Budget 2023: Hunt warns childcare support boost ‘can’t happen overnight’
Jeremy Hunt has said the Government wanted to roll out extra childcare support announced in his Spring Budget for parents “as soon as possible” but was given advice that it wouldn’t be possible “overnight”.
The Chancellor announced in the Spring Budget on Wednesday that parents of eligible children as young as nine months will be able to claim 30 hours of free childcare a week, saving them around £6,500 a year, in a bid to get people back into work. The current policy applies to three and four year olds.
The move is expected to raise employment by 60,000 as it frees up parents, as well as “raising the hours worked by mothers already in work”, the Office for Budget Responsibility (OBR) said.
But the extra support won’t begin to be available until next year, with Mr Hunt explaining that the a £5.2 billion a year improvement policy will be introduced in stages to ensure there is “enough supply in the market”.
Working parents of two-year-olds will only be able to access 15 hours of free childcare a week from April 2024. From September 2024 the 15 hours will be extended to working parents of children aged between nine months and two years old, helping nearly a million parents.
Full childcare support covering 30 hours a week for children aged between nine months and three years old won’t be available until September 2025.
The timeframe for implementation has left many parents struggling with childcare costs frustrated saying it will arrive “too late” for them.
Budget Day | Wednesday 15th March 2023
When questioned why the support isn’t being offered immediately, Mr Hunt told the BBC: “We’re willing to start it as soon as possible but the advice we had is that it’s such a big change in the market that it wouldn’t be possible to do it overnight”.
Mr Hunt says to implement the changes “in an orderly way” it needs to be “ramped up” over two years.
Early years leaders are concerned nurseries and childminders could struggle to deliver additional places for younger children from next year if the funding provided by the Government does not meet rising costs.
Neil Leitch, chief executive of the Early Years Alliance (EYA), which represents around 14,000 childcare providers, said: “At a time when settings are closing at record levels and early educators are leaving the sector in their droves, unless the proper infrastructure is put in place by the time the extended offers are rolled out, many parents of younger children expecting funded places to be readily available to them are likely to be left sorely disappointed.”
Megan Jarvie, head of Coram Family and Childcare charity, said it was “crucial” that there is enough funding for the expansion of free childcare places.
She said: “The sector needs to be on board. The funding rate needs to be right. And there needs to be a lot of work done between now and April to be ready to start delivering.
“Shortages of childcare are already growing and we’re now looking to expand the number of children in childcare.”
Tamer Shakran, who works as an assistant branch manager at a roofing supplier in Basingstoke, said he and his partner currently spend £1,200 each month on four days of nursery a week for their daughter, who is nearly two.
"(I'm) incredibly angry about it ... This would have been an incredible help for families like mine but now we have to struggle on for another year," Mr Shakran, 31, said.
"It's too late for me, I work a 45-hour week and my partner works full time also - we have no local family members to help look after our daughter, so we have to send her to childcare.
"We and many others are also in debt with gas and electricity providers, struggling to keep within our budget for groceries, and many other factors of inflation leading to more people getting into debt.
"This needs to be brought in this year.People are struggling out here in the real world, the Government are so out of touch with how it feels to just try and live in the current economy."
In his Budget speech, Mr Hunt said the Government will increase funding paid to nurseries providing free childcare under the hours offer by £204 million from this September and rising to £288 million next year.
Joeli Brearley, chief executive and founder of Pregnant Then Screwed charity, said: “We need to see the detail as to how this money is being distributed and we need to know that the government is investing in these new schemes based on the actual cost to deliver them.
On Wednesday, the Chancellor said the Government will change minimum staff-to-child ratios in England from 1:4 to 1:5 for two-year-olds in England, but the change will “remain optional”.
He announced that the Government would pilot incentive payments of £600 for childminders joining the profession - £1,200 if they join through an agency.
Ms Brearley said: “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.”
Announcing his reforms to childcare on Wednesday, the Chancellor said: “We have one of the most expensive systems in the world.
“Almost half of non-working mothers said they would prefer to work if they could arrange suitable childcare.”
In his Budget speech Mr Hunt also said he wants all schools to be able to offer wraparound care either side of the school day by September 2026.
Extension of support for household bills
The Chancellor also used the improved economic picture to promise an extension of support for household bills, maintaining the energy price guarantee at its current £2,500 level from April to June.
It had been due to rise to £3,000 in April and the cost of scrapping the planned 20 per cent increase will amount to about £3 billion.
For businesses, a three-year temporary tax break will allow investment in plant and machinery to be written off against corporation tax - which will rise from 19p to 25p in April - costing £10.7 billion in 2024-25.
A multi-billion pound tax break on pensions is intended to stop an estimated 15,000 high earners - including senior NHS doctors - leaving the workforce.
Mr Hunt abolished the £1.07 million lifetime allowance - the total amount of tax-relieved contributions that an individual can accumulate - and increase the tax-free annual allowance from £40,000 to £60,000.
The measures will cost the Treasury more than £1.1 billion year by 2027/28, but the independent Institute for Fiscal Studies said it would have only a limited impact on employment.
IFS director Paul Johnson said they would “encourage a relatively small number of better-off workers to stay in the workforce a bit longer” while Labour leader Sir Keir Starmer branded it a “permanent tax cut ... for the richest 1 per cent”.
Mr Hunt committed to spend around two-thirds of the £25 billion a year improvement in the public finances. The OBR said the economy would avoid a technical recession - two consecutive quarters of shrinkage - but it still forecast a contraction of 0.2% this year, a significant improvement on the -1.4% predicted in November.
The budget watchdog also upgraded its growth forecast for 2024 from 1.3% to 1.8%, but downgraded predictions for the following years to 2.5% in 2025, 2.1% in 2026 and 1.9% in 2027.
The Chancellor resisted demands from Tory MPs, including Boris Johnson, to scrap April’s increase in corporation tax. The move will contribute to the tax burden hitting a post-Second World War high of 37.7% in 2027-28, with the ratio of corporation tax receipts to GDP set to be the highest since the tax was introduced in 1965.
The Budget took place against the backdrop of an estimated half a million workers, including junior doctors, teachers and civil servants, walking out in disputes over pay, jobs and conditions.
Shares in top European banks plummeted and the FTSE 100 of the UK’s biggest publicly listed companies dropped to the lowest level this year amid fears of a banking crisis. Despite the promises of help with the cost of living, families still face a painful financial squeeze.
Living standards, based on real household disposable income (RHDI) per person, is expected to fall by a cumulative 5.7% over the two financial years 2022-23 and 2023-24 - less than forecast in November but still the largest since records began in 1956-57.
Sir Keir Starmer said: “After 13 years of his Government, our economy needed major surgery, but like millions across our country, this Budget leaves us stuck in the waiting room with only a sticking plaster to hand.
“A country set on a path of managed decline, falling behind our competitors, the sick man of Europe once again.”
The OBR said debt was falling “only by the narrowest of margins” in five years’ time, allowing Mr Hunt to meet his fiscal target, with around £4 billion of the £6.5 billion headroom linked to increasing fuel duty - something no chancellor has done since 2011.
In other measures:
- The fuel duty freeze and the 5p cut in its rate will be maintained for another year, saving the average driver around £100 at a cost of more than £5 billion this year.
- Taking advantage of tax flexibility since leaving the European Union, a “Brexit pubs guarantee” will see duty on draught pints up to 11p lower than in supermarkets.
- Some 12 new investment zones will be created, offering up to £80 million of support each for tax breaks and incentives.
- Mr Hunt promised the “biggest change to our welfare system in a decade”, with reforms aimed at supporting more disabled people into work.
- There will be tougher sanctions for benefits claimants who fail to meet requirements to look for work or choose not to take up a reasonable job offer.