Jeremy Hunt has announced a £4bn boost for childcare in Wednesday's spring budget – extending 30 free hours of childcare provision to cover one and two-year-olds. Previously, free childcare hours for working parents did not kick in until children turned three.
The move is intended to encourage more parents back into the workplace as the chancellor attempts to boost the economy, and bolster the spluttering early years sector.
Hunt also announced the government will pay childcare providers more for the free provision they provide – a move that may also save parents money as private nurseries often require parents to "top up" the hourly rate the government pays them for childcare to make up what they actually charge.
The UK currently has among the highest childcare costs in the UK, with the chart below showing how they compare to other countries in the OECD based on the most recent available figures.
Here, Yahoo News UK explains what the new childcare rules mean for families...
What were the old childcare payment rules?
The free hours provision previously kicked in the term after a child's third birthday and provided either 30 hours per week during term time (or, in effect, 22 hours for nurseries open during school holidays).
The scheme provided the hours to working parents, with a caveat that neither parent earned more than £100,000 – at which point the free offering was slashed to the standard universal offering of 15 hours per week for term time, or 11 hours pro-rata throughout the year, for children aged three and over.
The scheme ran alongside other financial provision such as child benefit and tax-free childcare, which saw the government provide a 20% top up of people's payments to childcare providers.
A list of additional provisions, like support for those with special educational needs, can be found here.
Chancellor to promise 30 hours of childcare a week for one and two-year-olds (Sky News, 6-min read)
Free childcare: What is new?
As part of his spring budget announced on Wednesday, Hunt said he would extend free childcare provision to children aged 9 months and over – in short, free hours will kick in when paid maternity or paternity leave comes to an end.
Commenting that he did not want "any parent with a child under five to be preventing from working if they want to", Hunt said the free provision amounted to a childcare saving of around 60% a year for parents.
The extension of free hours will roll out over a period of time in an attempt to ensure there is availability for the free provision the government has promised.
“Working parents of two-year-olds will be able to access 15 hours of free care from April 2024, helping around half a million parents," Hunt said.
"From September 2024, that 15 hours will be extended to all children from 9 months up, meaning a total of nearly one million parents will be eligible.
"And from September 2025 every single working parent of under 5s will have access to 30 hours free childcare per week.”
What else was announced on childcare?
The government is set to increase the amount it pays childcare providers to deliver the free hours, with £204m for providers from this September, and up to £288m in 2024, in an attempt to alleviate concerns that the sector is struggling to stay afloat.
One of the ways it will make childcare providers' costs cheaper is by lowering the ratio of staff to two-year-olds from 1:4 to 1:5 – meaning there will be one adult for every five small children, in line with ratios currently seen in Scotland.
However, Hunt said the change in ratios was optional for childcare providers.
He also announced that parents who receive universal credit could have their childcare fees paid upfront rather than waiting to be reimbursed for them – and upped the maximum claim for parents to £951 for one child and £1,630 for two children.
For parents with older children, Hunt announced plans to boost wraparound care in schools – aiming to have 8am-6pm care in place for older children by September 2026.
Who will be eligible for extended free childcare and when will it start? (Independent, 4 min)
What's the response been?
While many parents have welcomed the financial boost offered by extending free childcare hours, there are concerns about carer-to-child ratios and the impact the new rules will have on embattled early years providers.
Neil Leitch, chief executive of the Early Years Alliance, 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."
Pregnancy and childcare campaign charity Pregnant Then Screwed said ahead of the budget announcement that the devil would be in the detail – and has since said the provision does not go far enough.
"We are concerned that the money pledged is not enough to reduce costs for parents sustainably," said founder Joeli Brierly in a statement.
"It is imperative that there is a clear and remunerated strategy to attract more educators into the sector, to retain those workers and to offer progression opportunities.
"Without a workforce plan providers will continue to be forced to close, and increasing ratios will be detrimental to staff retention, what they need is better pay which will come from significant investment into the sector and into the roll out of the free hours scheme."
In a tweet, the Institute for Fiscal Studies (IFS) director Paul Johnson said: “Extending free childcare to all children over 9 months really is a big extension of the welfare state... about doubles childcare spending.
“We’ve been edging in this direction for a good 20 years. This is a new leg of the welfare state finally nearing its end point.”
Winners and losers from the Budget 2023 – and what it means for your money (The Telegraph, 5-min read)