Fund 50 hours a week of childcare from nine months old

## Summary Every child in England from nine months old until they start school would be able to get up to 50 hours a week of free childcare for 48 weeks a year, whether or not their parents work, and nurseries and childminders would be paid 20% more per hour so that enough places exist. Parents, mainly mothers, would face much lower costs if they returned to work or increased their hours, which should raise employment and output. ## Objective High childcare costs and the part-time cap on current funded hours discourage parents of young children, especially second earners, from working full-time. The policy works mainly through **labour supply**: higher participation and longer hours among parents of under-fives. A secondary channel is **productivity**, as fewer parents would step down to lower-skilled part-time jobs. A 20% increase in funding rates would also lower the price parents pay for childcare. ## Measures 1. **Entitlement.** All children in England from nine months old until the start of the reception term after their fourth birthday would be entitled to 50 funded hours a week for 48 weeks (2,400 hours a year). Families could also spread this over 52 weeks at up to 46 hours a week. There would be no work or income test. This would replace the existing 15- and 30-hour entitlements and the disadvantaged two-year-old offer. 2. **Provider funding rates.** Average hourly funding rates for each age band would be set 20% above the baseline 2027-28 rates, on all funded hours. Assumed illustrative national averages: - under-twos: about £12.00 to £14.40 - two-year-olds: about £8.80 to £10.55 - three- and four-year-olds: about £6.10 to £7.30 Local authorities would have to pass on at least 97% of funding to providers. 3. **Charging rules.** Providers would not be able to charge parents top-up fees for funded hours. They would be able to charge only for meals and consumables, which would have to be optional and transparently priced. 4. **Administration.** The Department for Education (DfE) would fund local authorities through the early years block of the Dedicated Schools Grant. Councils would register children and pay providers. HMRC's eligibility-code check for working parents would end for under-fives. ## Timing and phasing - **September 2027:** the full entitlement and rate increase would start. Take-up of the extra hours would be limited by the number of places available. - **2027-28:** a part year of seven months, with take-up of additional hours at around 60% of the steady-state level. - **2028-29:** take-up would reach around 90% of steady state as capacity expanded. - **2029-30 onwards:** steady state. - **2032-33:** parameters would be unchanged in real terms, with rates uprated annually in line with DfE's provider cost index. ## Cost and financing These are gross additional costs above the March 2025 baseline, in **cash terms** (£bn). They assume a steady state of £8bn a year in 2027-28 prices, uprated by about 2% a year. | | 2027-28 | 2028-29 | 2029-30 | 2030-31 | 2031-32 | 2032-33 | |---|---|---|---|---|---|---| | England entitlement | 3.9 | 7.3 | 8.3 | 8.5 | 8.7 | 8.8 | **Assumptions behind the cost** - About 2.1 million eligible children. - Steady-state take-up of the additional hours that implies roughly 60% more funded hours than the baseline. - Higher take-up than this would raise the cost materially. Full use of 2,400 hours by most children would cost well over £20bn. - The figures are net of lower Tax-Free Childcare and Universal Credit childcare-element spending on pre-school children. **Barnett consequentials** for Scotland, Wales and Northern Ireland would add about 20%, or roughly £1.7bn a year at steady state. They are not included in the table and are assumed to be paid. **Financing:** the measure is assumed to be paid for by additional **borrowing**, with no offsetting tax rise or spending cut. It would be recorded as departmental (DEL) resource spending by DfE. ## Delivery **Legislation:** a Childcare Bill would amend the Childcare Act 2016 to remove the working-parent condition and the Childcare Act 2006 (section 7) to extend hours. This would be followed by regulations and revised statutory guidance. Royal Assent would be needed by spring 2027. **Responsible bodies:** - DfE would set rates and fund councils. - Local authorities would deliver places and meet their sufficiency duty. - Ofsted would regulate quality. - HMRC would wind down eligibility codes. **Main risks:** - **Workforce shortages.** Possibly 60,000 to 80,000 extra early years staff would be needed, so places may lag demand. - **Higher-than-assumed take-up**, raising the cost. - **Provider cost inflation** absorbing the 20% rate increase. - **Loss of quality** for very young children. - **Uneven place sufficiency** in deprived and rural areas. - **Deadweight**, where parents already working full-time switch existing paid care to funded hours. ## Relation to the baseline The March 2025 forecast already assumes the expanded system in place from September 2025: - 30 hours a week, 38 weeks a year, for working parents of children from nine months - 15 universal hours for three- and four-year-olds - 15 hours for disadvantaged two-year-olds This is funded within DfE's DEL envelope, with early years entitlement spending of around £8bn in 2025-26. The OBR's forecast already includes its estimated labour supply effect from the 2023 expansion. The analyst should therefore model only the **additional** changes: - the increase from 1,140 to 2,400 hours a year - the removal of the work test - the 20% rise in provider funding rates on all funded hours

The proposal would give every child in England from nine months to school age up to 50 funded hours of childcare a week for 48 weeks, with no work test, and would raise provider funding rates by 20% from September 2027. Only the increment over the March 2025 baseline is modelled, because the baseline already includes the 30-hour working-parent offer and its labour-supply effect. The increment is mapped to higher nominal government consumption (CGGPS), its public-finance counterpart (CGGPSPSF) and current spending (PSCE) of ≈£13bn a year by 2032, including a take-up uplift and Barnett consequentials. A labour-supply shock worth ≈0.15% of total hours is added. Total hours worked (HWA) are raised directly, the participation rate (PART16) and trend participation (TRPART16) by ≈0.06pp, and average hours (AVH) by ≈0.017 hours, net of new entrants working shorter hours. Further judgements cover the fees households would no longer pay (which trims measured consumption) and the lower price parents pay for childcare (which lowers the CPI), plus small rises in Bank Rate and gilt yields.

### Interpretation The proposal would entitle every child in England from nine months old until the start of reception to up to 50 funded hours of childcare a week for 48 weeks a year (2,400 hours). There would be no work or income test, and the new offer would replace today's 15- and 30-hour offers and the disadvantaged two-year-old offer. Providers would be paid 20% more per hour on all funded hours and could no longer charge top-up fees. The scheme would start in September 2027, with places, and therefore take-up, building over two years. The March 2025 baseline already contains the 2023 expansion, together with the OBR's estimate of its labour-supply effect. That expansion covers 30 hours a week for 38 weeks for working parents from nine months, universal 15 hours for three- and four-year-olds, and 15 hours for disadvantaged two-year-olds. Only the increment is modelled: the rise from 1,140 to 2,400 hours a year, the removal of the work test and the 20% rate rise. The sponsor costs this at £3.9bn in 2027-28 rising to £8.8bn in 2032-33 for England. The main demand lever is nominal general government final consumption (CGGPS). Its public-finance counterpart (CGGPSPSF) and public sector current expenditure (PSCE) are moved in step. This is the right mapping because places that councils buy from nurseries and childminders are recorded as local authority procurement (LAPR), delivered to families in kind, rather than as a cash benefit. The impulse includes a judgement that take-up would exceed the sponsor's assumption, plus Barnett consequentials. It is ≈£0.7bn in 2027Q3 and ≈£2.2bn a quarter from 2027Q4, rising to ≈£3.3bn a quarter (≈£13bn a year) by 2032. The supply lever is labour input. Total hours worked (HWA), which has no equation in this version of the model, is raised directly so that it is ≈0.15% higher from 2030. The 16+ participation rate (PART16) and the trend participation rate (TRPART16) are raised in step, and average weekly hours (AVH) slightly, so that LFS employment (ETLFS) rises through ETLFS = 1000 × HWA/AVH. Trend output (TRGDP) is ≈0.12% higher by 2032. Two effects the equations do not capture are added as judgements. First, households would stop paying fees the state takes over, which trims measured consumption. Second, the price parents pay for childcare would fall, which lowers the consumer prices index (CPI). Bank Rate (R) and the 20-year gilt yield (RL) are nudged up by a few basis points. ### How it works through the OBR model 1. **The lever is a rise in government purchases of childcare.** Nominal government consumption (CGGPS) and current spending (PSCE) would be ≈£2.9bn higher in 2027 and ≈£13.2bn a year higher by 2032. Of the 2032 figure, ≈£11bn is in England and ≈£2.2bn is Barnett consequentials. The model's equation for real government consumption (CGG) is dlog(CGG) = 0.0007 + 0.37·dlog(CGGPS) + 0.18·dlog(CGGPS(−1)) − 0.42·dlog(CGG(−1)). It turns only about 40% of a sustained nominal increase into extra volume, with the rest showing up in the government consumption deflator (GGFCD). That split suits this policy. Roughly £6bn a year would buy genuinely new output: new hours of care in England and services funded by the devolved administrations. The rest would take over fees parents already pay or raise what providers receive per hour. The new output alone is worth ≈0.16% of GDP before any offsets elsewhere. 2. **Part of the spending would replace fees households already pay, trimming measured consumption.** About £3.5bn a year of fees, mainly paid by working families buying full-time care above the current 30 hours, would move from households' bills to the state. In the national accounts this shifts spending from household consumption (CONS) to government consumption without changing the care children receive. CONS would therefore fall mechanically by ≈0.15% once the scheme is mature. Families would not simply bank the saving: the analysis assumes ≈70% is spent on other goods and services within about two years, which unwinds most of the mechanical fall. 3. **Lower fees would pull down measured consumer prices.** Childcare for under-fives carries a weight of ≈0.3% in the CPI. The price parents pay for a typical place would fall by ≈40%, lowering the CPI level by ≈0.10–0.12% from late 2027. The consumer expenditure deflator (PCE) is tied to CPI growth through PCE/PCE(−4) = CPI/CPI(−4), so the PCE level falls by a similar amount. This is a one-off drop in the price level rather than lower inflation year after year, but it raises what every household's income can buy. 4. **Real incomes and consumption would then recover.** Real household disposable income (RHHDI) is defined as 100 × household disposable income (HHDI) / PCE. It would be ≈0.2% higher by 2030, driven by the lower price level, the earnings of extra parents in work and higher pay in the childcare sector. The consumption equation passes ≈0.10 of income growth into spending in the same quarter and closes ≈12.5% of the gap to its long-run relationship each quarter. In that long-run relationship the income elasticity is 0.44, alongside wealth terms. This slow adjustment, combined with the respending of fee savings, explains the profile. CONS is ≈0.06% below baseline at the end of 2027, back to baseline in 2029 and ≈0.05% above by 2032. 5. **Parents would supply more labour, the policy's main lasting channel.** Free full-time, full-year care removes the cost that most deters second earners from returning after maternity leave or moving from part-time to full-time work. The analysis raises the participation rate (PART16) and trend participation (TRPART16) by ≈0.06pp, worth ≈35,000 more parents in work at ≈24 hours a week. It also adds ≈0.85 million hours a week from parents already working. Together these lift total hours worked (HWA) by ≈0.15% by 2030. HWA has no equation in the model, and average weekly hours (AVH) enter ETLFS = 1000 × HWA/AVH with a negative sign. HWA is therefore shocked directly, and AVH is raised by only ≈0.017 hours: the net of longer hours for existing workers and shorter hours for new entrants. LFS employment (ETLFS) then rises by ≈35,000. The matching rise in PART16 means the new workers join the labour force rather than coming out of unemployment. Removing the work test tempers the gain, because non-working parents would get free care whether or not they take a job. The response per pound is therefore assumed to be smaller than for the 2023 expansion. The new hours are valued at ≈75% of average productivity, and a small effect is added from fewer mothers stepping down to lower-skilled jobs. On that basis trend output (TRGDP) is ≈0.12% higher by 2032. 6. **Firms would invest to equip the extra output.** Desired capital stock (KSTAR) is set by KSTAR = exp(log(MSGVA) − 0.4·log(COC) + constant). It is proportional to market-sector gross value added (MSGVA) for a given user cost of capital (COC). Private nurseries are in the market sector, so both the extra care and the extra parental labour raise MSGVA and therefore KSTAR. COC barely moves, because the 20-year gilt yield rises by only a few basis points. The investment equation responds almost one-for-one to lagged MSGVA growth. Together with ≈£1bn of nursery building and fit-out over 2027–29, this lifts business investment (IBUS) by ≈0.25% in 2028–29. The effect eases to ≈0.16% as the capital stock catches up. 7. **Output would combine a fading demand boost with a lasting supply gain.** Real GDP (GDPM) would be ≈0.11% higher at the end of 2027, peak at ≈0.20% in 2029 and settle at ≈0.16% by 2032. The demand element follows a blended spending multiplier of ≈0.45 on impact. The multiplier is higher for purchases of new care and lower for the fee savings and provider payments, which work like transfers. It decays as capacity limits and slightly higher interest rates bite. By 2032 only ≈0.04 percentage points of the gain is demand and ≈0.12 points is higher productive capacity. 8. **The labour market would tighten slightly before normalising.** As a rule of thumb, unemployment falls by roughly 0.4–0.5pp for each 1% that demand runs above capacity (the Okun relationship). On that basis the unemployment rate (LFSUR) would be ≈0.05pp lower at its 2028 trough, about 17,000 fewer people unemployed. Parents entering the labour force who are still looking for work hold the fall back a little. As the demand boost fades, LFSUR returns towards baseline, at −0.01pp in 2032. Employment would be ≈40,000 higher, mostly mothers. The 60,000 to 80,000 extra early-years staff would be drawn largely from other jobs and from outside the labour force. 9. **Prices and gilt yields would move only slightly.** A tighter labour market typically lifts wages and prices — the Phillips channel. Private-sector average earnings (PSAVEI) respond to falling unemployment, adding a few hundredths of a percent to the price level by 2030. This is smaller than the one-off fall in childcare prices, so PCE would be ≈0.07% lower in 2032. The Monetary Policy Committee is assumed to look through the childcare price drop and nudge Bank Rate (R) up ≈3bp in 2028–29 against the demand pressure. The 20-year gilt yield (RL) would drift up ≈4bp by 2032 as debt rises by ≈1.2% of GDP, at ≈3bp per percentage point of debt. ### Key assumptions - **Baseline:** the March 2025 Economic and fiscal outlook, carried forward from 2029-30 at ≈1.7% real growth and 2% CPI inflation. Nominal GDP is ≈£3.13tn in 2027, ≈£3.45tn in 2030 and ≈£3.75tn in 2032, and public sector net debt (PSND) is ≈£3.55tn (≈95% of GDP) at end-2032. - **Baseline early-years spending line:** ≈£8bn in 2025-26 and ≈£9bn in 2027-28 on roughly 1.1 billion funded hours, uprated with DfE's cost index. The 2023 expansion and its labour-supply effect are already in the baseline, so only the increment is costed. - **Gross static cost:** the sponsor's England figures of £3.9bn, £7.3bn, £8.3bn, £8.5bn, £8.7bn and £8.8bn for 2027-28 to 2032-33, net of lower Tax-Free Childcare and Universal Credit childcare payments, converted to calendar years. - **Take-up and deadweight uplift:** cost runs 10% above the sponsor in 2027, 15% in 2028, 20% in 2029 and 25% from 2030. Free hours with no top-up fees would attract more use, and more switching of paid hours, than the assumed 60% rise in funded hours. England cost is ≈£11bn by 2032. - **Delivery profile:** places, not demand, bind at first, with 60% of steady-state take-up in 2027-28 and 90% in 2028-29, and 60,000 to 80,000 extra staff needed. The switch of already-paid hours to funded hours would happen at once, which is why the uplift starts in 2027. - **Barnett consequentials:** ≈20% of England spending (≈£2.2bn by 2032), assumed paid and spent by the devolved administrations on services with a similar demand effect. - **Split of the spending:** of ≈£11bn in England at steady state, ≈£4bn buys new hours, ≈£3.5bn replaces fees parents already pay, ≈£0.5bn replaces top-up charges, and the rest raises providers' receipts per hour. About 45% of total spending is new output in volume terms, in line with the government consumption equation. - **Respending of fee savings:** ≈70% of the ≈£3.5bn is spent on other goods and services within about two years. - **Consumer-price effect:** childcare for under-fives weighs ≈0.3% in the CPI and its price to parents falls ≈40%, lowering the CPI and PCE level by ≈0.10–0.12%. The exact effect depends on how the ONS records funded hours. - **Labour-supply response:** ≈45,000 full-time equivalents, made up of ≈35,000 more parents in work and ≈0.85 million extra hours a week, or ≈0.15% of total hours. It is entered as a ≈1.7 million-hour rise in weekly HWA, ≈0.06pp on PART16 and TRPART16 and ≈0.017 hours on AVH. It phases in at 50% by end-2028, 80% by end-2029 and in full from 2030. Removing the work test is assumed to dampen the response per pound relative to the 2023 expansion. - **Productivity of new hours:** ≈75% of the average, plus ≈0.02% from fewer mothers stepping down to lower-skilled jobs, giving potential output ≈0.12% higher by 2032. - **Demand multiplier:** a blended ≈0.45 on impact (≈0.6 on new purchases, ≈0.3 on fee savings and provider payments), decaying to ≈0.1 by 2032. - **Investment block:** cost-of-capital elasticity of desired capital of −0.4 and the real depreciation ratio (RDELTA) of 2.2% a quarter, as coded. An extra ≈£1bn of nursery fit-out is spread over 2027–29. - **Monetary-policy reaction:** Bank Rate (R) is ≈3bp higher in 2028–29, then fades, with the MPC looking through the one-off childcare price fall. RL is ≈1bp higher in 2027, rising to ≈4bp by 2032, at ≈3bp per percentage point of GDP of extra debt. - **Fiscal feedback rates:** cyclical receipts of ≈0.5 per £ of extra nominal GDP. About 40% of extra parental earnings returns in tax and lower Universal Credit. The effective tax rate on extra childcare-sector pay and profits is ≈20%, and marginal debt interest is ≈4%. The comparatively firm parts of this analysis are the in-model coefficients: the consumption equation's income and wealth elasticities, the −0.4 cost-of-capital elasticity, the accelerator in business investment, and the identities that link spending to borrowing and debt. The least anchored inputs come from outside the model. The most important is take-up. With no top-up fees and no work test, families could use far more of the 2,400 hours than assumed. Each 10% more funded hours in total would add ≈£2bn a year in England plus Barnett, so the fiscal cost is more likely to be understated than overstated. The second is the labour-supply response, where credible estimates range from ≈20,000 to ≈70,000 full-time equivalents. A weak response, as UK evidence on universal part-time places suggests, would cut the 2032 GDP gain to under 0.1% and remove about half of the £5.7bn of supply-side receipts. A strong response would roughly double both. The other external judgements matter less for the borrowing total but more for how the macro rows look. The share of spending that replaces existing fees drives the dip in measured consumption. The ONS treatment of funded hours drives the fall in the CPI: if the ONS did not record the lower net price, PCE would end slightly higher rather than lower and consumption would be a little weaker. The assumed rise in Bank Rate and gilt yields is small but compounds over the horizon, accounting for about £2bn of the debt-interest row. The counterfactual matters too: if DfE's baseline early-years spending turns out higher than assumed, the 20% rate rise on all funded hours would cost more. ### Headline results Real GDP (GDPM) would be ≈0.11% above baseline at the end of 2027 and ≈0.19–0.20% above in 2028–29 as places and take-up expand. It would then ease to ≈0.16% by 2032. The early profile is mostly demand: government buys new childcare output and families respend fee savings. That boost fades as capacity limits and slightly higher interest rates take hold. The more durable supply effect then takes over, with more parents, mainly mothers, in work and working longer. By 2032 roughly three-quarters of the gain reflects higher productive capacity rather than stimulus. Consumption (CONS) would follow an unusual path. It would be ≈0.06% below baseline at the end of 2027, because families stop paying for childcare the state now buys, which moves that spending out of the household column of the national accounts. It would recover to baseline by 2029 and reach ≈0.05% above by 2032 as fee savings, higher real incomes and extra earnings are spent. Business investment (IBUS) responds faster, at ≈0.24–0.26% higher in 2028–29 as nurseries fit out new places and firms equip the extra output, before settling at ≈0.16%. The consumer expenditure deflator (PCE) would be ≈0.09–0.10% lower in 2027–28 because parents pay less for childcare. Mild demand pressure would leave it ≈0.07% lower by 2032. The unemployment rate (LFSUR) would dip by up to ≈0.05pp in 2028 and return close to baseline by 2032 as the demand effect fades and new parental entrants are absorbed, with employment ≈40,000 higher. The 20-year gilt yield (RL) would drift up by ≈4bp by 2032 as the extra borrowing accumulates.

### Costing the policy - **Gross static cost (mechanical spending increase):** +£43.3bn over 2027–2032. This is the sponsor's England costing, net of lower Tax-Free Childcare and Universal Credit childcare payments, converted to calendar years and added directly to public sector net borrowing (PSNB). It is ≈£2.2bn in 2027 (four months of the scheme), £7.2bn in 2028 and ≈£8.8bn by 2032. - **Behavioural cost (higher take-up and deadweight):** +£9.4bn. With no work test and no top-up fees, more families would use more funded hours. Parents already paying for long hours would switch them to free hours at once. Cost is therefore assumed to run 10% above the sponsor in 2027, rising to 25% from 2030 (≈£2.2bn a year by 2032). - **Barnett consequentials:** +£10.5bn. Comparable spending in England generates ≈20% extra for Scotland, Wales and Northern Ireland, ≈£2.2bn a year by 2032. As the proposal states, it is assumed to be paid. - **Demand feedback (IT / NIC / VAT on extra activity and childcare-sector pay):** −£13.2bn. About £8.8bn comes from the cyclical boost to output, which peaks at ≈0.13% of GDP in 2028–29, with ≈0.5 of every extra £ of nominal GDP returning to the Exchequer. About £3.9bn is income tax, NICs and corporation tax on the higher pay and profits that the 20% rate rise puts into the sector. A further ≈£0.5bn comes from lower uprating of benefits linked to the consumer prices index (CPI), because measured childcare prices fall. - **Supply-side receipts feedback (higher labour supply from parents):** −£5.7bn. The ≈45,000 full-time-equivalent rise in parental labour supply lifts GDP by ≈0.12% by 2032. About 40% of the extra earnings returns as income tax, NICs, VAT and lower Universal Credit, ≈£1.7bn a year by 2032. - **Debt-interest feedback (higher debt and gilt yields):** +£6.5bn. About £4.5bn is interest at ≈4% on the extra debt, including interest on interest. The other ≈£2bn reflects a ≈3bp higher Bank Rate (R) on reserves and a ≈3–4bp higher 20-year gilt yield (RL) on new issuance. - **Net cumulative PSNB change:** +£50.8bn. This is the sum of the rows above. Before debt interest, the feedbacks recover ≈30% of the £63.2bn direct cost. Borrowing would be ≈£11.9bn a year higher by 2032, a structural gap of ≈0.3% of GDP that falls entirely on the current budget. ### Debt path The extra borrowing would accumulate into public sector net debt (PSND). PSND would be ≈£2.2bn higher at the end of 2027, ≈£28bn higher by 2030 and ≈£50.8bn higher by the end of 2032, against a baseline of ≈£3.55tn. Relative to nominal GDP of ≈£3.75tn in 2032, the extra debt alone would add ≈1.35 percentage points to the debt-to-GDP ratio. A larger economy offsets part of this. Real GDP (GDPM) would be ≈0.16% higher, and the GDP deflator is assumed broadly unchanged because government pays more per hour of childcare while consumer prices dip. The bigger denominator therefore takes ≈0.15 points off a baseline ratio of ≈95%, leaving PSND/GDP ≈1.2 points higher in 2032. The intermediate years use nominal GDP of ≈£3.24tn in 2028, ≈£3.35tn in 2029, ≈£3.45tn in 2030 and ≈£3.60tn in 2031. In 2027 the denominator effect slightly outweighs the first months of borrowing, so the ratio is fractionally lower that year. On the OBR's standard assumptions the policy would be far from self-financing. The labour-supply and demand feedbacks recover under a third of the cost, and by 2032 borrowing would be ≈£12bn a year higher. Because this is day-to-day spending, that hole would bear directly on the current-budget rule. Paying for it would require lasting tax rises or spending cuts.

### Overall pattern Households would gain ≈£10.3bn a year by 2032, ≈£355 per UK household on average. This is made up of four parts: - ≈£3.0bn of cash savings on fees: ≈£3.5bn of fees, less the Tax-Free Childcare and Universal Credit support families would no longer receive. - ≈£0.5bn from the end of top-up charges. - ≈£6.2bn of free childcare valued at its cost: ≈£4bn of new hours in England plus ≈£2.2bn of Barnett-funded services. - ≈£0.6bn of higher pay for early-years staff. The rest of the ≈£13.2bn cost would go mainly to nursery owners' margins and higher costs per hour, with some returning to the Exchequer as tax on the extra pay. The direct gain is progressive as a share of income. In cash it is fairly flat, at ≈£305–£395 per household across the deciles, but it is worth ≈2.2% of income in the poorest tenth and ≈0.3% in the richest. The cash savings go mostly to higher-income dual-earner families, while lower-income families gain mainly free hours they do not currently buy. Once future taxpayers pick up the ≈£11.9bn a year of extra borrowing (≈£410 a household), the average household would be a small net loser of about £55 a year. Families with a child under school age in England would still gain substantially. ### Who gains - **Families paying for full-time childcare for a child aged 9 months to school age (England):** ≈+£7,500 a year, ≈11.5% of income. About 400,000 families already paying for full-time care above the 30-hour offer would have up to ≈1,260 more hours a year funded and pay no top-up fees. The largest savings would go to parents of under-twos and to London, where fees are highest. - **Families taking up extra childcare hours they do not currently buy:** ≈320,000 extra childcare places of about 25 hours a week, worth ≈£4bn a year at cost. These are mostly families where a parent does not work full-time, including many on lower incomes. Without a work test, they could use nursery for two-year-olds and under-twos for the first time. - **Early years workers:** ≈+£1,500 a year each, ≈7% of net pay. Part of the 20% rise in funding rates would need to go on higher pay to recruit the 60,000 to 80,000 extra staff and to keep the ≈400,000 existing ones. ### Who loses - **No direct losers, but higher borrowing:** ≈£11.9bn a year more borrowing by 2032. No household would pay more directly. Future taxpayers would bear the cost instead, as set out under Paying for it and bond markets below, along with mortgage borrowers through slightly higher gilt yields. ### Paying for it and bond markets - **Future taxpayers:** −£410 a year per household, ≈0.9% of income. Borrowing would be ≈£11.9bn a year higher in 2032, and divided by ≈29 million households that is ≈£410 a household every year. This is an ongoing annual amount, not a one-off or a total over the horizon. Under the fiscal rules it would eventually have to be met by higher taxes or lower spending. If met through broad-based taxes, higher-income households would pay the most in £. A borrowing-financed giveaway therefore has losers even if none are visible today. - **Future taxpayers (additional debt):** ≈£1,750 a household. Public sector net debt (PSND) would be ≈£50.8bn higher by the end of 2032. Shared across ≈29 million households, that is ≈£1,750 each, which future taxpayers would have to service or repay. - **Mortgage borrowers:** ≈−£55 a year per mortgaged household, ≈0.1% of income. The ≈4bp rise in the 20-year gilt yield (RL) by 2032 would pass through to new and refixed mortgage rates. That is at roughly £1,400 a year per percentage point on a ≈£140,000 mortgage. ### Across the income distribution The decile figures show gains of ≈£325 a year in the poorest tenth, peaking at ≈£395 in the third decile and easing to ≈£305 in the richest. Cash gains are therefore broadly flat, while the gain as a share of income falls steadily from ≈2.2% to ≈0.3%. Two forces offset each other. Cash fee savings rise with income: dual-earner families using full-time paid nurseries are concentrated in the upper half, and the seventh to tenth deciles take ≈60% of the fee savings. The in-kind value of new hours is concentrated lower down. Families with young children are over-represented there once incomes are equivalised, and fewer parents in those deciles currently buy care. Early-years staff, most of them low-paid women, sit mainly in the third to sixth deciles. The averages hide very large differences. Most households in every decile have no child of the right age and would gain nothing directly, while eligible families would gain thousands of pounds. In the bottom deciles, families in deprived and rural areas where places are scarce may see little benefit at first. At the top, London families paying ≈£20,000 a year for a full-time under-two place would save the most. They would also face the greatest risk of premium nurseries leaving the scheme. ### Caveats The figures depend most on how much of the spending replaces fees parents already pay (counted as cash) and how much buys new hours. New hours are valued at their cost to government, the convention used in the ONS Effects of Taxes and Benefits analysis, which may overstate what families would pay for them. The figures also depend on how much of the rate rise reaches staff pay rather than nursery owners' margins. The devolved administrations are assumed to use their Barnett money in ways that benefit households similarly. These are static first-round effects for 2032. They exclude the small second-round effects shown in the macro results: ≈40,000 more people in work, prices ≈0.07% lower and slightly higher interest rates. They rest on DfE's Childcare and early years survey of parents, the Family Resources Survey and the ONS household-income deciles.