Last reviewed 27 November 2020

The Chancellor Rishi Sunak has announced an additional £44 million of early years funding to increase the hourly rate paid to childcare providers for the Government’s funded childcare offers.

The funding forms part of the Comprehensive Spending Review which sets out the Government’s spending plans for the next year and will come into force from April 2021.

An additional £2.2 billion has also been pledged for schools in England in 2021-2022 and includes funding for free school meals over the school holidays. Although there will be a pay freeze for most teachers, public sector workers who earn less than the median wage of £24,000 a year will receive a pay rise of at least £250.

The Chancellor also announced the National Living Wage (NLW) and National Minimum Wage (NMW) rates which will come into force from April 2021 having accepting in full the recommendations made by the Low Pay Commission at the end of October. The National Living Wage will increase by 2.2 per cent from £8.72 to £8.91, and will be extended to 23 and 24 year olds for the first time. The National Minimum Wage for younger workers and apprentices will be increasing as follows.

  • 21-22 year olds – up 2% from £8.20 an hour to £8.36 an hour

  • 18-20 year olds – up 1.7% from £6.45 an hour to £6.56 an hour

  • 16-17 year olds – up 1.5% from £4.55 an hour to £4.56 an hour

  • apprentices – up 3.6% from £4.15 an hour to £4.30 an hour

The early years sector has welcomed the additional funding but fears it will not be enough to keep childcare settings afloat as they face the ongoing financial pressures of the Covid-19 crisis. Purnima Tanuku, chief executive of the National Day Nurseries Association (NDNA), said:

“We welcome any increase in investment for the early years sector by the Chancellor. A further £44 million amounts to an increase of just over 1.2 per cent. However, this won’t help providers meet all the rising costs of delivering the Government’s childcare policy while also responding to the pressures of the current pandemic.”

“Childcare providers, who have worked so hard throughout the pandemic for parents, key workers and vulnerable children, deserve support and recognition. Childcare places will be essential in any economic recovery, but this won’t be possible if those who deliver these places are put into financial hardship.”

“Nurseries are facing a double whammy of reduced income and maintaining measures to keep settings as Covid-secure as possible.”

The full Spending Review report is available here.