Treasury documents released after the speech provided clarification as to what this means in practice, with the Government confirming it would provide an extra £500m over two years to support the sector to deliver the expanded childcare offer.
However, it is not yet clear what measures the Government will use to ensure that rates for the funded hours rise in line with costs.
‘To support the sector to deliver the expansion of childcare support, the government is confirming that the hourly rate providers are paid to deliver the free hours offers will increase in line with the metric used at Spring Budget 2023 for the next two years,’ it states. ‘This reflects that workforce costs are the most significant costs for childcare providers and represents an estimated additional £500 million of investment over two years.’
Both the National Day Nurseries Association and the Early Years Alliance welcomed the news but with the expansion of 15-hour funded childcare to two-year-olds just weeks away, urged ministers to continue to listen to the sector about the challenges they face.
The Early Years Alliance said it was ‘a positive first step’, but more much support including longterm funding workforce strategy were needed, while the NDNA also supported the move but said they were disappointed the Chancellor did not extend the business rates discount to nurseries.
Purnima Tanuku, chief executive of the National Day Nurseries Association (NDNA) said, ‘NDNA has been calling for the Government to use annual reviews to address the gap in funding, particularly in relation to inflation and minimum wage increases. In the current financial climate we welcome the fact that the Chancellor has listened and committed to additional funding indexed to rising costs for 2025/26 and the year after.
‘We hope the Government continues to listen to the sector about the challenges providers are facing. The increase in the pass-through of funding is a welcome step and the Government must ensure that all local authorities are passing all the required funding to those providers delivering high-quality early education and care.’
Neil Leitch, CEO of the Early Years Alliance, welcomed the plans and said they have ‘long called for a mechanism to ensure that early years funding rises in line with provider delivery costs though, as always, the devil in the detail and we await confirmation of exactly what metric is being used to underpin funding increases to understand how beneficial this policy will be in practice.’
‘That said, what this policy does not do is to close this gap in any way, or address the wholly inadequate funding baseline from which providers are forced to operate. With the early years funding shortfall estimated to stand at £5 billion, it is clear that there is still much more to do to build and sustain an affordable, accessible and high-quality care and education sector over the long term.’
June O'Sullivan CEO of the London Early Years Foundation (LEYF), which operates 41 community nurseries in London, said, ‘The Government’s promise to increase the national hourly rate to the Early Years sector over the next two years is certainly welcomed and a good start and it's encouraging that ministers are listening to the urgent calls from the sector.
‘However, for this to be effective, the funding and provision must be adequate to ensure poorer children from disadvantaged backgrounds can access nurseries which provide high-quality care and education and that staff are paid fair salaries. Now, more than ever, must we all work together to improve the quality, affordability, accessibility and availability of childcare in this country.’
Commenting on the funding rates' plans, Christie & Co said 'further clarity will be required to ensure this keeps pace with cost increases and the burden is not gradually passed back to providers or parents over time, as has been the case under the current funding system'
Child benefit
In changes to child benefit, Hunt has announced a consultation on child benefit rules, to apply it to collective household incomes rather than for individuals from April 2026. The threshold for a high income tax charge on the benefit will be raised from £50,000 to £60,000. The top of a taper to withdraw the benefit will be raised to £80,000 from £60,000.
Joeli Brearley, CEO and founder of parent campaign group Pregnant Then Screwed, said, ‘It is clear the Government has listened to our concerns about the need to increase future funding rates based on workforce costs and inflation – but we eagerly await the detail on the metric being used to understand the impact this will have in real terms.
‘This commitment has the potential to enable providers to better plan for the future which will improve the sustainability of the sector, if done properly. Additionally, we applaud the recognition from the government that benefits based on individual income instead of household income are unfair, and we hope that they roll this out across other benefits e.g childcare entitlements.’
Working Families also welcomed the commitment to guarantee the rates that will be paid to childcare providers.
‘We will be watching this with great interest to see that this promise is kept and that parents and carers are not left without sufficient childcare places due to a shortfall in funding.’
However, they said, ‘We recognise that the cost of living for the UK’s 12 million working parents and five million working carers is still exorbitantly high. For those on lower incomes, times are still incredibly challenging and a decision to not introduce any additional support to those on Universal Credit or legacy benefits except to increase the time to pay back budgeting advance from 12 months to 24 months is, in our view, not sufficient’.
Budget 'fails to address challenges for children and families'
Other charities supporting children and low-income families said the Budget had not delivered for poor families.
Chief executive of Child Poverty Action Group Alison Garnham said, ‘For almost 15 years, the four million kids from poor families have been at the bottom of the pile and today is no different. This was a Budget all but blind to buckling family budgets and broken public services and will leave a legacy of crumbling classrooms, cold homes, and empty tummies.
‘Families needed the two child limit and benefit cap to be scrapped along with investment in children’s benefits, in free school meals and in the public services they rely on, from children’s centres to libraries to afterschool clubs to welfare rights advice, but the Chancellor turned away.’
Mark Russell, chief executive at The Children's Society said, ‘This budget was an opportunity to lay down a marker for a compassionate, forward-thinking society that values the wellbeing of every child. Unfortunately, that opportunity was missed, and this budget fails to address the fundamental challenges facing our children and families. Frankly this whole approach is a sticking plaster on a gaping wound. We urgently need substantial long-term, properly funded support for struggling families and their children – the budget offers temporary fixes that are not enough.’
Meanwhile, the Women's Budget Group calculated that single men will gain on average close to £500 more a year than lone mothers from the combined cuts to National Insurance contributions in the Autumn Statement and Spring Budget.
They welcomed the change to the child benefit threshold 'a relief to many parents, especially lone mothers, who are currently losing out on what should be a universal benefit for children. In high-cost areas like London, an income of £50,000 after tax is lower than median costs of rent, childcare and energy for a two-child household.
'However, we are very concerned about the move to a household means test for child benefit. Independent taxation and benefits are a key principle of women’s economic independence.'
Labour's response
Giving his statement in response to the Chancellor’s speech Labour leader Sir Keir Starmer said, ‘There we have it, a last desperate act of a party that has failed. Britain in recession. The national credit card maxed out, and despite the measures announced today the highest tax burden for 70 years.’
Starmer said there the Conservatives ‘Give with one hand, take more with the other’, with tax thresholds frozen, dragging more people into higher taxes.
While the Chancellor was ‘telling working people in recession that there’s no crisis’, he said ‘food prices [were] 25 per cent higher than two years ago, rent up 10 per cent and an average extra £240 for people re-mortgaging’.
He said, ‘The whole country can see exactly who they are… party first, country second.’
