Record £9.5 billion early years investment

Families across the country will continue to benefit from more affordable, high-quality childcare as from next year nurseries and childminders will be backed by a record £9.5 billion investment to deliver the places families need – a boost of over £1 billion compared to this year.

Since September, over half a million families have been benefitting from the government's landmark rollout of 30 hours funded childcare, helping parents with the cost of living by saving them up to £7,500 a year, per child.

With average funding rates increasing by 4.3% for under 2s to almost 5% for 3-and-4-year-olds, well above inflation, the higher rates will help providers deliver more places for working families across the country. 

The government is delivering a childcare system that works for every family, in every community, for the long term. Through this record funding, it will continue to support the sector to fill childcare gaps where they might persist, and break down barriers for every child, regardless of background.

The government is also making sure even more of the money reaches the nurseries and childminders delivering high-quality day to day care, with councils barred from keeping back more than 3% for central services.

The announcement comes after the government lifted the cap on childcare benefits alongside the two-child limit, meaning parents on universal credit will get £736.06 in additional childcare support per child if they have more than two.

And it follows reforms that will help hard-up families further by boosting the number of school-based nurseries, ensuring even more families can access funded childcare. Free breakfast clubs will also save parents up to £450 per year while giving them precious time back.

Secretary of State for Education Bridget Phillipson said:

High-quality childcare is the first building block of national renewal, and central to how we get tens of thousands more children school ready by age five. It shapes children's futures, it strengthens working families, and it supports communities across our country.

That's why we are delivering a record £9.5 billion investment in early years, with nurseries and childminders receiving higher hourly funding rates. This is more money going straight to the frontline, helping providers grow, improve and offer every child the best possible start.

This is how we build a brighter future for our country – by investing in children, backing families and restoring opportunity from day one.

On average, local authorities will receive funding increases of 4.95% for three- and four-year-olds, 4.4% for two-year-olds, and 4.3% for children aged nine months to two years.

The government has also announced a further increase to the Early Years Pupil Premium (EYPP) to provide additional support for disadvantaged children, ensuring all children can benefit from high-quality early education regardless of their background. EYPP will rise by 15% to £1.15 per hour in 2026–27, equivalent to up to £655 per eligible child per year.

This comes as the government drives forward its Best Start in Life strategy, putting high-quality early years education at the centre of the mission to ensure 75% of children reach a good level of development by 2028.

It also complements the historic Child Poverty Strategy, which aims to ease pressure on families through measures such as lifting the two-child benefit cap, expanding free school meals and improving access to breakfast clubs.

Chief Executive of NDNA Tim McLachlan said:

We are pleased that the government has listened to the early years sector and will pay above inflation increases to hourly funding rates which should help providers to pay the statutory wage uplift for the majority of practitioners. With the mandatory pass-through rate set at 97% for next year, nurseries who are struggling with rising costs should notice the difference.

Staffing costs make up the bulk of nurseries' outgoings. With the government purchasing 80% of early years places, it's vital they get the funding rates right so that nurseries can deliver these places, remain sustainable and invest in their staff to deliver high quality provision for our children.

We also welcome the additional money to bolster the Early Years Pupil Premium to support disadvantaged children, something NDNA has been campaigning for over many years. Investing more in a child's earliest years gives them the best life chances and saves money in their later education.

Sarah Ronan, Executive Director, Early Education and Childcare Coalition, comments:

We are pleased that the government has listened to our members about the cost pressures the sector has faced in the last year. The further uplift in the Early Years Pupil Premium is also very welcome. This additional funding for disadvantaged children will be vital in ensuring that every child gets the best start in life, no matter their background. 

Combined, these measures represent a positive step in the right direction. Every pound that the Treasury has invested today will produce benefits that we will reap for years to come through improved child outcomes and increased parental employment. 

We look forward to next year's funding consultation as an opportunity to build on today's announcement and secure the long-term reforms that will ensure the ambition of the Best Start in Life Strategy is fulfilled.