Jeremy Hunt's free childcare expansion could be a 'disaster'

Childcare budget giveaway would be a ‘disaster without proper investment’ as bosses warn industry is in a staffing crisis – and some parents fear package won’t help them because it won’t come into full effect in time

• Chancellor promised up to 30 hours a week of free childcare for children as young as nine months
• The phased policy will be fully introduced by September 2025, Mr Hunt says

Jeremy Hunt’s plans to expand free childcare for one and two-year-olds will be an ‘utter disaster’ without more cash for nurseries, experts warned today, as parents welcomed the proposals but wished it could come quicker than 2025.

The Chancellor has defended not rolling the scheme fully until September 2025, describing it as the ‘biggest transformation in childcare in my lifetime’.

Yesterday he announced 30 hours a week of paid-for care will be extended to children of working parents aged from nine months to four years – but the massive expansion of free childcare is not immediate.

Parents who expect funded childcare places to be available could be left ‘disappointed’ unless proper infrastructure is put in place. Many mothers and fathers with young children now will miss out due to the near three-year timescale.

Neil Leitch, chief executive of the Early Years Alliance (EYA), which represents around 14,000 childcare providers, said: ‘We know from bitter experience that expansions of so-called ‘free childcare’ without adequate investment are a recipe for utter disaster, and given that many providers rely on fees from younger children to make up for current funding shortfalls, the impact on the sector if the government gets this wrong cannot be underestimated.

Jeremy Hunt has defended the speed of the rollout of his Budget offer of free childcare for working parents with children under the age of five, a policy which will not be fully available until September 2025.

‘At a time when settings are closing at record levels and early educators are leaving the sector in their droves, unless the proper infrastructure is put in place by the time the extended offers are rolled out, many parents of younger children expecting funded places to be readily available to them are likely to be left sorely disappointed.’

What do the childcare reforms mean for families? 

– Who will get free childcare?

Under the current system, parents of three and four-year-olds in England are eligible for 15 hours of free childcare per week, and working parents with children in the same age group are eligible for 30 hours of free childcare.

Now all eligible households in England with children as young as nine months – where all adults are working at least 16 hours a week – will be entitled to 30 hours a week of free childcare.

– When can parents access the scheme?

The offer of free childcare will be available to working parents of two-year-olds from April 2024, covering around half-a-million parents, but initially it will be limited to 15 hours.

From September 2024, the 15-hour offer will be extended to children from nine months, which the Government has said will help nearly a million parents.

The full 30-hour offer to working parents of children under five will come in from September 2025.

– What funding has been announced to improve childcare?

The Government will provide £4.1 billion by 2027-28 to expand the 30 hours a week of free childcare for working parents of younger children in England.

Ministers will also provide £204 million in 2023-24, increasing to £288 million in 2024-25, to raise the hourly funding rate paid to childcare providers in England to deliver the existing free hours offer.

The Chancellor said the Government will pilot incentive payments of £600 for childminders joining the profession, and £1,200 if they join through an agency.

Mr Hunt said the Government will fund schools and local authorities to increase the supply of wraparound care so all school-age parents can drop their children off between 8am and 6pm.

The Chancellor said the Government aims for all schools to start to offer a wraparound offer, either on their own or in partnership with other schools by September 2026.

The Treasury is understood to have acknowledged that the Government plan to provide £289 million for schools and local councils to pilot options for wraparound childcare will take time.

– Why is the Government providing more childcare support to parents?

The Chancellor has faced pressure to act on concerns about the cost of childcare and he acknowledged on Wednesday that the country has ‘one of the most expensive systems in the world’.

A recent survey by the charity, Coram Family and Childcare, showed that more parents across England are struggling to find childcare places and are facing higher prices which are ‘freezing’ them out of work.

It found that the average cost of a part-time childcare place (25 hours) a week for a child under two in a nursery is now £150.89 across England.

Last week, shadow education secretary Bridget Phillipson said a Labour government would completely overhaul Britain’s ‘broken’ childcare system, and she said she wanted to ‘move away’ from the current system of free childcare provision as it would not solve problems of availability.

– Is there enough childcare provision and staff for the policy to work?

Early years leaders are concerned nurseries and childminders could struggle to deliver additional places for younger children if the funding provided by the Government does not cover increasing costs.

A number of early years providers have reported struggling financially, with some nurseries forced to close in recent years, due to funding pressures.

Recruitment and retention challenges in the childcare sector could also make the policy hard to deliver.

The survey Coram Family and Childcare, released last week, found that only half of local authorities in England said they had enough childcare places for children under two.

It also revealed that the number of local authorities in England who report having enough places for the universal 15 hours a week free childcare entitlement for three and four-year-olds has dropped to 73%.

A survey by the National Day Nurseries Association suggests that 98% of nurseries in England say their funding rates do not cover delivery costs and 83% expect to either make a loss or break even.

Neil Leitch, chief executive of the Early Years Alliance, said: ‘At a time when settings are closing at record levels and early educators are leaving the sector in their droves, unless the proper infrastructure is put in place by the time the extended offers are rolled out, many parents of younger children expecting funded places to be readily available to them are likely to be left sorely disappointed.’

– What are the plans for ratios in early years settings?

The Government will change minimum staff-to-child ratios from 1:4 to 1:5 for two-year-olds in England but the Chancellor said the change will be ‘optional’.

It comes after the Department for Education ran a consultation last year on the proposals, which were widely criticised across the early years sector.

A petition signed by more than 109,000 people suggested changing the balance could be dangerous for children, and childcare leaders warned that more staff could leave the profession if ratios were changed.

Mr Leitch called the decision to push ahead with the change ‘shameful’.

He added: ‘Parents want affordable care and education, but they also want to ensure that their children are in safe environments receiving quality care and education – something this policy completely flies in the face of.’

How will parents on universal credit be given help with childcare?

Families on universal credit will receive childcare funding upfront, rather than in arrears, to help parents who struggle to afford upfront costs for childcare.

The maximum universal credit childcare allowance – which has been frozen at £646-a-month per child for years – will increase to £951 for one child.

Megan Jarvie, head of Coram Family and Childcare charity, said it was ‘crucial’ that there is enough funding for the expansion of free childcare places.

‘If it is not right then we are at risk of seeing big childcare shortages because they are already growing,’ she told the PA news agency.

Ms Jarvie added: ‘The sector needs to be on board. The funding rate needs to be right. And there needs to be a lot of work done between now and April to be ready to start delivering.

‘Shortages of childcare are already growing and we’re now looking to expand the number of children in childcare.

‘There’s a lot of work that needs to be done to make that possible. We don’t have enough for the current demand and potentially demand is going to grow.’

Early years leaders have warned that nurseries and childminders could struggle to deliver additional places for younger children from next year if the funding provided by the Government does not meet rising costs. 

Sam Freedman, a former government education adviser, said today that the Government faces ‘big challenges’ to get it right.

He said that ministers must increase the hourly pay currently given to nurseries to subsidise free hours. He said: ‘At the moment, nurseries subsidise the too-low free hourly rate by charging more for one- and two-year-olds, [hence] such high prices. If one- and two-year-olds also get free hours then they cannot cross-subsidise. You risk a major supply problem’.

But Chancellor told Sky News: ‘This is the biggest transformation in childcare in my lifetime.

‘It is a huge change and we are going to need thousands more nurseries, thousands more schools offering provision they don’t currently offer, thousands more childminders.

‘We are going as fast as we can to get the supply in the market to expand.

‘But it is the right thing to do because we have one of the most expensive childcare systems in the world and we know it is something that is a huge worry, for women in particular, that they have this cliff-edge when maternity leave ends after nine months, no help until the child turns three and that can often be career ending.

‘So I think it is the right thing to do for many women, to introduce these reforms and we are introducing them as quickly as we can because we want to remove those barriers to work.’

Mr Hunt claims it will save the average family with a toddler in nursery more than £80 a week – but parents with multiple young children or who live in the more expensive South-East will benefit even more.

Forecasts suggest the multi-billion-pound policy will bring another 60,000 parents into work by 2027/28, and Mr Hunt hopes parents already in work will increase their hours. The Chancellor told MPs: ‘We have one of the most expensive systems in the world.

‘Almost half of non-working mothers said they would prefer to work if they could arrange suitable childcare.

‘For many women, a career break becomes a career end. Our female participation rate is higher than average for OECD economies, but we trail top performers like Denmark and the Netherlands.

‘If we matched Dutch levels of participation, there would be more than one million more women who want to work in the labour force. And we can.’ The Government estimates around 435,000 people in England with a child under three do not work due to caring responsibilities.

Mr Hunt said the extension of the 30 hours offer would be worth an average of £6,500 every year for a family with a two-year-old child using 35 hours of childcare every week, reducing their childcare costs by nearly 60 per cent.

Currently, working parents of three and four-year-olds are eligible for 30 free hours a week unless one parent earns more than £100,000 a year. 

But two-year-olds are only entitled to 15 free hours a week if their parents claim certain benefits.

The policy will be rolled out in stages, with working parents of two-year-olds able to access 15 hours per week from April next year. From September 2024, all working parents of children aged nine months to three years can access 15 hours per week. From September 2025, eligible parents of under-fives will be given 30 hours free per week.

Shadow chancellor Rachel Reeves said the Government is ‘a bit late to the party’ when it comes to childcare.

Speaking about the childcare plans announced in the Budget, she told BBC Radio 4’s Today programme: ‘We back these plans. We wouldn’t have got into this mess in the first place because we wouldn’t have scrapped the infrastructure that the last Labour government created.

‘And I think a lot of people who, like me, people who’ve got kids who are already in primary school will be saying, well, you know, it’s great that the Government have got to this point, but they’re a bit late to the party, frankly, because many mums and dads have struggled on their own for the last few years, the last decade, when support for working parents has been taken away.

‘And now they’re saying after the next election there’s going to be more support for childcare.

‘Well, absolutely, because we hope there’s a Labour government after the next election, and we will make childcare and working parents a priority.’

In his Budget speech, Mr Hunt said the Government will increase funding paid to nurseries providing free childcare under the hours offer by £204 million from this September and rising to £288 million next year.

Joeli Brearley, chief executive and founder of Pregnant Then Screwed charity, said: ‘We need to see the detail as to how this money is being distributed and we need to know that the government is investing in these new schemes based on the actual cost to deliver them.

‘Free childcare from nine months is brilliant, but only if there are childcare settings to be able to access this care. Without the correct funding there won’t be.’

On Wednesday, the Chancellor said the Government will change minimum staff-to-child ratios in England from 1:4 to 1:5 for two-year-olds in England, but the change will ‘remain optional’.

He announced that the Government would pilot incentive payments of £600 for childminders joining the profession – £1,200 if they join through an agency.

Nurseries are concerned about how it will be funded and if they have the capacity for many more children

Ms Brearley added: ‘Without a workforce plan, providers will continue to be forced to close, and increasing ratios will be detrimental to staff retention, what they need is better pay which will come from significant investment into the sector and into the roll-out of the free hours scheme.’

Announcing his reforms to childcare on Wednesday, the Chancellor said: ‘We have one of the most expensive systems in the world.

‘Almost half of non-working mothers said they would prefer to work if they could arrange suitable childcare.’

In his Budget speech Mr Hunt also said he wants all schools to be able to offer wraparound care either side of the school day by September 2026.

He added: ‘One-third of primary schools do not offer childcare at both ends of the school day, even though for many people a job requires availability throughout the working day.

‘To address this we will fund schools and local authorities to increase supply of wraparound care so all school-age parents can drop their children off between 8am and 6pm.’

Christine Farquharson, senior research economist at the Institute for Fiscal Studies (IFS), said: ‘For such a huge reform to the early years system in England, today’s Budget gave us remarkably little detail about the one thing that will really matter: the funding rate that providers will receive.

‘Even under current patterns of childcare use, expanding the 30-hour offer to almost all pre-schoolers in working families will put Whitehall in charge of the price of 80% of childcare hours delivered in England.

‘That raises the stakes for getting the funding rate right, with the potential for huge damage to the quality and availability of childcare if the government gets it wrong.’

Conservative MP Robin Walker, chair of the Education Select Committee, said: ‘There will be questions about how the sector will scale up in time to meet the increase in demand for childcare that will follow.

‘The Department for Education has been handed billions, and it will now need to deliver.’

Mr Hunt also announced more funding to childcare providers to deliver the existing free hours offers, with £204million extra this year, increasing to £288million in 2024/25. And the Government will pilot start-up grants of up to £1,200 for new childminders in a bid to address vacancies. Staff-to-child ratios for two-year-olds will rise from 1:4 to 1:5 to give providers more flexibility.

There will also be an expansion in care at the start and finish of the school day for parents with older children, from September 2024.

But the Institute for Fiscal Studies last night warned the extension of free childcare would exacerbate ‘one of the most severe distortions’ in the tax and benefit system.

This is because the generous provision of free hours ends abruptly once one parent earns more than £100,000. The IFS said: ‘A parent with a one-year-old and a three-year-old whose childcare provider charges England’s average hourly rate for 40 hours per week would, after these reforms, find that their disposable income falls by £14,500 if their pre-tax pay crosses £100,000.

‘Disposable income would not recover its previous level until pre-tax pay reached £134,500. A parent earning £130,000 would be worse off than one earning £99,000.’

Joeli Brearley, founder of campaign group Pregnant Then Screwed, said: ‘Parents of young children felt ignored, but this will restore their faith in democracy, so we thank ministers for hearing our cry.’

But she stressed that attracting more childcare workers was critical.

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