A £4bn expansion of free childcare for one and two year olds in England
The plan would give parents of one- and two-year-olds an extra 30 hours a week and increase funding for the existing free childcare program for three-year-olds.
Chancellor Jeremy Hunt also plans to increase the hourly rate paid by the government to childcare workers to meet their existing entitlement to 30 hours a week, a key demand from the sector and some Conservative MPs.
The Government will provide funds to local authorities to start rolling out full childcare services in schools from September 2024 as it seeks to fulfill Labor’s pledge to come up with a bold childcare offer ahead of the next election.
The Guardian announced last month that the Treasury had commissioned work to study the cost of free childcare for one and two-year-olds, but Hunt had feared it would prove too expensive. However, the proposal is understood to have come back on the table after forecasts suggested it could help boost growth.
Childcare has emerged as a major political battleground ahead of the next election, with British parents facing the highest cost in the world, meaning some parents, even those on middle incomes, are finding it isn’t worth accepting new or additional work.
Officials hinted the measure could be Hunt’s “rabbit-out-of-the-hat” moment in a statement that was otherwise expected to bring few surprises, with the chancellor downplaying expectations of tax cuts or other big spending commitments.
Rishi Sunak was understood to make a final decision on signing off on the plan, which government insiders believe would help him deliver on his promise to boost sluggish growth, on his return from the US on Tuesday.
While markets have calmed down and the economic outlook less turbulent since Liz Truss’ disastrous mini-budget last September, millions are still struggling with the cost of living while inflation is at a 40-year high and the country is on hold is detected .
Conservative MPs who have called for tax cuts are likely to be disappointed as the Chancellor is focused on delivering on Sunak’s promise to boost growth by encouraging the over-50s, those with disabilities and chronic illnesses and benefit recipients to return to work return to work.
The Government is also expected to change the staff-to-child ratio for two-year-olds in childcare, moving from 1:4 to 1:5 to align with Scotland, and will consider further measures to give flexibility to providers .
A Treasury source suggested that the Department of Education could decide how the new funding could be better allocated between the existing offering for three-year-olds and new offerings for younger age groups.
A second senior Whitehall source said they believed Hunt could establish a new entitlement to free time for parents of children between the ages of nine and 36 months and an additional offer for one-year-olds from disadvantaged families.
They also said the DfE has been pushing to fund the hours “at cost” rather than the current low rate, which has left childcare providers struggling and in many cases requiring top-up payments from parents.
Many experts warn that government subsidies are not enough to fund the places needed, leading to large supply gaps in parts of the country. In Hammersmith and Fulham in London, for example, a recent study by Nesta showed that a place for a two-year-old costs £10 an hour. The government subsidy rate for this location is £6.66.
“At this point it’s all about getting money to providers,” said one Tory MP. “If they’re not being adequately funded for what they’re doing, there’s no point in just offering more and more hours.”
The Chancellor said on Sunday that childcare costs discouraged some parents from taking up work and that the government could make a “big difference” by making a “big difference” as part of a package of measures to lower barriers to entry into the labor market could by helping to lower them further.
Ministers have already announced plans, to be confirmed in the budget, to pay parents childcare allowance in advance rather than afterwards. The current support cap of £646 per child per child is also expected to increase by several hundred pounds.
However, the chancellor downplayed the prospect of expanding free childcare. “We want to help everyone. It’s expensive to do. You can’t always do everything at once,” he said.
Meanwhile, in recent days, some childcare workers have been called into the Treasury Department to film bits on camera discussing the importance of properly funded childcare. “It was clear we were being asked to take part in a promotional video tied to their big budget announcement,” said one.
All three and four-year-olds are currently entitled to a free part-time kindergarten place for 15 hours a week, 38 weeks a year, regardless of their families’ income. You are entitled to 30 hours of free childcare if both parents earn the equivalent of at least 16 hours a week at the national living wage.
Additional reporting by Jessica Elgot and Kiran Stacey