take. Parents face longer waiting lists, limited session times, and fewer flexible options, putting pressure on working families.
Closures of Nurseries and Childminders
As financial pressure mounts, some providers are left with no choice but to close their doors. Small, community-based nurseries and independent childminders are most at risk, leaving early years deserts in some areas and deepening inequality.
Every unspent pound is a missed opportunity to support early years education.Parents, providers, and the wider community must come together to demand better.
The Government knew it was underfunded.
A two-and-a-half-year Freedom of information (FOI) battle has revealed what many parents and early years professionals feared: the UK government knew it was underfunding it’s “free childcare” policy, and chose to roll it out anyway.
The Early Years Alliance obtained internal government documents showing that ministers were aware the funding wouldn’t cover the actual cost of delivering early education. Despite this, they proceeded with the 30-hour offer, placing additional pressure on nurseries, preschools, childminders and families.
What Did the Government Know?
- The real cost to deliver a funded was estimated at £7.49 per hour by 2020-21
- Local Authorities were only funding £4.89 per hour on average – a £2.60 shortfall.
- Ministers were warned that this gap would lead to higher costs for parents and pressures on quality.
- Providers were expected to operate at maximum legal child-to-staff ratios to break even.
The ” Free Childcare” offer isn’t truly free. Parents are often charged extra for meals, activities, or additional hours to make up for the underfunding – especially for children under 3.
Meanwhile, many providers are struggling to stay open, cutting back staff or reducing availability, all of which affect the quality and accessibility of care.
For real change to happen, the funding must match the true cost of early years education. Until then the ‘free’ offer will continue to come at a hidden cost.