Nurseries: Finance

The department uses the early years national funding formulae (EYNFF) to distribute the early years entitlements budget to local authorities. The EYNFF determine local authority hourly funding rates by taking into consideration the different costs of delivering early years provision in different parts of the country.

The hourly funding rate for each entitlement varies to reflect the costs of delivering provision to different age groups. We know that the cost of delivery is highest for younger children due to higher staff costs, as staffing makes up the most significant proportion of provider costs.

Rates also vary between local authorities reflecting the different communities that local authorities serve. However, it is local authorities who 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.

The department will consult on changes to how early years funding is calculated and distributed, details of which will be published in 2026, to ensure funding is matched to need.