Demand for free childcare 'could cost government £1billion extra per year'

A government scheme to extend free childcare to more children has had higher up-take than expected, and could cost the government £1billion more per year than previously thought.

Figures published in March show the number of people who are newly eligible for the scheme was 26 per cent higher than originally expected.

The Department of Education spent £2billion on the scheme last year, up from a planned £1.6billion.

Ministers have been warned the childcare sector is at risk of "collapse", as experts predict the funding gap will create "substantial pressure” on the government.

Education Secretary Bridget Phillipson told The Independent that the unexpected take-up was a "good problem to have" and that children would not be left without places on the scheme.

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Ms Phillipson said: “I want as many parents as possible to take up the offer. It allows parents to juggle work and family life, but it also sets up children to succeed. And the demand that parents are showing is a good problem to have, because it also brings economic dividends as well."

“If people are able to work, or work a few more hours… that helps us all as a society as well and it gets economic growth going.”

However, she did not guarantee that parents would get a space at their local nursery when the scheme expands again in September 2025.

Ms Phillipson said: “What I can’t guarantee is that it will be as close to home as they would like or it will be their first choice, but we’re confident that the rollout will go well in September.”

From September 2024, the age at which working parents could access 15 hours of free childcare was lowered from children aged 2 years and older to children aged from 9 months old.

From September 2025, working parents will be able to claim 30 hours of government-funded childcare a week for children aged from nine months.

Industry leaders warned that parents were likely to be left "disappointed," while nurseries cautioned that staff shortages were already making it difficult to meet the government's promise.

CEO of the Early Years Alliance, Neil Leitch, told The Independent that the "infrastructure will collapse" if the majority of all childcare hours delivered are government hours and are "inadequately funded."

The cost of extending the scheme was originally expected to be £4billion per year, but it could now cost approximately £5billion, according to The Institute for Fiscal Studies.

A £640million boost to funding announced in Rachel Reeves's spending review would “go some way to filling this gap… [but] could still leave substantial pressure from higher-than-expected take-up”, the IFS said.

The free childcare policy was launched in December 2023 under former Conservative chancellor Jeremy Hunt.