| Practice area: | Education and Labour Markets |
|---|---|
| Client: | Save the Children |
| Published: | 16 June, 2025 |
| Keywords: | 2025 Childcare Early years Education economics Labour Market Economics Public Policy |
Government support for childcare has been expanding rapidly since the announcement in the Spring 2023 Budget. By September 2025, children aged two and younger from eligible working households will be eligible for 30 hours of entitlement funded childcare.
However, work by London Economics for Save the Children estimated that the funding proposed by the government was £388 million less than the cost to childcare providers of delivering those entitlement funded hours.
The newly published analysis highlights further funding gaps which, if filled, would improve inclusion and quality in childcare in several ways, including:
- Increasing workforce pay that would improve quality of childcare through improved recruitment and retention
- Improving childcare quality and inclusion through training courses for staff (e.g., mandatory SEND provision)
- Expanding eligibility to funded childcare entitlements to all single parents with a disability, all single parents carers, and all parents in training and education
- Expanding the current childcare entitlement from 38 weeks to 48 weeks per year, which would not only increase the entitlement for parents but also give parents more flexibility to choose when they use their hours (during and outside of term time)
The cost of Save the Children’s priority recommendations was estimated to be up to £1.14bn, consisting of
- £228 million associated with the cost of raising all childcare staff hourly pay to at least the Real Living Wage (£12.60 per hour),
- £6.8 million to provide early years child development training for those with no relevant childcare qualifications,
- £43.7 million to provide introductory level SEND training for all staff,
- up to £513.9 million to expand eligibility for childcare entitlement to single parents with a disability, single parent carers, and parents in training and education (who do not fulfil the earnings requirements), and
- £388 million to fill the current funding gap faced by providers.
More details about the analysis and findings can be found here, as well as on the Save the Children website here. Additional London Economics childcare and early years research can be found on @le-education.bsky.social.
Dr Su-Min Lee is a Principal Economist at London Economics, primarily working in the Education and Labour Markets team. He leads London Economics’ childcare research, ranging from evaluating the impact of childcare policies on parental labour market choices to understanding trends in the childcare workforce and childcare affordability. He can be contacted by email at [email protected].