Early Years Funding: Hampshire

Alex Brewer will move the motion, and then the Minister will respond. I remind other hon. Members that they may make a speech only with prior permission from the Member in charge of the debate and from the Minister. As is the convention in 30-minute debates, there will not be an opportunity for the Member in charge to wind up.

I beg to move, That this House has considered the adequacy of early years funding in Hampshire.

It is an honour to serve with you in the Chair, Sir Alec. A Hampshire nursery manager recently told me: “Sometimes the funding arrives so late that we are genuinely worried about making wages.”

That sentence has stayed with me, because it captures something that the national conversation about “free childcare” too often misses. The question is not simply whether Hampshire has enough childcare places on paper. It is also whether every family can access suitable, affordable and high quality early education and childcare when they actually need it and whether providers have the funding and workforce to deliver that sustainably. Those are two very different questions, and today I want to address them both.

Let us be clear about the scale of the pressure that the sector is under. Providers are being hammered by rising costs: increased employer national insurance contributions, rising energy costs just to keep the lights on, business rates and more. One nursery provider in my constituency of North East Hampshire told me that their liability insurance had risen by 19% this year alone, and that was on top of a 59% jump in business rates.

Department for Education analysis published in May found that on average providers took in just £1.01 for every £1 that they spent in 2025, and nearly half of providers reported income that fell short of covering their costs. I am aware that one nursery in my constituency is required to subsidise the Government’s funded offer by more than £51,000 in this academic year alone. It cannot be right that a sector that is already operating on wafer thin margins is left to absorb more and more tax rises.

I commend the hon. Lady for bringing this matter forward. She is right to highlight the funding shortfall, which is present across the whole United Kingdom of Great Britain and Northern Ireland. It is forcing nurseries to close, driving up childcare costs and stopping parents returning to the workforce. Does she agree that the Government need to make this issue a priority in education to ensure that children are educated and parents can cope with the pressures that they are under?

Yes, I absolutely agree; that is a precise summary of the current position. When we think of early years, most of us automatically think of nurseries, but in many areas of the country, and especially North East Hampshire, many families rely on local childminders. Earlier this month, a constituent of mine, Lorna, told me that after almost 26 years of running her childminding business, she must close it because of mounting financial pressures. She has loved the job, but the lack of any promise of a better financial future has left her with no choice.

Every ambition that we hold for this system—more places, better outcomes and proper support for children with additional needs—depends on a stable, skilled and well supported workforce. Parents do not use the language of workforce policy, but they feel its consequences all the same, including in high staff turnover, longer waiting lists, reduced flexibility and the particular difficulty of finding a place for a child with additional needs.

A Hampshire nursery manager put the underlying cause to me plainly: rising costs have not come with a matched uplift in the funding rate. Staffing alone accounts for three quarters of costs in the early years sector. That leaves early years settings particularly exposed to sudden changes, such as the increase in employer national insurance contributions. Providers cannot compete for the experienced senior staff necessary to deliver high quality support, and high staff turnover leads to higher training costs.

Every parent stuck on a waiting list is living with the downstream consequence of a workforce crisis that starts with underfunding, and Hampshire reflects many of the challenges in microcosm. It is a large county, spanning urban, rural and coastal communities. Hampshire county council’s childcare sufficiency assessment points to the same challenges: expanding supply to meet the extended 30-hour entitlement; tackling recruitment and retention; and ensuring that rising demand does not squeeze out children with special educational needs or from disadvantaged backgrounds—the very children who stand to gain the most from a good quality early years setting.

Free childcare makes for a great headline, but it has to be deliverable. As of September 2025, the county council projected that Hampshire would need an additional 2,100 childcare places in wards where supply is already limited just to meet the promise of 30 hours a week. This promise is not all it is made out to be. The figure of 30 hours is based on term time care only, so for those parents who work full time, that is spread out over 52 weeks, not 38. The rate for three and four year olds that is paid to settings is lower than the cost to provide the service, so those paying for additional hours are, in effect, subsidising the free provision. For those families who are barely getting by, with high living costs and stagnant wages for their own work, it is often more expensive for both parents to work. That is not good for our economy.

As with any business, cash flow is key, and providers across my North East Hampshire constituency tell me that they are paid in arrears, with funding for a month’s care landing in the last three days of that same month, compared with other counties that pay before the month even starts. So Hampshire nurseries are covering an entire month of wages, rent and bills with private fees. When that is combined with low or no profit margins, it sets the scene for instability and uncertainty. Young children, working parents and childcare providers all need stability in the sector to thrive, but the circumstances are far from ideal for that.

Nowhere is the funding gap starker than for children with special educational needs and disabilities. Before entering this House, I served as a school governor and ran a charity supporting children and young adults with Down’s syndrome and their families, so this is an issue I have seen up close from both sides of the school gate. Providers tell me that the pathway to secure support is long and difficult to navigate. By the time a child is identified, their needs are often already very high.

What funding does arrive frequently pays for only an enhanced ratio, which is no substitute for the one to one specialist care that many children need, and staff often lack the specialist training required. Indeed, in my previous line of work, it was the charity that stepped in to provide the training—a service with the uncertainty of being funded solely through donations and simply not available everywhere in the country. A child’s future should not be a postcode lottery.

Investing in our future generations is the best investment we can make, for them, for families and for society. That is why Liberal Democrats are calling for early years providers to be exempted from the rise in employer national insurance contributions. Hampshire’s early years providers are not asking for handouts; they are asking for the funding that was promised to arrive, to be enough and to be on time. A place on a spreadsheet is not the same as a place a family can use. A free hour that no provider can afford to deliver is not free at all. Our children’s futures, and those caring for them, deserve nothing less.

It is an honour to serve under your chairship, Sir Alec. I thank the hon. Member for North East Hampshire (Alex Brewer) for securing this important debate, and all hon. Members who are present. I will start by also thanking all the wonderful staff who work in early years settings in her constituency and across Hampshire. They do a brilliant job and give all our children the best possible start in life. They deserve all our thanks and recognition.

The hon. Lady made a number of fair points that I will address in my speech, but I will say at the outset that for the first time in a long time this Government have prioritised the early years. We have put record investment into the early years, with £9.5 billion next year. We have stretching targets to ensure that record proportions of children are ready for school. We are opening Best Start family hubs across the country and network sites, encouraging integration between our local services and early education providers. Through our best start in life strategy, we are determined to have the back of providers, ensuring that the workforce is brilliantly supported to continue doing such a fantastic job for our children and young people. It was important to start my remarks by situating us in that important context.

I will move on to my substantive speech and address the points that the hon. Lady raised. The Labour Government have delivered a record expansion of free childcare, halving childcare costs for families, boosting family finances and improving children’s life chances, driving towards record proportions of children being ready for school. Not only are we saving working parents thousands of pounds, but we are giving every child excellent early education, which they will need to thrive later.

My hon. Friend is making an excellent point. Does she agree that there is genuine excitement and joy from families when they see the benefits of this investment? She and I have both witnessed that in our community in Reading. The Government are building on a great tradition in that local authority; I wish other local authorities invested to that extent.

I thank my hon. Friend and constituency neighbour for giving me the opportunity to thank the fantastic early years staff in my constituency of Reading West and Mid Berkshire and across Reading, who do a brilliant job for our children. As a constituency MP, as well as a Minister, I know that giving every child the best possible start in life is so important for their future life chances. If we get it right in the early years, it makes a transformational difference as they grow older.

The work we are doing is thanks to our brilliant early education sector, which has worked tirelessly to deliver the large expansion of childcare, making it such a success. We have a responsibility to ensure that the sector is financially sustainable to deliver the entitlements and high quality early years provision. That is why we are investing record amounts in early education and why, through our proposals, we have the back of the sector. In 2026-27, we expect to provide over £9.5 billion for the early years entitlements, more than doubling annual public investment in the early years compared with 2023-24. We are investing over £1 billion more than last year to deliver a full year of expanded entitlements and an above inflation increase to entitlements funding rates.

The national average funding rate increases continue to reflect the forecast cost pressures on the sector, including the national living wage, and they take into account the wider workforce pressures felt by the sector that the hon. Member for North East Hampshire mentioned. On average nationally, we have increased the three and four year old hourly funding rate by 4.95%, the two year old hourly funding rate by 4.36% and the funding rate for the nine months to two year old entitlement by 4.28%. That investment, alongside the hard work and dedication of countless colleagues in the sector, means that working families are saving an average of £8,000 a year.

There has also been a benefit in Hampshire from those rate increases. The rates set for Hampshire have seen increases of 3.6% for three to four year olds, 2.9% for two year olds and 2.8% for under twos. That means that Government paid rates for Hampshire are £6.38 for three to four year olds, £8.73 for two year olds and £11.81 for under twos. That compares relatively favourably with average rates, which are marginally above those figures. This demonstrates, I think, our commitment to properly funding our early years settings to continue to deliver on this vital mission.

Hourly rates vary between local authorities, reflecting the relative needs of the children and the different costs of delivering provision across the country. Those rates are calculated using the early years national funding formula, which is used to target funding to local authorities where it is needed most. We believe that that approach is fair, efficient and transparent. Of course, we keep funding rates under review, and I assure the hon. Member that the team will have listened carefully to her points today. She may also be interested to know that, as we committed in the best start in life strategy, we plan to review early years funding and consult on changes to how we distribute that funding. I would welcome her contribution to that review. The consultation will begin imminently, and I ask her and everybody here today to encourage their constituents to feed into it.

We are also investing to help children from disadvantaged backgrounds and with additional needs to ensure that every child, no matter their circumstances, has the best start in life. On top of the largest ever uplift to the early years pupil premium in 2025-26, this year we increased early years pupil premium rates by 15%, equivalent to up to £655 per eligible child per year. We also expect to spend over £90 million on maintained nursery school supplementary funding in 2026-27. The best start in life strategy sets out our plan to boost uptake of the 15-hour entitlements to two, three and four year olds by working with local authorities and family hubs and tracking data through the local outcomes framework.

The hon. Member for North East Hampshire mentioned the vital issue of SEND. To support children with SEND, a further £47 million is being provided in 2026-27 to support greater inclusion of children with special educational needs and disabilities as part of our three year £1.6 billion inclusive mainstream fund. That is on top of mandatory SEN inclusion funds, through which providers can access support for children with early and emerging needs in their settings. Through the disability access fund, eligible children can also receive £975 per child per year to support reasonable adjustments.

Early years settings will also benefit from a dedicated early years offer within a £200 million national training package and access to specialist advice from health and education professionals through Experts at Hand. I assure the hon. Member that we are working tirelessly on this vital issue to ensure that every child with additional needs gets the help and support they need.

The hon. Lady also talked about the vital importance of the workforce. We know that we must invest in the workforce to ensure the best possible future for the early education system in this country. That is one reason why, earlier this month, we launched a £4,500 payment to attract and retain qualified nursery teachers in the communities that need them most, starting in 10 areas and expanding to 30 later this year. The scheme will boost outcomes for children and allow more families to access their funded childcare entitlement. Alongside that, we committed in the BSIL strategy to continue supporting the sector to grow and professionalise, and I assure Members that work on that is continuing at pace.

Our record expansion of childcare means that the Government now fund around 80% of childcare hours in the country, which is a remarkable figure. In effect, it means that we have created a new public service, and we must ensure that that public service is working for providers, parents and children. We announced at the autumn Budget 2025 that the Department is leading a review of early education and childcare support, provided by different parts of the Government. Our review will set out a new vision for the early education and care system—one that builds children’s life chances and supports parents’ work choices, and one that is simpler and easier to use for both providers and parents, improving access and the impact of the Government’s investment in children and families.

I look forward to engaging with colleagues from across the House as we make progress on that review. I also look forward to engaging widely with the sector, which is wonderfully diverse. It is important for me to say at the Dispatch Box how much we value the many private and voluntary nurseries that are operating at a brilliant level to provide such a great service for our children and young people. They will be at the heart of the review and of any future system.

I conclude by thanking all Members for their thoughtful contributions. It is clear that we share a common goal to ensure that every child has the best possible start in life and that every family can access high quality, affordable and flexible childcare. Despite our record funding, I recognise the challenges faced by some in the sector, particularly the costs that providers face and funding distribution. That is why we are continuing to work closely with them to refine our funding approach through consultation and to always make sure that we are listening, so I am grateful to the hon. Member for North East Hampshire. Through our consultation and review, we can ensure that our early education system fulfils the ambition that we all have for it. This is about more than childcare; it is about opportunity and life chances. I remain confident that, working together, we can deliver a system that truly meets the needs of every child and every family.

Question put and agreed to.

Sitting suspended.