The take-up of free early education and childcare places and the quality of childcare providers is lower in the most deprived areas of England, according to the National Audit Office (NAO). This risks increasing the development gap between disadvantaged children and their peers, and could have a negative impact on social mobility.

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.

“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.”

Gareth Davies, the head of the NAO

Read the full report

Supporting disadvantaged families through free early education and childcare entitlements in England

Notes for editors

Key facts

the Department for Education's funding for its early years entitlements in 2019-20

children taking up the entitlements at January 2019

providers receiving entitlement funding at January 2019

proportion of eligible 2-year-olds who took up the disadvantage entitlement in 2019

39% to 97%
variation between local authorities in the proportion of eligible 2-year-olds who took up the disadvantage entitlement in 2019

proportion of 3- and 4-year-olds who took up the universal entitlement in 2019

17 percentage points
gap between the proportion of children achieving a good level of development in the 10% most and least deprived areas in 2019

proportion of providers graded as requires improvement or inadequate by Ofsted in the 20% most deprived areas at January 2019, compared with 4% in the least deprived areas

proportion of local authorities with enough places in their area for the disadvantage entitlement, according to Coram Family and Childcare's 2019 childcare survey

estimated real-terms change in the average hourly rate local authorities paid to providers for the disadvantage entitlement between 2016-17 and 2019-20  

  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.
  3. Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.
  4. The National Audit Office (NAO) helps Parliament hold government to account for the way it spends public money. It is independent of government and the civil service. The Comptroller and Auditor General (C&AG), Gareth Davies, is an Officer of the House of Commons and leads the NAO. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether government is delivering value for money on behalf of the public, concluding on whether resources have been used efficiently, effectively and with economy. The NAO identifies ways that government can make better use of public money to improve people's lives. It measures this impact annually. In 2018 the NAO's work led to a positive financial impact through reduced costs, improved service delivery, or other benefits to citizens, of £539 million.

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