Government Proposes Changes to Early Years Funding: What Nursery Owners Need to Know

The government has launched a consultation on proposed changes to the early years funding system in England, with a focus on SEND funding, disadvantage, local funding rules and how money is allocated to local authorities and providers.

This may sound technical, but it matters. Early years funding affects nursery fees, provider sustainability, support for children with SEND, staffing decisions, and whether childcare places are affordable and available for families.

The Department for Education says it is seeking views on reforms to the early years entitlements funding system. The consultation includes proposals linked to the Early Years National Funding Formula, SEND support, local authority funding rules and how the system can better support access to childcare for children and families.

What has the government announced?

The Department for Education has opened a consultation called Changes to the funding system for early years entitlements. The consultation asks for views on how the early years funding system should be reformed.

The proposals include changes to how funding is distributed through the Early Years National Funding Formula, how SEND funding works in the early years, how local authorities allocate money to providers and how the system can better support children from lower-income families.

For nursery owners and managers, this is worth paying attention to because funding rules directly affect the money settings receive for funded childcare places.

Why does this matter?

Early years funding has become one of the biggest issues in the childcare sector. Parents often hear about “free childcare”, but many nurseries say the funding rate does not always cover the true cost of delivering care.

When the funding system does not work well, providers may feel squeezed. That can affect staff wages, opening hours, the ability to support children with additional needs, investment in resources and whether settings can offer enough funded places.

At the same time, families need childcare to be affordable, accessible and high quality. That is why any change to the funding system matters not only to nurseries, but also to parents and children.

What areas are being looked at?

The consultation covers several important areas. Some are technical, but they all connect to the same bigger question: how should early years funding be shared fairly and effectively?

The SEND funding issue

One of the most important parts of the consultation is SEND funding. Early years providers often report that supporting children with SEND can be difficult when funding is delayed, inconsistent or not enough to cover the support needed.

For a nursery, this can create a difficult position. Providers want to be inclusive and support children well, but they also need the right staffing, training, ratios, resources and specialist advice to do that safely and effectively.

Early Education has said the consultation focuses on SEND and disadvantage, but also argues that wider issues in the early years funding system still need to be addressed.

What could this mean for nursery owners?

For nursery owners, the consultation is not something to ignore just because some changes may not happen immediately.

If the funding formula changes, some local authorities could receive more funding while others may receive less than expected. If SEND funding is reformed, this could affect how quickly nurseries can access support for children with additional needs. If local funding rules change, this may affect the amount that reaches providers directly.

In practical terms, nursery owners should be watching for anything that affects:

What could this mean for parents?

For parents, the funding system affects more than people realise.

If nurseries are underfunded, parents may see higher charges for extras, limited funded-only places, shorter funded sessions, increased waiting lists or fewer providers offering the full funded entitlement in a flexible way.

If the funding system improves, it could help more families access childcare that is genuinely affordable and more inclusive for children with SEND.

However, whether the proposals will solve those issues depends on the detail, the funding rates and how local authorities implement any changes.

Why providers should respond

Consultations can feel distant from day-to-day nursery life, but this is one where providers should consider giving their views.

Nursery owners, managers, childminders and early years organisations understand the reality of delivering funded childcare. They know where funding falls short, where SEND support gets delayed, where local authority rules create problems and where families struggle to understand what they are entitled to.

Coram PACEY has encouraged the early years sector to engage with the consultation, noting that it is important for the Department for Education to hear directly from providers, childminders and those working with families.

My view

Any review of early years funding is welcome, but the key question is whether the proposals will deal with the real pressures providers face.

Nurseries do not only need a funding system that looks fair on paper. They need one that works in real life. That means funding should reflect staffing costs, rising overheads, SEND support, training, administration, meals, resources and the actual cost of delivering safe, high-quality care.

Parents also need honesty. If childcare is described as “free”, but providers cannot deliver it without charging extras or restricting sessions, then the system creates frustration on both sides.

The best outcome would be a funding system that is clearer for parents, fairer for providers and better able to support children with additional needs from the earliest stage.

What happens next?

The consultation is now open and the Department for Education is seeking views from the sector. After the consultation closes, the government will consider responses before confirming any changes to the funding system.

Nursery providers should keep an eye on the outcome because any reforms could affect future funding rates, SEND support arrangements and local authority funding rules.

For anyone planning to open a nursery, this is also worth watching. Funding is one of the most important parts of a nursery’s financial model, so any change to how money is allocated can affect business planning.