| Practice area: | Education and Labour Markets |
|---|---|
| Client: | Department for Education |
| Published: | 30 October, 2025 |
| Keywords: | Childcare Education economics Labour Market Economics |
London Economics (alongside research partners IFF Research) evaluated the Department for Education’s (DfE) Early Years Financial Incentives Pilot, which offered £1,000 to those new or returning to the childcare workforce as part of a randomised control trial across 40 local authorities, and provided recommendations to the DfE on the future use of financial incentives.
The Pilot sought to understand how financial incentives could be used to improve recruitment in early years, in light of longstanding recruitment issues and increases in demand for childcare. In April 2024, the Department for Education estimated that the early years workforce would need to expand by around 35,000 to cope with increased demand from the unprecedented expansion of childcare entitlements, with pre-school children from working families eligible for 30 hours free childcare per week from the age of 9 months from September 2025.
There were 512 incentives allocated as part of the Pilot, but London Economics found that the Pilot had no significant impact on the number of applications, as well as limited effectiveness in attracting candidates with suitable experience or qualifications. In addition, the evaluation found that applicants were often unaware of incentives even when they were eligible, and even among those who were aware, many suggested that the incentive did not influence their decision to apply.
However, the evaluation found no evidence of the incentives having a negative impact on the retention of existing staff, who were ineligible for the incentive. There was also no evidence suggesting that the incentives had a negative impact on recruitment in nearby local authorities where the incentives were not available.
The report, published by the DfE here, made recommendations for the future use of financial incentives. This included increasing the overall payment amount, improving communication to raise awareness, and aligning how the incentives were targeted with providers’ recruitment priorities.
Since the analysis, the government announced that incentives of £4,500 would be made available in the most disadvantaged areas, as part of its Best Start in Life strategy launched in July 2025.
The evaluation was covered by TES (formerly Times Educational Supplement), the Early Years Alliance, Nursery World, Children and Young People Now, and Nursery Management Today.
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, which ranges from evaluating the impact of childcare policies on parental labour market choices to understanding trends in the childcare workforce and childcare affordability and providing policy advice. He can be contacted by email at [email protected].