Mothers are often the ones who bear the brunt of high childcare costs, as official figures show that women perform approximately 60% more unpaid work than men. The Office for Budget Responsibility (OBR) has stated that providing 30 hours of free childcare per week to children aged between nine months and two years would gradually increase employment among parents with young families. The OBR estimates that by 2027-28, about 60,000 parents in this demographic would join the workforce as a result. The expansion of free childcare is expected to have the most significant impact on labor supply compared to other policies announced in the Budget.
However, concerns have been raised that the current free childcare scheme is already underfunded. Experts have warned that the funds allocated to the childcare sector in this week’s Budget are insufficient to support struggling nurseries. The Confederation of British Industry (CBI) has recommended that the government invest £8.9 billion into the early years sector, almost double the £4.6 billion allocated in the Budget.
Currently, nurseries subsidize the free hourly rates offered to parents of three and four-year-olds by charging higher fees for one and two-year-olds. However, experts warn that once the free allowance is expanded to cover both age groups, the funding shortfall will increase. The sector is concerned that the pledged funding will not reduce costs for parents sustainably. The cost of part-time care for a child under two is, on average, £148 per week, and this has increased by 5.6% in the past year.
In addition to funding issues, there is also a shortage of childcare places. Just half of local areas reported having sufficient childcare for children under two at the start of this year, a 7% decrease from 2022. This number drops to less than half for parents who work full-time. The Labour MP for Walthamstow, Stella Creasy, criticized the ill-planned reforms for one and two-year-olds and called for measures to increase the availability of nursery places. She compared the situation to the Help to Buy property scheme, which increased demand without adequately addressing supply issues.
Childcare providers have been struggling with rising energy and food costs, and one-third of them are at risk of closure within the next year. The sector is currently experiencing severe underfunding and a staffing crisis. The Early Years Alliance warns that the funding announced in the Budget is unlikely to be sufficient to stabilize providers. Expanding “free childcare” without adequate investment could have disastrous consequences for the sector.
Furthermore, the decision to relax staff-to-child ratios for two-year-olds in childcare is seen unfavorably by the sector. This change brings the rules in line with other countries but providers argue that it compromises the quality of care and education. They predict that any savings resulting from the relaxed ratios would be used to balance the books rather than benefit parents. Additionally, parents may choose not to use nurseries that have more children per staff member.
The Budget also includes support for parents on Universal Credit. The government will cover the childcare costs of parents on Universal Credit upfront, removing a financial barrier to work. Currently, these parents can only claim back 85% of their childcare costs after paying for them in advance. The proportion of eligible parents claiming this support is currently low at 13%, but these numbers may increase with the new policy. The government is also increasing help for Universal Credit parents who face high childcare costs by increasing the maximum amount that can be claimed.
To get a testimonial from two parents, Maxine Bell and Cheri Chadwick, are included at the end of the article. Maxine Bell expresses frustration that the childcare support has come too late for many struggling families. Cheri Chadwick, on the other hand, sees the new support as a positive development that will enable her to have more children.
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