Chancellor expected to expand free childcare in Budget announcement

Jeremy Hunt is expected to announce the expansion of free childcare for working parents in England to now include one and two-year-olds in today’s Budget.

Currently, working mums and dads with three and four-year-olds are eligible for 30 hours per week of free child care. The plans are part of a move to help encourage more parents back into the workplace and help boost economic growth.

Equivalent funding is expected to be announced for Wales, Scotland and Northern Ireland. The Treasury is not formally commenting ahead of the Budget — which will take place on Wednesday March 15th, ahead of the new tax year beginning in April.

However, it has not denied suggestions — as first reported in The Guardian — that the hourly rate paid to childcare providers by the government will also be increased, and that local authorities will be given funding to start setting up wraparound childcare provision in schools from September 2024.

The cost of childcare in the UK is among the highest in the world, seeing the government under pressure – including from some of its own MPs – to provide more help for parents. The rising costs of childcare has been seen as a deterrent preventing some parents from going back to work or being able to work full time.

The extension of free childcare has been lobbied for by business group the CBI, which calculates that while it will cost several billion pounds, it could raise up to £10bn in further revenue by increasing the number of parents able to work.

The Guardian also reported that the government could introduce changes to the staff-to-child ratios for two-year-olds in childcare, moving from one carer for every four children to 1:5 to align with Scotland — which the Treasury also has not denied. Supporters of the idea say it could help cut costs for parents.

However, the Early Years Alliance, which represents around 14,000 childcare providers in England, said relaxing ratios risked ‘severely compromising the safety and quality of care’ and putting more pressure on the workforce during ‘a severe staffing crisis’.

EYA chief executive Neil Leitch said underfunding had left the system ‘on its knees’, and though reports of more spending on the sector ‘appear positive, the devil is in the detail’. He said the government must ensure funding meets the sharply rising costs of delivering places.

Meanwhile, the government will also confirm that energy bill support will continue at current levels through to June. Currently, the government limits the energy bill for a typical household to £2,500 a year but this had been due to rise to £3,000 on April 1st.

Mr Hunt is expected to resist calls from some Tory MPs to cut taxes, saying: “The best tax cut right now is a cut in inflation.” A planned rise in corporation tax, from 19% to 25%, is due to come in from April 1st. However, under plans to be announced in the Budget, businesses will be able to mitigate this increase with a new system of capital allowances.

Amid further teacher strikes and rail strikes happening today and tomorrow (March 15th and 16th), no further cash is expected to be made available for public sector pay, but cabinet figures have expressed confidence that many of the industrial disputes are close to being settled.

In his Budget speech, Mr Hunt will refer to the ‘difficult decisions’ taken by the government last autumn ‘to deliver stability and sound money’, following the economic turbulence caused by Liz Truss’s tax-cutting agenda.