Pre-school Education: Finance

The hourly funding rate for the early years entitlements varies to reflect the costs of delivering provision to different ages. The department knows, from listening to the sector and from our own regular research, that the cost of delivery is highest for younger children due to tighter staffing ratios and, consequently, higher staff costs, as staffing makes up the most significant proportion of provider costs.

Each local authority receives an hourly rate for each entitlement, determined by the early years national funding formulae (EYNFF). The EYNFF targets funding to local authorities where it is needed most, reflecting the relative needs of the children and costs of delivering provision in that area. Local authorities are responsible for setting individual provider funding rates in consultation with their providers and schools forum, and fund providers using their own local funding formula.

Further details of how early years entitlements funding is distributed, including a detailed methodology document on the EYNFF and operational guidance, can be found here: https://www.gov.uk/government/publications/early-years-funding-2025-to-2026.