Data note. Every figure on this page is drawn from the Department for Education's published "2026 to 2027 early years funding rates" workbook and the Coram Family and Childcare Childcare Survey 2026. The DfE publishes two columns for each council: a rate before the termly funding adjustment and a slightly higher rate with it. We quote the before-adjustment column throughout, because DfE operational guidance states councils are expected to pass on a provider rate broadly in line with that column; it is the figure closest to what a nursery actually receives. The difference between the two columns is explained below. Full methodology and sources are set out at the end of this article.

England's early years funding settlement for 2026-27 set the headline rate for 3 and 4-year-olds at a national average of £6.42 per hour. That single number hides a far larger story: a 54% gap between the best and worst-funded councils, 50 local authorities pinned to the funding floor and an under-2s entitlement that is now the most expensive band the government funds.

This is the full local-authority-level breakdown, with the figures most reporting leaves out.

The headline rates for 2026-27

The Department for Education sets a separate funding rate for each of the three age bands. The national averages below are the DfE's own figures, weighted by the hours actually delivered in each council area.

Entitlement	2026-27 national average (£/hr)	Year-on-year change
3 and 4-year-olds (combined)	£6.42	+4.9%
2-year-olds	£8.90	Not published
Under 2s (9 months to 2 years)	£12.04	Not published

National averages are the DfE's own hours-weighted figures (before the termly funding adjustment). The 3 and 4-year-old combined average rose from £6.12 in 2025-26 to £6.42, a 4.9% increase. The DfE does not publish a single headline percentage uplift for the newer 2-year-old and under-2s entitlements.

The early years funding rate is the amount a local authority is paid per child, per hour, to deliver a government-funded childcare place. It is not the price a nursery charges a parent. The national average 3 and 4-year-old rate for 2026-27 is £6.42 per hour.

The under-2s figure is the one to watch. The entitlement for children aged 9 months to 2 years only began rolling out in September 2024, and at £12.04 per hour it is now funded at almost double the 3-4 year-old rate. That reflects the higher staff-to-child ratios required for the youngest children, where one adult may care for just three babies.

The postcode lottery: a 54% gap between councils

National averages flatten the most important feature of the system: where you live decides what your nursery is paid. Across the 151 local authorities funded in 2026-27, the 3 and 4-year-old rate ranges from £6.01 in the lowest-funded areas to £9.23 in Camden, a spread of 54%.

The five highest and lowest-funded councils for 3 and 4-year-olds show the pattern clearly.

Highest-funded council	£/hr	Lowest-funded councils	£/hr
Camden	£9.23	Derbyshire	£6.01
Westminster	£8.98	Leicestershire	£6.01
Tower Hamlets	£8.91	Lincolnshire	£6.01
Hammersmith and Fulham	£8.87	North Yorkshire	£6.01
Kensington and Chelsea	£8.83	Rotherham	£6.01

50 of England's 151 funded local authorities sit at the funding floor of £6.01 per hour (before the termly adjustment) for 3 and 4-year-olds. These are concentrated in the East Midlands, Yorkshire and the North.

The contrast is regional as much as local. Inner London councils are funded at an average of £8.40 per hour for 3 and 4-year-olds; the East Midlands averages £6.06 and the North East £6.04. The same entitlement, the same statutory hours, funded at a third more in one region than another.

Region	Average 3-4YO rate 2026-27 (£/hr)
Inner London	£8.40
Outer London	£7.21
South East	£6.69
East of England	£6.28
South West	£6.17
West Midlands	£6.15
North West	£6.12
East Midlands	£6.06
North East	£6.04
Yorkshire and the Humber	£6.03

The gap widens further for younger children. The under-2s rate runs from £10.34 in the lowest-funded councils to £17.87 in Westminster, and the 2-year-old rate from £7.66 up to £12.74 in Camden.

The £6.20 floor and what it means

For 2026-27 the DfE applied a £6.20 minimum funding floor to the 3 and 4-year-old rate (shown as £6.01 before the termly funding adjustment is added). Any council whose formula-derived rate fell below that level was lifted up to it.

Fifty councils landed on that floor. For those areas the "increase" is essentially the floor doing its job, not the local cost base being recognised. The floor protects providers in lower-funded areas from falling further behind, but it also means a large block of England receives an identical, flat rate regardless of local wage or rent pressures.

A second protection sits alongside it: a 0% year-to-year cap, meaning no council's rate was cut in cash terms compared with 2025-26.

Two numbers for the same council: the termly adjustment

There is a wrinkle worth understanding, because it is a common source of confusion for parents and providers alike. The DfE publishes each council's 2026-27 rate in two columns: one before a "termly funding adjustment" and one after it. The after-adjustment figure is a little higher, typically by around 18 to 21 pence per hour for 3 and 4-year-olds. For a floor council the before-adjustment rate is £6.01 and the after-adjustment rate is £6.20.

The termly funding adjustment is a small uplift the DfE adds to each council's headline 2026-27 funding rate. The department's operational guidance expects councils to pass on a provider rate broadly in line with the before-adjustment column, so that is the figure closest to what a nursery actually receives, and the one used throughout this article. The higher after-adjustment figure is what the council receives in total; whether the difference reaches providers depends on the council.

This is why you may see two slightly different rates quoted for the same area. Neither is wrong; they measure different points in the chain. When the question is "what is my nursery actually paid", the before-adjustment column is the better guide.

The gap that matters to parents: funding versus fees

Here is the figure almost no analysis joins up. The funding rate is what the council pays the nursery. It is not what the place costs to provide and it is not what a parent is charged.

According to the National Day Nurseries Association, for 2026-27 the average shortfall between the 3 and 4-year-old funding rate and providers' delivery costs is around £2.61 per hour, up from £2.36 the year before, with a £1.79 shortfall on 2-year-olds. The reason is simple arithmetic: the NDNA estimates provider staffing costs are rising by 10.84% as the National Living Wage and employer National Insurance increase, more than twice as fast as funding. Funding went up; the gap got wider.

The nursery funding gap is the difference between the hourly rate a council pays a nursery for a funded place and what the place actually costs to deliver. For 2026-27 it averages about £2.61 per hour for 3 and 4-year-olds, because provider costs are rising more than twice as fast as funding.

Nurseries cannot legally charge parents a top-up for the funded hours themselves. They recover the gap elsewhere: consumables charges, meal fees, "enhancement" or sustainability charges and full commercial rates on any hours beyond the funded entitlement. That is why a family signing up for "30 free hours" often sees their bill barely move. The funding rate sets the floor of that pressure and in the lowest-funded 50 councils the floor is at its lowest.

For the parent-facing side of this, Coram's Childcare Survey 2026 found a full-time nursery place for an under-two in England averages just under £149 a week for eligible families after the expanded entitlements, down 39% on 2025. Families who do not qualify for funded hours see no such fall.

What this means for your bill

Three practical takeaways follow from the data:

Your council's rate predicts your nursery's pressure to add charges. If you are in one of the 50 floor councils, your nursery is being paid the statutory minimum and is more likely to levy consumables or enhancement fees to stay solvent.
The youngest children are funded most but cost most. The £12.04 under-2s rate sounds generous until set against ratios of one adult to three babies. Expect the funded-versus-charged gap to be most visible for under-twos.
A higher funding rate is not a lower bill. Funding rising slower than provider costs means the gap nurseries pass on is structurally growing, not shrinking.

Methodology and sources

Funding rates are taken from the Department for Education's 2026 to 2027 early years funding rates workbook, covering 151 local authorities (the Isles of Scilly and the City of London are excluded, as they receive a separate central grant). For 3 and 4-year-olds, every figure on this page (national average, regional averages, the £6.01 floor and the highest and lowest councils) is taken directly from the workbook's before-termly-adjustment column, in line with DfE operational guidance that councils pass on a provider rate broadly in line with that column; the after-adjustment figures are higher (the £6.20 floor is the after-adjustment form of the £6.01 before-adjustment floor). The 2-year-old and under-2s rates have a single 2026-27 column with no termly-adjustment split. Their national averages (£8.90 and £12.04) are the DfE's published figures. The highest and lowest individual-council figures quoted for those two bands are the latest available rates. They are consistent with the DfE's stated uplift, though the source workbook does not re-publish them council by council. Where a rounded figure is shown, only the final published value is rounded; underlying calculations use full precision.

Parent-fee figures are from the Coram Family and Childcare Childcare Survey 2026. The funding-versus-cost shortfall figures (£2.61/hr for 3-4 year-olds, £1.79/hr for 2-year-olds, 10.84% staffing cost rise) are from the National Day Nurseries Association's analysis of the 2026-27 rates.

Sources:

This article is for general information and does not constitute financial advice. Funding rates and policy can change; check GOV.UK and Childcare Choices for the latest position.

England Childcare Funding Rates 2026-27