The government have rightfully been under growing pressure to inject more support into the childcare sector as the cost of living crisis continues

Recently, analysis by the charity, Coram found serious childcare shortages with only half of local areas reporting sufficient childcare for children under two, a decrease of 7% on 2022, and under half (48%) reporting enough childcare for parents working full-time, a decrease of 11% on last year. 

Coram also found that the cost of childcare across the country has continued to rise steadily. A part-time place (25 hours a week) for a child under two now costs an average of £148.63 per week, an annual increase of 5.6%.

Breaking down the Budget

It won’t come as a surprise that the Budget will focus heavily on the cost-of-living crisis.

Energy bill support

Since last year, businesses have been preparing to feel the shock of the energy support ending in April. However, the government has confirmed that it will extend the Energy Price Guarantee at current levels – £2,500 – for a further three months. The Chancellor stated that the extension of energy bills support into the summer “will bridge the gap and ease the pressure on families, while also helping to lower inflation”.

Early years support

With the sector under increasing financial strain, the chancellor has promised to help reduce the cost of childcare.

Currently, working parents with three and four-year-olds are eligible to receive 30 hours of free childcare per week. Now he has promised up to 30 hours a week of free childcare in England with children as young as nine months, instead of three- and four-year-olds.

The changes, which will be fully introduced by September 2025, will be worth up to £6,500 a year.

The government will provide £4.1bn by 2027-28 to cover the plan, although this is far lower than the amount that some estimate is needed. Hunt claims that this will reduce childcare costs for a family by nearly 60%. However, the changes will take time to implement, there has been very little detail about how this translates per child per hour and many nursery businesses need a solution now.

The new care for parents in England will be introduced in stages:

• Working parents of two-year-olds will get 15 hours of free care from April 2024,
• Children from nine months will get 15 hours free childcare from September 2024
• All eligible under-5s will get 30 hours free childcare from September 2025.

Families on Universal Credit

The government will pay childcare support to parents on universal credit up front. Mr Hunt has also said that he will raise the sum parents on universal credit can claim for childcare.

Ratios

Another area that the government is changing is the ratio system. Currently one adult can look after four children (age dependent). However, this will change from one carer for every four children to 1:5 to align with Scotland.

Early years response

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

“While on the surface, news that the government has reportedly committed to spending £4bn on the early years appear positive, as always, the devil is in the detail, and we await further confirmation about what this will mean for the early years sector over the coming months and years.

“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.

“We know that the sector is facing its most challenging time in decades – settings are closing at record levels, there is a severe recruitment and retention crisis, and costs continue to soar. Unless the government puts in safeguards to ensure that funding for all early entitlement offers continues to meet the sharply rising costs of delivering places, not only now but in the future, what is currently a crisis will end up in catastrophe.”

On the ratio changes, Leitch stated:

“Early education and care is a vital part of the wider education system and the announcement of a significant increase in investment should have marked the start of a renewed approach in terms of how the sector is valued and treated.

“It is all the more disappointing, therefore, that this progress has been undermined by the government’s reported decision to push ahead with relaxing ratios.

“Ever since this policy was first floated, it has received almost universal opposition. What exactly was the point of consulting if ministers were already going to completely ignore the needs of providers and parents and charge ahead regardless?

“The reality is that relaxing ratios risks severely compromising the safety and quality of care and education our youngest children receive at a time when they need more individual care and attention than ever before, while doing little, if anything, to lower costs for parents. 

“Worse still, at a time when the sector is dealing with a severe staffing crisis, it places even more pressure on a workforce that is already stretched to its limit.”

“We urge the government to rethink this shameful plan. At a time when we finally seem to be making some progress, policies that undermine the quality of care and education that children receive are the last thing we need.”

Purnima Tanuku OBE, chief executive of National Day Nurseries Association (NDNA) said:

“Putting childcare at the forefront of the political agenda at last is really welcome, as is any support for parents to help with the cost of childcare.

“Following the Chancellor’s announcement of 30 hours of childcare for all children of working parents under three, it will take a huge amount of careful planning to ensure the policy will work.

“Firstly we will need to see if the uplift in funding for providers promised from September this year is enough to cover all providers increasing costs and stabilise the early years sector which is currently in crisis. We need to see how this will translate into rates paid to providers and halt the high numbers of nursery and childminder businesses closing.

“Costs rise sharply for nurseries from April with a 14% increase in staff wages along with other energy and business rates burdens, so we are extremely concerned whether nurseries can continue operating sustainably without any increase in funding until September. For some nurseries who have already closed, it’s too late.

“Any expansion in the current offer cannot happen overnight, but we hope a year is long enough to get solid foundations in place for the 30 hour policy for all two-year-olds. The Government must therefore work closely with the sector on clear, effective plans to tackle the workforce pressures they are currently facing.

“Parents and providers categorically said no to any changes in ratios in a recent government consultation because it was not in their best interests and would not save any costs. Early years staff know their children best and they will take a professional judgement based on their experience.”

On Universal Credit, Tanuku added:

“The Chancellors’ plans to improve the Universal Credit childcare payments is really welcome. NDNA has been fighting for this reform for years because parents and providers have told us that the complexities of the system can be a real barrier to parents taking up work and children being able to access high quality early education places.

“We have given evidence to various Parliamentary inquiries and supported a legal challenge to the upfront payments system, so it’s a relief that the Chancellor has finally listened.”

Matt Arnerich, director of brand & comms at Famly stated: “Today is a day that puts Early Years in its rightful place at the very top of the policy agenda – and that is something to celebrate. However, we can only wait on the details to find out whether this will make any difference to hard-working Early Years professionals, or bankrupt them. Without properly funding the hours we already have, providers will continue to close at record rates.

“At Famly, we are seeing more of our nursery partners close down every week than we’ve ever seen before because it’s simply becoming unsustainable for them to keep the doors open. We can start funding babies from the hospital bed if we like – it will not help parents back to work if there are no nurseries left to take them

“Our providers were already yesterday seeing overwhelming parent requests for these 1 and 2-year-old funded hours, when the policy was still just hearsay. Now that it’s official, we can only imagine the admin burden this will cause – a problem we’re already trying to solve. We can only hope it will be worth it.”

June O’Sullivan, chief executive of the London Early Years Foundation (LEYF) added:

“Whilst we welcome The Chancellor’s decision to finally bring the early years sector to the forefront, the extra funding of £200m for childcare providers only covers approximately 10% of the £2 billion shortfall from the DfE’s own data in 2021. This will be significantly higher now given increased costs since the current government subsidy has not kept up with spiralling wages and inflation. 

“What’s more, the extension of the current 30 hours’ free childcare from nine months to three years will only be for working parents. Unfortunately, given the focus of the additional hours on working families alone, we expect this will have an adverse impact on the disadvantaged children and families who most need the support – thereby increasing the attainment gap that already exists of over 4.5 months between children and their peers from more disadvantaged backgrounds when they start primary school.

“The optional increase in the adult to child ratios is also hugely disappointing and will significantly reduce the time available for staff to spend with each child. This is particularly important for the youngest children, our little babies and two-year-olds, whose welfare and development are closely linked to social interaction and forming secure attachment relationships with adults. Now more than ever, we need the Government to continue leveraging its support and commit fully to improving the quality, affordability, accessibility and availability of childcare and fix what is currently a broken system.

“Finally, we also need clarity about what the government means about ‘wrap around school care’ and the implications this would have.”

Emma Rooney, chief executive, Childbase Partnership: “We welcome any initiative that promises more support for parents in accessing quality Early Years care and education.

“Unfortunately, the leaked information in advance of the Budget announcement raised expectations. Like parents in all our nurseries in England we are very disappointed that the much-needed financial support is neither enough nor coming sooner.

“As always, it is the detail in how this funding will be rolled out that will reveal the long-term benefits.

“As a training provider – through The Childbase Partnership Academy of Excellence – we look forward to hearing more about the proposed ‘Returnships’ for the over fifties.”

Courteney Donaldson, managing director – Childcare & Education, Christie & Co said: “Increased funding in the education sector, and early years specifically, has been long-anticipated, following years of lobbying, so it’s encouraging that the Chancellor has reported that funding for nurseries will rise in the next few years, and that there will be a boost to the financial support received by parents of children aged from nine-months. However, both reforms will need to be accompanied by a clear strategy detailing how this funding is to be deployed before it can be understood whether or not costs allocated will meet the rising costs the sector is still facing and whether said funding is sufficient for childcare settings to be sustainable. We expect those that deliver high-quality childcare will welcome the opportunity to pay staff more and retain current ratios if government funding is sufficient to cover the cost of delivery, rather than rush to reduce ratios.”

“The sector will very much welcome this new ‘returnership’ workforce strategy which, we hope, with campaigns such as NDNA’s First Five Years Count – which highlights the importance of working in the early years sector – will encourage more workers into this key sector.”