Women’s Budget Group says underfunded expansion could be a fatal blow to the early years

Date Posted: Monday 13th February 2023

childcareSocial InfrastructureSpring Budget 2023

Recent reports suggest that the Treasury is considering expanding the current early years offer for parents.[1]

Responding to these rumours, Sara Reis, Acting Director at the Women’s Budget Group said,

“The current early education and childcare system is not working for anybody: not for children, not for parents, not for the workforce and not for the economy. It is a broken system that needs urgent attention so we welcome reports that the Treasury has recognised the need to invest in the early years for a healthy economy.

“Despite our repeated calls for investment in the early years however, we are deeply concerned that rumours of an announcement on childcare in the Spring Budget are based on the Treasury looking at how to increase provision on the cheap; trying to get more people back into work without realising the potential knock on impacts if not done properly. This could be a fatal blow to a sector hanging in the balance.

“The Government knowingly underfunds the existing ‘free hours’ for 2, 3 and 4-year-olds giving them less per hour than it costs early years settings to provide, forcing them to charge parents of younger children more per hour to cross-subsidise other ages to meet their costs.

“Simply expanding the current system to young children would make it even less financially viable for the majority of settings, which would likely result in providers closing down in greater numbers than the more than 4,000 that have already closed their doors,[2] having the opposite effect than intended and making it even harder for parents to find suitable provision for their children.

“Moreover, any expansion of state-funded provision must include a workforce strategy. Wages in this sector are among the lowest in the labour market with one in eight earning less than £5 per hour, and 37% of staff leaving their job in the first two years.[3]

Finding, training and retaining the additional staff needed to accommodate all parents of 1 and 2 year olds who would want to take up the offer without improving the pay offer and opportunities is both insulting and unworkable.

“If the Treasury is serious about increasing funding for early education and childcare as a means to support parental employment and economic prosperity, they should start by funding the current offer at cost, which would help bring down the costs to parents and support investment in training and support for workers.

“Beyond that, they must move to a supply-side funding model, a better rewarded workforce and increased targeted support for the most disadvantaged children, who benefit the most from high-quality early education and childcare.

“In the longer-term the Government should invest in universal and free early years provision available from the age of six months. Investment in such a system would largely pay for itself through additional taxes to the exchequer from the additional jobs created in the sector and the returns on maternal employment – as we have modelled.”

[1] https://www.theguardian.com/politics/2023/feb/10/treasury-considering-huge-expansion-free-childcare-england

[2] https://www.gov.uk/government/statistics/childcare-providers-and-inspections-as-at-31-march-2022/main-findings-childcare-providers-and-inspections-as-at-31-march-2022#fn:1#_ftn2

[3] https://www.gov.uk/Government/news/stability-of-the-early-years-workforce-in-england-report


About the Women’s Budget Group

The Women’s Budget Group is an independent network of leading academic researchers, policy experts and campaigners. Our vision is of a caring economy that promotes equality between women and men.

For more information or further comment, contact

Erin Mansell, Head of Communications and Public Affairs: erin.mansell@wbg.org.uk