Apply now for 15 hours 'free childcare' for two-year-olds but is it really free?

2nd January 2024

Applications for 15 hours of 'free childcare' for 2 year olds for working parents open on 2nd January 2024

From 2nd January 2024, eligible working parents in England can apply for 15 hours per week of term time (38 weeks per year) 'free childcare' for their two-year-olds to start from April 2024 in the term after their child turns two.

Qualifying parents can already receive 30 hours 'free childcare' for children aged three to four and the scheme is being gradually expanded throughout 2024 and 2025 to eventually provide 30 hours free childcare for children from the age of nine months. The annoucements were first made in the Spring Budget 2023.

Which parents qualify?

Parents who work and earn the equivalent of 16 hours a week at the National Minimum Wage, and earn less than £100,000 adjusted net income per year are eligible to apply for 'free childcare'.

That means individuals who earn between £8,670 and £100,000 usually qualify. For couples, the rules apply to both parents, so both must earn at least £8,670 and neither can earn more than £100,000.

There is more information available on the exact criteria on the government's Childcare Choices website.

Parents of two-year-olds may qualify for 'free childcare' before April 2024 if they claim certain benefits. Find out more about free education and childcare for two-year-olds.

Find out more about how to apply for 'free childcare' if you're working.

When does the 'free childcare' start?

Right Now - 30 hours free childcare for children aged three and four.

2nd January 2024 - Applications open for 15 hours free childcare for two-year-olds.

April 2024 - 15 hours free childcare for two-year-olds starts.

September 2024 - 15 hours free childcare extended to all children from the age of nine months.

September 2025 - Parents of children under the age of five will be entitled to 30 hours free childcare per week.

The 'free' hours can be used from the start of the term after the child reaches the relevant age.

Parents will be asked to reconfirm that they are still eligible for the support every 3 months.

Where can the 'free childcare' be used?

The 'free childcare' can be used at participating registered childminders, nurseries and pre-schools.

Is it really free childcare?

Well, that's what the government call it but not all parents and childcare providers would agree. In order to fund the 'free childcare', the government provide funding to local authorities. Local authorities then set their own hourly rates that they pay to local registered childcare providers who take part in the scheme.

Each local authority has a different rate and the often the rates offered to childcare providers are lower than that they would usually charge, causing childcare providers to lose out.

The government have offered local authorities additional funding to help increase rates of pay and cater for the extra 'free childcare' hours but many argue this isn't enough.

The government say that they are investing over £400 million in 2024-25 to increase the hourly rates paid to local authorities. They say that in 2024-25, national average hourly rates paid will be £11.22 for under twos, £8.28 for two-year-olds, and £5.88 for three and four-year-olds.

Childcare providers aren't allowed to take the funded rate in part payment of their usual rate. If they offer 'free childcare' then they can't charge more for childcare services.

However, childcare providers are allowed to charge extra for things like food, nappies and trips which can sometimes top-up the funded rate closer to their normal rate.

Childcare providers may also charge higher rates to parents for any additional hours they require, over and above the 'free childcare' funded hours.

Some childcare providers also ask for a voluntary top-up payment to cover any shortfall but parents aren't obliged to pay it.

Many childcare providers feel the funded rates are too low and uneconomically viable and so choose not to take part in the 'free childcare' scheme. Other providers have called upon the government not to use the term 'free childcare' and to instead refer to the scheme as 'funded childcare' or 'subsidised childcare'.

So, it's not such a great idea after all?

The concept of giving parents free childcare is a great idea in principle. Most families are already struggling with the cost of living crisis, increased utility bills, higher interest rates and other household expenses.

Many families find that a large proportion of their family income is already spent on childcare costs and so if this can be reduced then it is of course welcome.

However, if the government want to provide free childcare then it must not be at the expense of childcare providers receiving lower rates than they would ordinarily charge.

Childcare providers, such as registered childminders and nurseries, are also struggling financially themselves and whilst most welcome the opportunity of extra business via the 'free childcare' scheme, they must be adequately compensated for it.

The funded rates that childcare providers receive are often not published very far in advance by local authorities, meaning providers have no idea how much they are likely to receive before choosing whether to accept the children of parents obtaining the funding.

The rates paid by local authorities to childcare providers can vary significantly across the country, making it a postcode lottery over how much providers will receive.

Whilst providers are permitted to charge extra for food, nappies, trips and other consumables, these charges are optional and parents cannot legally be forced to pay them. For example, parents could provide their own food & nappies or not send their children on trips.

Some providers have been unwittingly penalised for the way in which they invoice for additional fees. The Local Government and Social Care Ombudsman even ordered one council to repay a father's nursery fees after it found that the nursery was not providing transparent invoices.

It might be better if parents could receive funding directly and spend it on childcare as they wish, with providers free to set their own hourly rates to ensure that they are not forced to undersell themselves. Another disadvantage of the current scheme is that it does not apply to nannies, even if they are Ofsted registered.

I don't live in England - Is there support for parents in other parts of the UK?

The offer mentioned above relates to England only but Scotland, Wales and Northern Ireland operate their own schemes.

How much does childcare cost in my area?

You can use our Childcare Costs tool to see the average rates being charged by childcare providers in your postcode area.

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