Prospective parents hoping for free childcare up to primary school must hold off for more than a year to get the full benefits of the new system announced in the chancellor’s Budget speech, Martin Lewis said.
Jeremy Hunt yesterday revealed the government would pay nurseries to provide up to 30 hours of childcare for children aged nine months up to their third birthday – closing a gap that has forced parents to stump up hundreds of pounds a week.
The measure was largely welcomed but has faced criticism for a delayed, phased rollout, with the scheme not coming into full effect until Autumn 2025.
Mr Lewis, the money saving expert, broke down the policy in a special Budget-themed edition of his ITV financial advice programme.
Though some children will be eligible for 15 hours free from next September, “to get the full gain from this you need to be born in December 2024,” Mr Lewis said.
He added that women “in the very early stages of pregnancy” may just have children eligible for the first phase as they would be under nine months old at the time of implementation.
The government estimates one million parents will benefit from the first phase, with the full policy worth up to £6,500 a year for working families.
Mr Lewis said there was “one big miss” in the new policy with regards to provisions for parents on universal credit.
Such families will receive childcare funding upfront, rather than in arrears, to help parents who struggle to afford upfront costs for childcare.
Mr Lewis said said: “The one big miss on this is this does not apply to legacy benefits, in other words, those who get tax credits for childcare, you will not see the equivalent uplift.
“My suspicion is many who have higher child care costs and are on tax credits will be better off shifting to universal credit.”
However, Mr Lewis clarified that shifting to universal credit was “not a simple decision, especially because universal credits are eligible to what’s called deductions, which many on tax credits aren’t”.
“You should always get one-on-one help before making that decision”, he said.
Currently, parents on universal credit can claim back 85 per cent of their childcare costs – but they have to pay upfront first. This will change under the new plans so people are not left out of pocket.
The maximum universal credit childcare allowance – which has been frozen at £646-a-month per child for years – will increase to £951 for one child.
Mr Hunt said his policy was the “biggest transformation in childcare in my lifetime” as he defended the scheme from criticism.
