Parents of two-year olds are set for extra support with rising childcare costs from the new year.
The cost of childcare is a major barrier for parents when managing work and also if trying to get a mortgage and while working parents can get 30 hours of free childcare per week, this currently only applies to three and four-year olds.
That doesn’t help if you have a toddler going to a childminder so that you can return to work though.
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The government is trying to address this by offering 15 hours of free childcare for parents of two-year olds in a move promised in the Spring Budget.
Applications will open in January and the entitlement will apply from April 2024.
How the free childcare hours will work?
Currently, children aged three and four in England are entitled to 570 hours of free childcare each year, usually taken as 15 hours a week for 38 weeks of the year.
These hours can be used at a registered childminder, nanny, playscheme or nursery.
Working parents who earn a wage equivalent to 16 hours a week at the national minimum wage and don’t earn more than £100,000 per year are entitled to up to 30 free hours.
A provider may require you to take the hours at certain times and you may have to pay for extra costs such as meals or nappies.
From January, working parents of two-year olds will also be entitled to 15 free hours.
But unlike the current system, this won’t be given automatically.
Parents will need to register for the free hours, which can be accessed from April 2024.
Childcare providers often highlight that these hours aren’t actually free though as these still need to pay staff and cover energy and food bills as well as insurance and other costs.
The government has tried to help by increasing the national average hourly rates to £11.22 for under twos, £8.28 for two-year-olds, and £5.88 for three- and four-year-olds from April to reflect increases in the minimum wage from April.
Will the extra hours make a difference?
Parents will always welcome lower childcare costs but getting the support does involve extra administration and won’t cover everything at a time that the cost of living remains high.
“Firstly, the hours are for term-time only – meaning that parents who work the standard 52 weeks of the year will have a 14-week shortfall in the free hours,” says Laura Suter, head of personal finance at AJ Bell.
“At the same time, nurseries and childminders often charge extra fees for additional hours, food, nappies or activity costs. It means that while the free hours save parents some money, they rarely provide a free ride for a kid in childcare for 15 hours a week.”
She says it is frustrating for parents that they have to actively claim these new free hours rather than being automatically awarded them.
“Under the current system all parents are eligible for 15 free hours from the term after their child turns three, however, it’s automatically claimed by the nursery rather than parents having to apply for it,” Suter adds.
“The difference with the new system is that parents have to be working to claim the new 15 free hours, putting a complication in place that presumably prevents the government adopting the same automatic system for these new childcare hours. But doing so would ensure far higher uptake and that all eligible parents get access to the support.”
It also adds an extra financial burden on childminders, creating a risk of closures and a lack of supply which could push up costs.
Helen Donohoe, chief executive of the Professional Association for Childcare and Early Years, says that while the additional funding is welcome, a “significant shortfall” remains.
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