The Chancellor must invest £1.82bn in childcare to help families with the cost-of-living crisis

Please note: a previous version of this press release estimated the shortfall at £1.75bn. This was changed on the 15th March 2023 to reflect updated assumptions in our analysis. 

• The Women’s Budget Group, the UK’s leading gender equality think tank, is calling on the Chancellor to boost funding for early years and childcare by £1.82bn in the Spring Budget.

• This is the estimated shortfall between current Government funding for the existing 15 and 30-hour ‘free’ schemes, and the actual cost to providers of delivering those hours. The failure to fund these hours at their true cost is at the root cause of high parent fees, closures and poor pay and conditions for the workforce.

• WBG is also calling on the Government to raise the ceiling of total childcare costs it will reimburse eligible parents through Universal Credit, which have not increased since 2016, and to remove the current 85% cap. The average cost of a fulltime nursery place for a child under two is nearly double the capped amount families can currently claim.

• They are also calling for the Department for Work and Pensions to fund the upfront costs of childcare through a grant scheme, to unlock the working potential of over 300,000 parents, and support economic growth.

Sarah Ronan, Early Education and Childcare Lead at the Women’s Budget Group said,

“If the Chancellor is serious about growing the economy and supporting families through the cost of living crisis, he needs to prioritise investment in early education and childcare. Years of chronic underfunding have led to extortionate fees for parents, providers closing down and early years workers leaving the sector because of poor pay. Mothers are being forced out of work at a time when bills are rising, and children are being denied vital early education that sets them up for life.

“When households were faced with unmanageable energy costs, the Government stepped in. Yet each month, parents of young children are paying as much on childcare, if not more, as they are on housing, and we’ve yet to see any decisive action from Government. The Chancellor knows how urgent this crisis is. To not step in and take action now would be to knowingly push the sector towards collapse and families into poverty.

“We all benefit from childcare. It enables parents to go to work, it provides children with the early learning experiences that help them to excel in school. It is a vital public service. The Government must commit to a rescue and reform programme for the early years sector. That has to start with urgent action on funding to ensure the sustainability of the childcare sector so we don’t see more closures, and a longer term bolder vision for early years reform.

“A thriving economy is underpinned by strong social infrastructure and a healthy and well cared for population at all ages. That starts with the early years.”

ENDS

About the Women’s Budget Group

The Women’s Budget Group is an independent network of leading academic researchers, policy experts and campaigners working towards a gender equal economy. WBG hosts the Early Education and Childcare Coalition, a group of 30 organisations representing parents, children, providers, early years workers and the business community. Together they are campaigning for reform of the early education and childcare sector so that it delivers for all.

For more information or further comment, contact

erin.mansell@wbg.org.uk / press@wbg.org.uk

Notes to editors

• The Government funds local authorities an hourly rate to pass onto providers for the 30 hours a week ‘free’ childcare on offer to working parents of 3- and 4-year-olds who meet the eligibility criteria, and 15 hours ‘free’ childcare to parents of disadvantaged 2-year-olds.

• The hourly rate falls far short of the costs of providing childcare, especially with the impact of inflation and energy costs. Many providers therefore subsidise the government funding through charges to parents outside the ‘free’ hours and for add-ons like food and activities, making it increasingly unaffordable for parents to work.

• The Government reimburses up to 85% of childcare costs up to a maximum amount for parent claiming Universal Credit, which they must fund up-front and then reclaim. The total they can claim is capped at £646 for one child and £1108 for 2 or more children. This has not revised since 2016.

• Coram Family and Childcare Trust’s 2022 childcare survey found the average weekly cost of having a child under 2 in a nursery setting for 50 hours in England was £273.57, which is £1,185.47 per month.

• Citizens Advice estimated in 2021 that some 317,000 parents are locked out of work by this mechanism and according to Save the Children, only 13% of those eligible to claim the childcare element of Universal Credit take it up.

• A survey of parents by Pregnant Then Screwed published today (2^nd March 2023) found one in ten parents now pay the same or more than their daily take home pay on childcare costs.

• WBG’s calculation is based on the 2020/21 hourly cost of provision the Department for Education estimated in a 2015 paper on spending review scenarios, published following an FOI request from the Early Years Alliance. The WBG added the impact of inflation and the uplift to the National Living Wage to the hourly rates for both age groups.

• To fund the 3- and 4-year-old hours at cost requires an additional £1.54bn, and a further £286 million is needed to fund the hours for 2-year-olds at cost, totalling £1.82bn.

​Read our response to the Spring Statement here

Read our detailed response to the childcare announcements made in the Spring Statement here: WBG finds Government funding for early education and childcare falls short by £5.2bn