The poorest third of families will see almost no direct benefit from new funding entitlements, according to research.

From September 2025, all children in working families will get up to 30 hours of funded childcare a week from nine months old. A report from the Institute for Fiscal Studies found the government’s planned expansion of funded childcare will directly benefit a fifth of families earning less than £20,000 a year, compared to four-fifths of families with household incomes above £45,000.

The report found the proportion of children eligible for disadvantaged two-year-old funding fell from almost 40% in 2015 to just over 25% in 2022, as a result of benefit reforms and a reduction in the maximum income allowed for eligibility.

The analysis also revealed funding per hour for three- and four-year-olds was more than 17% lower in 2022–23 than a decade previously, once childcare providers’ costs were taken into account. Core funding per hour for two-year-olds in 2022–23 was no higher in real terms than when the entitlement was introduced in 2015–16.

Christine Farquharson, IFS associate director and an author of the report, said: “Spending on the free entitlement is now four times higher than it was two decades ago. With the new childcare entitlements announced in the Budget, it’s now set to double again over just three years. But these new entitlements are another big step towards an early years system focused on helping parents to work – with much less to say about reducing inequalities in children’s development.”

Neil Leitch, chief executive of the Early Years Alliance, said: “There is a wealth of research showing that children from poorer backgrounds benefit the most from quality early education and care – and yet, as this report rightly highlights, the upcoming 30-hour expansion is set to exclude these children almost entirely.  For all ministers’ talk of the need to ‘close the gap’ between disadvantaged children and their peers as early as possible, the government has made it very clear that this policy was created to encourage parents to return to work, rather than ensuring that all children can access a high-quality early education.”