As part of today’s Spring Budget, Chancellor Jeremy Hunt is predicted to announce several incentives to help parents with the soaring cost of childcare as part of the “back to work” statement, reports suggest.

Currently in England, all three- and four-year-olds are entitled to 15 hours’ free childcare a week.

But to qualify for 30 hours, each parent must work, earn a weekly minimum wage, and less than £100,000 a year. This includes self-employed parents.

However, parents of one and two-year-olds don’t receive this help, meaning many struggle to pay childcare fees after returning to work until they’re eligible for Government support.

Parents in the UK already pay the highest childcare fees of any developed nation, according to the OECD, and three-quarters of mothers said it makes no financial sense to work because of the high cost of childcare.

It now costs an average of £148.63 per week for a part-time childcare place for a child under two, a rise of 5.6% since 2022, according to the charity Coram.

Meanwhile, providers are struggling with rising costs with many having already closed down. Early years providers face an increase of 8% in costs over the next year, which is ultimately likely to be passed to parents in the form of  higher childcare costs.

‘Devil is in the detail’

Given the mounting financial pressure on families amid the cost-of-living crisis, the extension would be a welcome step by the Government, but “the devil is in the detail”, according to Neil Leitch, CEO of the Early Years Alliance. 

Leitch said: “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.”

This is echoed by Christine Farquharson, economist at the Institute for Fiscal Studies who told BBC Radio 4 Today: “The risk there is that the funding providers get for their current hours has been cut 13% in real terms since its peak in 2017. That’s left a lot of providers cross-subsidising, putting up the prices that younger children pay to plug the gaps in the three and four-year-old entitlement. And if this reform goes ahead, that effectively closes off that channel entirely.”

When asked whether spreading funding across more children actually fails to deal with the funding crisis facing early years settings, Farquharson agreed.

Other changes to the childcare sector

The extension of free childcare funding for one and two-year-olds comes as part of other changes to the sector are also expected.

This includes increasing the minimum number of children being looked after in childcare settings from four to five per member of staff – a move which has been slammed by critics who say it will be unsafe and won’t save families any money.

Elsewhere, families who receive benefits will also receive more money to cover childcare costs, with this money paid upfront.

It has also been suggested that a sign-up bonus will be paid to encourage more people to work in the childcare sector.

And, the Chancellor is also predicted to increase the subsidy childcare providers receive from the Government for the free hours some two-year olds and most three and four-year olds receive.

Related: Why 30 hours free childcare isn’t really ‘free’