A £4billion expansion of free childcare for one and two-year-olds could form part of a surprise announcement in today’s Budget to help get people back into work.
The Government is set to offer 30 hours a week of free childcare to all children aged one and two, on top of the existing free hours for those aged three and four.
Currently all families of three and four-years-old get 15 hours of free childcare a week, over 38 weeks. Households can also qualify for 30 hours a week if parents earn the equivalent of 16 hours a week at the national minimum or living wage.
But if one parent earns more than £100,000 a year, this rules them out of the free 30 hours – and this exception is expected to remain within the new proposals.
The move from Chancellor Jeremy Hunt would come amid concerns about the cost of childcare amid broader cost-of-living challenges and inflation pressures.
Here, we look at the current situation with free childcare and how you could benefit from the suggested changes.
CURRENT FREE CHILDCARE SITUATION
Does anyone currently get free childcare for those aged under two?
No, there is normally no free childcare provision for any children in England aged under two.
What is the current free childcare provision for two-year-olds?
As it stands, you can get 15 hours a week of free childcare for your child aged two if you live in England and receive benefits such as Income Support; income-based Jobseeker’s Allowance; or income-related Employment and Support Allowance.
You can also get the free hours if you receive Universal Credit, and your household income is £15,400 a year or less after tax, not including benefit payments; Child Tax Credit, Working Tax Credit (or both), and your household income is £16,190 a year or less before tax; or you get the guaranteed element of Pension Credit.
Two-year-olds can get free childcare if they are looked after by a local authority; have an education, health and care plan; get Disability Living Allowance; or have left care under an adoption order, special guardianship order or a child arrangements order.
However, you may still have to pay for extra costs such as meals, nappies or trips.
The plan is believed to include 30 hours a week of childcare for three and four-year-olds (file)
What are three and four-year-olds entitled to?
All children aged three and four in England currently get 570 free hours of childcare a year, which equates to 15 hours per week when 38 weeks of the year are counted.
The hours must be with an approved childcare provider, and stop when your child starts in reception class. You can get it from the term after your child’s third birthday.
Which three and four-year-olds get 30 free hours?
This depends on whether you are working; your income and that of your partner, if you have one; your child’s age and circumstances; and your immigration status.
You can usually get 30 hours free childcare if you (and your partner, if you have one) are in work; on sick leave or annual leave; on shared parental, maternity, paternity or adoption leave.
If you’re on adoption leave for a child aged three to four, you must return to work within 31 days of the date you first apply for 30 hours free childcare for that child.
If you are not currently working you may still be eligible if your partner is working, and you get Incapacity Benefit, Severe Disablement Allowance, Carer’s Allowance, Limited Capability for Work Benefit or contribution-based Employment and Support Allowance. You can apply if you’re starting or re-starting work within the next 31 days.
In terms of income, over the next three months you and your partner (if you have one) must each expect to earn at least:
- £1,976 if you’re aged 23 or over
- £1,909 if you’re aged 21 or 22
- £1,420 if you’re aged 18 to 20
- £1,000 if you’re under 18 or an apprentice
This is at least the National Minimum Wage or Living Wage for 16 hours a week on average.
You can use an average of how much you expect to earn over the year, if you do not get paid regularly.
Certain types of income will not count towards the minimum amount you must earn to be eligible, such as dividends, interest and income from investing in property.
If you or your partner have an expected ‘adjusted net income’ over £100,000 in the current tax year, you will not be eligible.
You must have a National Insurance number and at least one of the following: British or Irish citizenship; settled or pre-settled status, or you have applied and you’re waiting for a decision; permission to access public funds.
If you have a partner, they must have a National Insurance number too.
You can apply from when your child is two years and 36 weeks old.
PROPOSED NEW PLAN
What are the new plans on free childcare?
The Government is set to offer 30 hours a week of free childcare to all children aged one and two, on top of the existing free nursery hours for those aged three and four.
Who will be eligible?
Full details of any expansion are likely in today’s Budget, but it is expected that the 30 hours will be for working parents, as long as neither of them earns over £100,000.
Why is the Government making the change?
Chancellor Jeremy Hunt is expected to announce the £4billion policy as part of a wider drive to tackle Britain’s labour shortages and get more people in work.
For many working parents, the cost of childcare is so expensive that almost all of one of their wages is eaten up by it. This limits some from working and discourages others from taking on extra hours.
He wants hundreds of thousands more people in employment, with support focusing on the over-50s, disabled people and those on Universal Credit.
Will nursery providers get any more funding?
Yes, Jeremy Hunt is expected to increase the hourly rate paid to childcare providers by the Government to deliver their existing 30 hours weekly entitlement.
Childcare fees in the UK are among the most expensive in the world, with spiralling costs for areas such as energy and food forcing day nurseries to hike their charges to levels some parents can no longer afford.
Yet underfunding for the current 30-hours provision has seen nurseries close, while others have pushed the costs onto parents of younger children.
At the same time as this, parents complain that once the cost of extras are added in, they still end up with large nursery bills, despite getting 30 hours free childcare a week.
What has been the political reaction to the plan?
Childcare looks like it will be a key political battleground before next year’s general election, and Labour has promised to make it a priority if it wins.
Its MP Stella Creasy, who has campaigned on the issue, branded Mr Hunt’s plan ‘economically illiterate’, warning it would push up demand without addressing supply.
Labour has promised to give the British childcare system a complete overhaul, having labelled it ‘broken’.
Alison McGovern, the shadow employment minister, said that any announcement on childcare needed to be part of a ‘proper reform strategy’.
She told BBC Newsnight: ‘If we spend Budget Day tomorrow talking about childcare I’ll think that’s a good thing. And I think this is where our agenda needs to be… We need to know much more about how this is going to work.
‘This can’t just be a one-day announcement and that’s it we’ll see how it works. We need proper reform.
‘This has got to be part of a proper reform strategy because we know that the system’s not working at the moment.’
What has been the early reaction outside politics?
Neil Leitch, chief executive of the Early Years Alliance, said the ‘devil was in the detail’ about any plan.
‘We know from harsh experience that what can sound like an impressive investment in theory can end up being wholly inadequate in practice, and so understanding exactly how this announcement will translate into hourly funding rate changes, especially in light of the extension of the 30 hours offer to one and two-year-olds, will be key to understanding the impact on the sector,’ he said.
The Financial Times cited research by the organisation which found the Government in 2021 gave nurseries about £4.90 for each funded hour, despite estimates that it would cost around £7.50 per hour to care for each child.
Paul Johnson, director of the Institute for Fiscal Studies, said many would welcome any announcement to boost free childcare.
But he warned that the ‘whole system is hugely complex’, adding: ‘As universal support has expanded, targeted support for children most in need has contracted.’
Purnima Tanuku, chief executive of the National Day Nurseries Association, warned that providers cannot ‘magic up’ places.
‘I think that we need to really see the sums,’ she told BBC Newsnight.
‘The challenges are at the moment, suddenly nurseries can’t just magic up places all of a sudden because they are in a crisis.’
