Chancellor Jeremy Hunt today pledged to “guarantee rates” for nurseries as part of the government’s childcare expansion plans in Wednesday’s Spring Budget

Hunt reiterated that he was “sticking to our plan” during his speech to Parliament, confirming government plans to guarantee working parents of two-year-olds in England access to 15 hours of ‘free’ childcare.

The first phase of the expansion plan will kick-in from April 2024 which Hunt claims could bring an extra 60,000 parents to re-enter the workforce. This

Over this weekend, Hunt refused to confirm a guarantee that the first stage of the rollout will be delivered in April with the Shadow education secretary Bridget Phillipson saying that her party’s findings leave the Conservatives’ childcare promise “in absolute tatters”.

During his speech , the Chancellor said:

“I am today guaranteeing rates for childcare providers to deliver the landmark offer.

“There’s no quick or easy fix to the UK’s childcare challenge but it’s clear that bolder action could deliver a sizeable economic prize.”

The Spring Budget 2024 document which was published after Hunt’s speech stated:

“Confirming that the hourly rate childcare providers are paid to deliver the free hours offers for children aged nine months to four years will increase in line with the metric used at Spring Budget 2023 for the next two years. This reflects that workforce costs are the most significant costs for childcare providers and represents an estimated additional £500 million of investment over two years. This will give childcare providers the confidence to expand and support delivery of the government’s landmark expansion of free childcare.

“Confirming an additional £500 million of new funding for councils to support the provision of adult and children’s social care, announced on 24 January.”

Spring Budget 2024

Other key points from the Budget included:

• Full child benefits to be paid to households where highest-earning parent earns up to £60,000 – the current limit is £50,000
• Partial child benefit to be paid where highest earner earns up to £80,000
• National Insurance, a payroll tax, cut by 2p in the pound for employees and the self-employed
• Threshold at which small businesses must register to pay VAT raised from £85,000 to £90,000 from April
• Covid-era government loan scheme for small businesses extended until March 2026

Neil Leitch, chief executive of the Early Years Alliance, said:

“We at the Alliance have long called for a mechanism to ensure that early years funding rises in line with provider delivery costs, and so welcome the fact that today’s announcement should help prevent the current funding gap from widening even further over the coming years.

“That said, what this policy does not do is to close this gap in any way, or address the wholly inadequate funding baseline from which providers are forced to operate. With the early years funding shortfall estimated to stand at £5 billion, it is clear that there is still much more to do to build and sustain an affordable, accessible and high-quality care and education sector over the long term. 

“We know that the early years is facing its most challenging time in decades. Not only have years of underfunding wreaked havoc on the sector – prompting both a surge in setting closures and the worst staffing crisis in years – but the sector is just weeks away from the biggest expansion in early entitlement hours, with many settings warning that they do not have sufficient funding, capacity or space to meet the likely surge in demand. As such, while today is certainly a positive starting point, much more support – including significant long-term funding and a comprehensive workforce strategy – is crucial if nurseries, pre-schools and childminders are to be to able to sustainably deliver both existing and upcoming entitlement offers. With many settings already on the brink of closure, simply maintaining the status quo is not an option.

“Today’s Budget hints at a renewed approach to how the early years is recognised – but rather than being viewed as a solution to the early years crisis, it must be seen as the first step of many that need to be taken to safeguard the future of our vital sector.”

Purnima Tanuku OBE, chief executive of National Day Nurseries Association (NDNA) said: “NDNA has been calling for the Government to use annual reviews to address the gap in funding, particularly in relation to inflation and minimum wage increases. In the current financial climate we welcome the fact that the Chancellor has listened and committed to additional funding indexed to rising costs for 2025/26 and the year after.

“We hope the Government continues to listen to the sector about the challenges providers are facing. The increase in the pass-through of funding is a welcome step and the Government must ensure that all local authorities are passing all the required funding to those providers delivering high-quality early education and care.

“We would have liked to have seen some immediate support to providers with their current three and four-year old funding. Our recent survey showed that 83% say funding doesn’t cover their costs and 73% expect to make a loss overall or just break even. The Government must continue to work with the sector to ensure parents and families are able to access the expanded offer and providers can deliver this sustainably.

“It’s very disappointing that the Chancellor didn’t extend the business rates discount to the childcare sector where it is desperately needed.”

David Eaves, director – Childcare & Education, Christie & Co, commented: “Following today’s Spring Budget, it’s important to not forget the 30.6% growth in funding for new childcare entitlements as highlighted in IFS’s ‘Public service spending: an even bigger squeeze’ report published in November 2023, whereby early years was a major outlier as other areas of spending saw depleted and sometimes cuts to funding. Funding for Schools, for example, will be held flat in real terms, with 0.0% growth expected. 

“In his statement today, the Chancellor did announce there will be increases to the funded rates over the next two years, which will likely be welcomed by the sector, although further clarity will be required to ensure this keeps pace with cost increases and the burden is not gradually passed back to providers or parents over time, as has been the case under the current funding system. Furthermore, reforms to Local Authority funding rules, ensuring they will have a finite window to communicate funding rates and that a minimum of 97% of funding will be passed on to providers, should allow settings to plan for the future with greater certainty; however the well-publicised issues with parents having difficulty obtaining their code to access the expanded two-year-old funding needs to be addressed before the wider roll out. Finally, while the Government launched a trial recruitment campaign in February in an attempt to encourage individuals into the early years workforce, including one-off bonuses of £1,000 in select Local Authorities, the impact of this will not be known for some time, with many settings highlighting a lack of qualified staff as a major barrier to providing the expanded funding offer.”

Ros Marshall, managing director international at Bright Horizons, commented:  

“Providing children with the best possible start in life is paramount, and a robust, sustainable early years sector, delivering high quality, affordable care and education to more children, is the most effective way to achieve this goal. 

Early years providers have been engaging with the Government, Treasury, and the Department for Education over the last year to raise awareness of our sector’s challenges and to collectively find solutions.  

Wednesday’s announcement brings some positive news for the sector, families, and most importantly, children. Funding certainty is crucial for maintaining the health of the early years sector, and we are delighted that the persistence demonstrated by providers has resulted in this development. 

However, a standardised approach to funding at local authority level now needs to follow, to ensure rates and increases are processed consistently across the country. There is a stark difference between systems and processes used by each local authority, often causing delays and unnecessary challenges in accessing funding for providers. Greater transparency and simplification will reduce unnecessary bureaucracy for all stakeholders.”