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by Jess Gibson

Local authority funding rates for the early years entitlement from March 2025 to April 2026 have been set, the government has confirmed.

These are the average rates that will be paid by the Department for Education (DfE) to local authorities to fund the early years entitlement expansion’s continued rollout.

The early entitlement expansion includes:

• the 15 hours entitlement for eligible working parents of children from nine months up to two years old (due to be extended to 30 hours from 1 September 2025)
• the 15 hours entitlement for eligible working parents of two-year-old children (due to be extended to 30 hours from 1 September 2025)
• the 15 hours entitlement for families of two-year-olds receiving additional support (formerly known as the 2-year-old disadvantaged entitlement)
• the universal 15 hours entitlement for all three and four-year-olds
• the additional 15 hours entitlement for eligible working parents of three and four-year-olds.

The majority of the local authority hourly rate announced by the DfE is to support providers with the core costs of providing entitlement hours, with a small proportion being used to support local authorities to administer the entitlements locally.

In the announcement, the government has stated that the 2025 to 2026 pass-through rate – which is the minimum amount of funding local authorities pass on to providers – is being increased from 95% to 96%.

Frontline provider rates will be confirmed by individual local authorities by 28 February 2025.

Further information about the funding rates for 2025/26 can be found .

Commenting, Alliance CEO Neil Leitch said: â€œWhile any increase of funding is, of course, welcome, the fact is that today’s funding rates will fail to even come close to covering the cost of changes to National Insurance Contributions and wage increases.  

“With our own research showing the National Insurance changes will cost settings more than £18,000 a year, what providers needed was a commitment to mitigate the impact of these changes. Yet in reality, by not accounting for these changes in next year's rates, countless nurseries, pre-schools and childminders will be left with no option but to raise costs, reduce places, or simply close their doors completely.  

“What’s more, the Treasury may claim that the rates announced today take into account the upcoming rises to national and living wages, but we know it will do little – if anything at all – to support settings in meeting these increases while ensuring wage differentials between junior and senior staff. As such, not only will it place even more financial pressure on settings, but it is likely to make the sector’s ongoing staffing crisis even worse.   

“Today was an opportunity for the Treasury to show it recognises the catastrophic impact that the National Insurance and wage changes will have on the sector. Not only has it turned a blind eye to this, but it will have clear repercussions on families expecting to take advantage of the ongoing expansion."