Ways and Means - Financial Statement and Budget ReportWays and Means

Part of the debate – in the House of Commons at 12:31 pm on 15 March 2023.

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Photo of Jeremy Hunt Jeremy Hunt The Chancellor of the Exchequer 12:31, 15 March 2023

This is a comprehensive plan to remove the barriers to work facing those on benefits, those with health conditions and older workers. That is the E of the employment pillar of today’s growth budget.

Which brings me to the final pillar of our growth plan. After employment, enterprise and everywhere, I turn to the E of education. Over more than a decade, this Conservative Government have driven improvement in our education system. We have risen by nearly 10 places in the international league tables for English and maths since 2015.

In the autumn statement, I built on this progress with an extra £2.3 billion annual investment to our schools. We are reviewing our approach to skills with Sir Michael Barber. We have set out our plans to transform lifelong learning with a new lifelong loan entitlement and my right hon. Friend the Prime Minister announced plans to make maths compulsory until 18. But today I want to address an issue in our education system that is bad for children and damaging for the economy. It is an issue that starts even before a child enters the gates of a school. Today I want to reform our childcare system.

We have the one of the most expensive systems in the world. Almost half of non-working mothers said they would prefer to work if they could arrange suitable childcare.

For many women, a career break becomes a career end. Our female participation rate is higher than average for OECD economies, but we trail top performers, such as Denmark and the Netherlands. If we matched Dutch levels of participation, there would be more than 1 million additional women working. And we can do that.

So today I announce a series of reforms that start that journey. I begin with the supply of childcare. We have seen a significant decline in childminders over recent years— down 9% in England in just one year. But childminders are a vital way to deliver affordable and flexible care, and we need more of them. I have listened to representations from my hon. Friend Siobhan Baillie and decided to address this by piloting incentive payments of £600 for childminders who sign up to the profession, rising to £1,200 for those who join through an agency.

I have also heard many concerns about cost pressures facing the sector. We know that is making it hard to hire staff and raising prices for parents, with around two thirds of childcare providers increasing fees last year alone. So we will increase the funding paid to nurseries providing free childcare under the hours offer by £204 million from this September, rising to £288 million next year. That is an average of a 30% increase in the two-year-old rate this year, just as the sector has requested.

I will also offer providers more flexibility in how they operate in line with other parts of the UK. So alongside that additional funding, we will change minimum staff-to- child ratios from 1:4 to 1:5 for two-year-olds in England as happens in Scotland, although the new ratios will remain optional with no obligation on either childminders or parents to adopt them.

I want to help the 700,000 parents on universal credit who, until the reforms I announced today, had limited requirements to look for work. Many remain out of work because they cannot afford the upfront payment necessary to access subsidised childcare. So for any parents who are moving into work or want to increase their hours, we will pay their childcare costs upfront. And we will increase the maximum they can claim to £951 for one child and £1,630 for two children, an increase of almost 50%.

I turn now to parents of school-age children, who often face barriers to working because of the limited availability of wraparound care. One third of primary schools do not offer childcare at both ends of the school day, even though for many people a job requires it to be available before and after school. To address this, we will fund schools and local authorities to increase the supply of wraparound care so that all parents of school-age children can drop their children off between 8 am and 6 pm. Our ambition is that all schools will start to offer a full wraparound offer, either on their own or in partnership with other schools, by September 2026.

Today’s childcare reforms will increase the availability of childcare, reduce costs and increase the number of parents able to use it. Taken together with earlier Conservative reforms, they amount to the most significant improvements to childcare provision in a decade. But if we really want to remove the barriers to work, we need to go further for parents who have a child under 3. For them childcare remains just too expensive.

In 2010, there was barely any free childcare for under-fives. A Conservative-led Government changed that, with free childcare for three and four-year-olds in England. It was a landmark reform, but not a complete one. I do not want any parent with a child under five to be prevented from working if they want to, because it is damaging to our economy and unfair, mainly to women, so today I announce that in eligible households in which all adults are working at least 16 hours, we will introduce 30 hours of free childcare not just for three and four-year-olds, but for every single child over the age of nine months.

The 30 hours offer will now start from the moment maternity or paternity leave ends. It is a package worth on average £6,500 every year for a family with a two-year- old child using 35 hours of childcare every week, and it reduces their childcare costs by nearly 60%. Because it is such a large reform, we will introduce it in stages to ensure that there is enough supply in the market. Working parents of two-year-olds will be able to access 15 hours of free care from April 2024, helping about half a million parents. From September 2024, that 15 hours will be extended to all children from nine months up, meaning that a total of nearly 1 million parents will be eligible. From September 2025, every single working parent of under-fives will have access to 30 hours of free childcare per week.