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Spring Budget Breakdown for Employers: Changes to childcare
In this series of articles, we reflect on key changes announced by the Chancellor in the Spring Budget and assess their impact in relation to employee management and employee benefits. In this piece we explore changes to childcare.
The affordability of childcare has become an increasingly acute issue for working parents in recent years. Data from the Organisation for Economic Co-operation and Development ranks the UK as having some of the most expensive childcare costs in the developed world.
While 30 hours a week of free childcare is available for working parents, this is not offered until children are three years old, and analysis indicates that childcare costs for parents of children under two are currently more than £2,000 a year higher than they were in 2010.
In some cases, the economics of this situation mean it makes little financial sense for some parents to work at all and they are making the difficult decision to leave their jobs. As a result, highly valued skills and experience are being lost from the UK PLC talent pool.
What was announced
Key headlines relating to childcare announced by the Chancellor included:
- By September 2025, every eligible child over the age of nine months with working parents will benefit from 30 hours of free childcare.
- The reforms are being introduced in phases. Eligible parents of two-year-olds will receive 15 hours of free childcare from April 2024. This will be followed in September 2024 by 15 hours of free childcare being offered to eligible parents of children aged nine months to three years.
- A £204 million boost to nursery funding from September 2023 to support existing free hours care.
- Funding for schools and local authorities to increase the supply of wraparound care provided between 8am and 6pm.
What it means
The measures unveiled by the Chancellor were broadly welcomed as a supportive move for parents who are balancing careers with sky-high childcare costs. However, particularly in the midst of the current cost-of-living crisis, some have questioned the phased nature of the changes.
Questions have also been raised about whether the funding pledges will result in the childcare system having the necessary structures and resources in place to deliver on the Chancellor’s promises.
As such, current employees are likely to continue facing childcare difficulties over the coming months and years, and employers should be mindful of providing whatever support they can to these individuals in order to encourage the retention of talent.
Research consistently shows the value of flexible working to UK parents, particularly in the wake of the pandemic. Indeed, one poll places flexibility on a par with pay as the top priority for mothers. So, while additional childcare funding might ease some of the financial pressures facing working families in due course, employees will also continue to look for their employers to offer lifestyle benefits in the short term.
This article forms part of a series looking at the key changes announced by the Chancellor in the Spring Budget and they mean for those with responsibility for employee management and employee benefits schemes.
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