A £4billion extension to free childcare for one and two-year-olds could be part of a surprise announcement in today’s Budget to help people get back to work.
The government is set to offer 30 hours of free childcare a week to all children aged one to two, in addition to the existing free hours for those aged three and four.
Currently, all three- and four-year-old families get 15 hours of free childcare per week, over 38 weeks. Households can also benefit from 30 hours per week if the parents earn the equivalent of 16 hours per week at the national minimum wage or minimum living wage.
But if a parent earns more than £100,000 a year, that excludes them from the free 30 hours – and that exception is expected to remain in the new proposals.
Chancellor Jeremy Hunt’s move would come amid concerns over the cost of childcare amid wider cost of living challenges and inflationary pressures.
Here we look at the current situation with free childcare and how you might benefit from the suggested changes.
CURRENT SITUATION OF FREE CUSTODY
Does anyone currently get free childcare for under twos?
No, there is normally no free childcare for children under two in England.
What is the current free childcare offer for two year olds?
As it stands, you can get 15 hours a week of free childcare for your two-year-old child if you live in England and receive benefits such as Income Support; income-based jobseeker’s allowance; or income-related employment and support allowance.
You can also get the free hours if you receive Universal Credit and your household income is £15,400 a year or less after tax, not including benefit payments; Child tax credit, working tax credit (or both) and your household income is £16,190 a year or less before tax; or you get the guaranteed element of the pension credit.
Two-year-olds can get free childcare if cared for by a local authority; have an education, health and care plan; obtain a subsistence allowance for persons with disabilities; or left care under an adoption order, special guardianship order, or children’s arrangement order.
However, you may still have to pay for additional costs such as meals, diapers or travel.
The plan would include 30 hours a week of childcare for three and four-year-olds (file)
What are three- and four-year-olds entitled to?
All children aged three and four in England currently get 570 hours of free childcare a year, which equates to 15 hours a week when 38 weeks of the year are counted.
Schedules must be made with an approved childcare provider, and stop when your child enters reception class. You can get it from the trimester following your child’s third birthday.
Which three and four year olds get 30 hours free?
It depends if you work; your income and that of your partner, if you have one; your child’s age and situation; and your immigration status.
You can usually get 30 hours of free childcare if you (and your partner, if you have one) work; on sick leave or on annual leave; on shared parental, maternity, paternity or adoption leave.
If you are on adoption leave for a child between the ages of three and four, you must return to work within 31 days of the date of your first request for 30 hours of free childcare for that child.
If you are not currently working, you may still be eligible if your partner is working and you receive Incapacity Allowance, Severe Invalidity Allowance, Caregiver Allowance, Limited Capacity Allowance work or a contribution-based employment and support allowance. You can apply if you start or resume work within the next 31 days.
In terms of income, over the next three months, you and your partner (if you have one) should each expect to earn at least:
- £1,976 if you are 23 or over
- £1,909 if you are 21 or 22
- £1,420 if you are between 18 and 20
- £1,000 if you are under 18 or an apprentice
That’s at least the national minimum wage or living wage for 16 hours a week on average.
You can use an average of what you expect to earn during the year, if you are not paid regularly.
Certain types of income will not count towards the minimum amount you must earn to be eligible, such as dividends, interest and income from real estate investments.
If you or your partner have an ‘adjusted net income’ of more than £100,000 in the current tax year, you will not be eligible.
You must have a national insurance number and at least one of the following: British or Irish nationality; settled or pre-settled status, or you have applied and are awaiting a decision; permission to access public funds.
If you have a partner, they must also have a national insurance number.
You can apply when your child is 2 years and 36 weeks old.
NEW PLAN PROPOSED
What are the new plans on free childcare?
The government is preparing to offer 30 hours a week of free childcare to all children aged one to two, in addition to the existing free childcare hours for those aged three and four.
Who will be eligible?
Full details of any expansion are likely to be in today’s budget, but the 30 hours are expected to be for working parents, as long as none of them earn more than £100,000.
Why is the government making the change?
Chancellor Jeremy Hunt is expected to announce the £4billion policy as part of a wider campaign to tackle Britain’s labor shortages and get more people to work.
For many working parents, the cost of childcare is so high that nearly all of their pay is swallowed up in it. This prevents some from working and discourages others from working overtime.
He wants hundreds of thousands more people to have jobs, with support focused on those over 50, those with disabilities and those on Universal Credit.
Will childcare providers get more funding?
Yes, Jeremy Hunt should increase the hourly rate paid to childcare providers by the government to allow them to meet their current 30 hour weekly entitlement.
Childcare costs in the UK are among the most expensive in the world, with soaring costs in areas such as energy and food forcing nurseries to raise fees to levels some parents can no longer afford afford.
Yet the underfunding of the current 30-hour provision has caused nurseries to close, while others have passed the costs on to parents of younger children.
At the same time, parents complain that once the cost of extras is added, they still end up with big childcare bills, despite 30 hours of free childcare a week.
What was the political reaction to the plan?
Childcare appears to be a key political battleground ahead of next year’s general election, and Labor has vowed to make it a priority if they win.
His MP Stella Creasy, who has campaigned on the issue, called Mr Hunt’s plan ‘economically illiterate’, warning he would increase demand without tackling supply.
Labor has vowed to carry out a complete overhaul of Britain’s childcare system, after calling it ‘broken’.
Alison McGovern, the shadow jobs minister, said any childcare announcements had to be part of an “appropriate reform strategy”.
She told BBC Newsnight: ‘If we spend Budget Day tomorrow talking about childcare, I’ll think that’s a good thing. And I think that’s where our agenda needs to be… We need to know a lot more about how this is going to work.
“It can’t just be a one day announcement and that’s it, we’ll see how it works out.” We need proper reform.
“It has to be part of a proper reform strategy because we know the system is not working at the moment.”
What was the first reaction outside of politics?
Neil Leitch, chief executive of the Early Years Alliance, said “the devil was in the details” of any plan.
“We know from experience that what may seem like an impressive investment in theory can end up being totally inadequate in practice, and so understand exactly how this announcement will translate into hourly funding rate changes, particularly in light of the “Extending the 30-hour offer to one- and two-year-olds will be key to understanding the impact on the sector,” he said.
The Financial Times cited research by the organization which found the government in 2021 was paying nurseries around £4.90 for every hour funded, despite estimates that it would cost around £7.50 per hour to take care of each child.
Paul Johnson, director of the Institute for Fiscal Studies, said many would welcome any announcement to boost free childcare.
But he warned that ‘the whole system is hugely complex’, adding: ‘While universal support has expanded, targeted support for the most needy children has contracted.’
Purnima Tanuku, chief executive of the National Day Nurseries Association, warned that providers cannot “magify” places.
“I think we really need to see the sums,” she told BBC Newsnight.
“The challenges right now are, suddenly nurseries can’t just create magical places all of a sudden because they’re in crisis.”
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