National Audit Office report on Supporting disadvantaged families through free early education and childcare entitlements in England

The Department for Education (DfE) funds three entitlements to free early education and childcare for pre-school children in England.1 By funding the entitlements, DfE aims to support children’s development and help parents manage childcare costs so that they can work. It also aims to close the development gap between disadvantaged children and their peers. In 2019, there was a 17 percentage points gap in the proportion of children achieving a good level of development between children in the 10% most and least deprived areas.

In 2019-20, DfE’s funding for the entitlements totalled £3.5 billion. Since 2016-17, the NAO estimates that total funding has increased by 24% in real terms due to the introduction of the extended entitlement for working parents of 3- and 4-year olds. However, funding for the disadvantage and universal entitlements has fallen by 4%. There is conflicting evidence on whether the DfE’s funding is sufficient to cover the costs of early years providers.

The NAO finds that the vast majority of eligible families are benefiting from the entitlements. Take-up of the universal entitlement of 15 hours per week for all 3- and 4-year olds is high, with 1.3 million children (93%) using the entitlement in January 2019. Take-up of the extended entitlement has increased since it was introduced in 2017, with nearly 330,000 children using the entitlement in January 2019.

However, the DfE has missed its aspiration for between 73% and 77% of eligible 2-year-olds to take up the disadvantage entitlement of 15 hours per week. In 2019, take-up nationally fell to 68%, and varied between 39% and 97% among different local authorities. Families in deprived areas are less likely than families in other areas to take up these free childcare places.

Barriers to making use of the entitlements particularly affect disadvantaged families. DfE’s 2019 parents’ survey found that 72% of respondents in the 20% most deprived areas were aware of the extended entitlement, compared with 91% in the least deprived areas. While the entitlements guarantee a number of hours of free childcare, another DfE survey in 2018 found that 74% of entitlement-funded early years providers made additional charges, such as for meals or certain activities. DfE has trialled some different ways of improving take-up among disadvantaged families and local authorities also take action, but there is no robust evidence on what works locally.

Local authorities are legally required to ensure there are enough childcare places in their area. In 2019, the charity Coram Family and Childcare found that 63% of local authorities reported there were enough childcare places for the disadvantage entitlement. Local authorities have a small amount of flexibility to use funding to incentivise providers to meet local needs, such as expanding provision for disadvantaged families.2 However, few local authorities chose to make full use of this flexibility.

Ofsted graded 94% of entitlement-funded providers as 'good' or 'outstanding' in January 2019, up from 85% four years earlier. However, deprived areas have fewer ‘outstanding’ providers (18% of providers, compared with 27% in the least deprived areas) and more providers graded as 'requires improvement' or 'inadequate' (10% compared with 4%). At January 2019, 5,400 children taking up the disadvantage entitlement and 103,600 children taking up the universal entitlement were at ‘requires improvement’ or ‘inadequate’ providers.

The NAO recommends that DfE should work with local authorities to develop a better understanding of the approaches that work best in increasing take-up among disadvantaged families and to assess the extent to which additional charges are a barrier to take-up. The NAO also recommends that DfE should make better use of available data to investigate the geographic variations in take-up of the entitlements and the availability and quality of early years provision.

Gareth Davies, the head of the NAO, said today: 

“Families with young children across the country are benefiting from their entitlement to free early education and childcare places, which aim to prepare children for school and improve their life chances.

“However, if these entitlements are to help level the playing field, it is essential that more disadvantaged children benefit from high-quality childcare. DfE should do more to ensure that all disadvantaged families are aware of the free childcare on offer and are able to access it.”

Key facts

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Notes for Editors

1. The three entitlements that DfE funds are: the disadvantage entitlement of 15 hours per week for disadvantaged 2-year-olds; the universal entitlement of 15 hours per week for all 3- and 4-year olds; and the extended entitlement of an additional 15 hours per week for 3- and 4-year-olds with eligible working parents.
2. Local authorities can use up to 10% of entitlement funding from the DfE as ‘supplements’ to support providers to meet local needs. However, local authorities allocated 4.3% of their funding to supplements on average in 2019-20, ranging widely from less than 0.1% to the full 10%. All local authorities must have a supplement specifically to support provision for deprived families; on average, they used 3.0% of funding for this purpose.