Chancellor fails to address sector crisis in latest budget

The Chancellor, Kwasi Kwarteng, delivered a ‘mini’ budget, announcement this morning, called his Growth Plan, to the House of Commons that had a number of policies that will affect childcare providers.

Earlier this week the Department for Business, Energy and Infrastructure announced the new Energy Bill Relief Scheme designed to help businesses with the cost of their energy bills.

Along with this, the Mr Kwarteng announced that the planned rise in corporation tax will be cancelled, and will remain at 19%.

The 1.25% National Insurance increase brought in from April this year will also be reversed, saving businesses £10,000 on average next year.

There was no announcement on removing business rates for early years settings in England or anything on reforming the VAT system for childcare providers like the plans to tackle VAT costs for overseas visitors. There were also no measures announced to directly address the early years workforce crisis.

The Chancellor, did make reference to that fact that reform of the childcare system would be announced by the Government in coming weeks: “the Government will set out further details of plans to speed up digital infrastructure, reform business regulation, increase housing supply, improve our immigration system, make childcare cheaper, improve farming productivity and back our financial services.”

Purnima Tanuku OBE, Chief Executive of the National Day Nurseries Association said: “There will be some elements of today’s announcement that will help the early years sector including cancelling the unfunded increase in national insurance contributions and the confirmation of energy bills relief for businesses. However, childcare providers face a number of ongoing crises that are not addressed today.

“The Chancellor referenced the cost of childcare and bringing forward plans for reform. But we have to recognise that the UK has one of the lowest levels of investment per child in early education. The cost of childcare for families cannot be addressed without changing this underlying fact.

“Current proposals of tinkering with ratios will not achieve the unrealistic savings the Government has promised to parents and will heap more pressure on a stretched workforce. Our sector is facing a workforce crisis and without the right staff nursery cannot provide the high-quality early education and care that is vital for their development.

“With low unemployment and record vacancies, the Chancellor’s plans for growth are dependent on parents and carers being able to work. Investing in early education and care is a policy that pays for itself by helping economically inactive parents return to work or increase their hours. Research has shown that supporting mothers with adequate childcare could increase their earning power by over £10 billion.

“While we heard about tackling VAT costs for overseas visitors, there was nothing on reforming this for childcare providers on the resources they buy for our youngest children. Our own research shows that due to government underfunding the majority of early years settings expect to operate at a loss or just break even. This means nurseries will struggle to benefit from plans on corporation tax.

“There is clearly some support for childcare businesses here but this has not gone far enough to help the sector, which is a crucial foundation for the UK’s economy and is in crisis.”

The Government did make reference to the childcare sector in the full text of the Growth Plan 2022: saying, “The UK has some of the highest quality childcare provision in the world, but it is also one of the biggest costs facing working families today and a barrier for people remaining in the labour market. The government will bring forward reforms to improve access to affordable, flexible childcare.

NDNA has been clear from the start that now is not the time for adjustments to ratios and it should not be used as a cost cutting exercise.

Other announcements included:

  • Cutting the basic rate of income tax to 19% in April 2023 (a year earlier than planned)
  • Cutting Stamp Duty on all levels of the property market
  • Setting up ‘Investment Zones’ in 38 local and mayoral combined authority areas in England
  • Changing the regulations to increase investment by pension funds
  • New measure to help people on low incomes secure more and better paid work

Read the Press Release

Read the Growth Plan 2022

  • England
  • Budget
  • Chancellor
  • Energy Bill Relief Scheme
  • Growth Plan
  • Kwasi Kwarteng
  • National Insurance
  • Ratios
  • VAT

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