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NEWS: Budget announcement and the childcare sector

Yesterday the Chancellor announced a number of significant measures impacting on childcare in England worth over £4bn. 

In England the measures include: 

  • Expansion of 30 hour offer to children from nine months of age. 
  • An uplift in the hourly rate paid to providers from September to provide funded childcare.  
  • A change in adult-to-child ratios. 
  • A £600 ‘start up grant’ for childminders with a higher payment for those who look to join a childminding agency. 
  • Additional local authority funding for extra wraparound hours in primary schools. 

There will also be changes to the Universal Credit system which will have a positive impact on families in Wales: 

  • Parents on Universal Credit will receive childcare support upfront rather than in arrears- something that PACEY and a coalition of organisations have been campaigning for. 
  • An increase in the maximum amount that parents can receive for childcare support through the Universal Credit system. 

Please see Update on Childcare Offer announced by Welsh Government on 17 March 2023. We will wait to see how other changes announced influence the approach in Wales. 

Expanding 30 hour funded childcare to children from 9 months-of-age (England only) 

The announcement that the 30 hour a week funded childcare scheme will be expanded to include children from nine months old has taken many by surprise. It is understood that the proposal came back on the table following forecasts that suggested it could help boost economy growth.  

The plan will be phased: 

  • April 2024 – Eligible two-year old children will get 15 hours of free childcare per week. 
  • September 2024 – Eligible children between nine months and two years will get 15 hours. 
  • September 2025 – Eligible children between nine months and three years will get 30 hours. 

For those in Wales the extension of high-quality childcare to all two-year olds in Wales was announced in March 2022 and the phasing in of this begun in September. We will share any further announcements from Welsh Government in reaction to the budget today 

Uplift in hourly rate to be paid to providers (England only) 

PACEY welcomes the announcement that there will be an increase in the funding rate for funded childcare hours from September.  

The overall budget for funding paid to early years providers for the existing entitlement offers for three- and four-year-olds is also due to increase. The Chancellor said this will increase by £204 million in 2023/24 and £280 million in 2024/25. 

This is in addition to the £4.1 billion that the government will provide by 2027-28 to facilitate the expansion of the new funded hours for younger children. 

We understand that some providers are concerned that this uplift will still not be enough to make their service sustainable, particularly with increased demand, however it is a far greater offer than we expected, and now we will need to take the time to understand the details and calculate how it translates to settings on the ground. 

PACEY believes the only way forward is for government to work with the sector to develop a robust and long-term plan for funding that recognises early education and childcare as a vital part of the education infrastructure, just like schools.   

In Wales the rate paid to providers has been considered more recently with an 11% increase in the rate implemented in April 2022.  

Changes to adult-to-child ratios (England only) 

In addition to the spending commitments above the Government has decided to move ahead with changes to adult-to-child ratios. The change from 1:4 to 1:5 for two-year-olds aligns with Scotland, and the government has said they will consult on further measures to improve flexibility for providers. 

This is a disappointing move by the Government. In consultation with our members, we know that there is very little, if any, support for this measure and that is true of parents too. We are concerned that an already beleaguered early years workforce will feel wholly let down by this and, more importantly, the education, care and safety of children will be adversely impacted. We will continue to work with the Government to better understand and communicate the implications of the policy for children and early years professionals. 

Changes announced in England today around ratios will not directly impact on childcare in Wales at this time. In line with the voice heard, and strong feelings from members, PACEY Cymru has raised issues in relation to ratios in recent months with Welsh Government. We await the Welsh Government’s response to the changes announced and any plans they have. 

£600 ‘start-up’ grant for childminders (England only) 

PACEY has long called for start-up grants as one measure to help counteract the decline in childminding. So, we are pleased to see that the government today has announced a £600 incentive for childminders. It’s a start, and a move towards a more positive approach to recruitment in the childcare sector. PACEY’s aim now is to find out more details on the scheme for example when it will start and how it will work.   

The higher payment outlined as an incentive for childminders to join an agency requires further discussion with Government around how it will work and perceived benefits to the sector. 

We are also awaiting Welsh Government’s response in relation to their thoughts on these payments and any plans they have. 

Childcare costs through Universal Credit to be paid upfront (UK wide) 

The Government also announced that families eligible for the Childcare Costs Element of Universal Credit will now be given the payments upfront, helping them secure the right childcare for their child. 

For several years, PACEY, along with other organisations, has been calling for this. We have been supporting single working mum Nichola Salvato in her legal battle to reform the upfront childcare payments rule. Nichola claimed that the requirement for parents on Universal Credit to find the money to pay childcare fees themselves, then only later claim them back from the Department of Work and Pensions (DWP) was unlawful discrimination. We also know, from consulting with PACEY members, that too many providers have had to turn parents on Universal Credit away, because they themselves cannot afford to provide childcare before payment is secured. 

This announcement will not only help families on Universal Credit to get the support they need to get into work or to increase their working hours; it will also mean more providers can offer their children vital early education and support. 

This is a huge win for Nichola, other parents in her position, and all of us who have been involved in the campaign.  

An increase in childcare support through Universal Credit (UK wide) 

The Government also announced that they will be increasing the maximum amount families claiming Universal Credit can receive for childcare support. The Childcare Costs Element of Universal Credit has been frozen at £646 a month per child since 2005, despite the huge increases in childcare costs since this time. It means that this support will go up from £646 to £950 for one child and from £1100 to over £1600 for two or more children. 

At the same time the government will also be requiring benefit claimants to attend more meetings with work coaches and attend skills bootcamps to help them get back to work. 

Wraparound/before and after school provision (England only)

Local authorities in England will be given £289 million over two academic years, starting in September 2024, to provide wraparound provision at schools. The aim is allow parents to drop their children off at 8am and pick them up at 6pm. It will be a two-year pathfinder (pilot) scheme and will include all primary schools. 

In summary: 

At first sight, the Government’s commitment to spending over £4bn on childcare and the early years is of course to be celebrated, but we must wait to see the details.  

As a sector we know that top line figures that can at first appear impressive, can turn out to be far less positive when the sums are done, and the funding allocation is applied as hourly rates on the ground. We hope, however, that lessons have been learned and the extension of the 30 hours offer to one-and two-year-olds in England will come with the necessary funding.  

The changes to Universal Credit provision are very much welcome and will make a big difference to many parents, their children and our members that support them. 

The wraparound proposal in England again raises a number on questions around capacity to deliver in already over stretched primary schools. We look forward to seeing further information on how this policy will come to fruition. 

Finally, the relaxing of adult to child ratios in England concerns us and our members alike. We understand that the needs of the economy will always have influence on the childcare and early years sector, it has always been that way, but our sector is not just about the immediate needs for economic growth. It is about the growth of children, their education, development and care and all Government policy should keep that firmly in their sight. We are concerned that ratios changes will undermine that, but we will work with Government as all the measures announced today come to life.