Autumn Budget 2025: What is the Next Government Must Fix in Childcare

As the UK heads toward another major election cycle and the next round of budget decisions, one issue keeps rising to the top of national conversations. Childcare. It is often framed as a family issue, yet the reality is far more serious.
It is an economic emergency, a workforce emergency and, for thousands of providers, a
financial survival emergency.

Parents are struggling to afford it. Providers are struggling to deliver it. Children are struggling to thrive within a system stretched beyond its limits. Despite this, the government continues to impose requirements while restricting funding, all while spending millions on communications campaigns that raise expectations without providing the means to meet them. This has created a wedge between parents and settings, fuelling frustration where cooperation is needed.

The sector is expected to do more every year with funding that has not kept pace with reality for well over a decade. Parent fees are rising because funding has fallen behind inflation, yet many nurseries have been pressured to label these increases as voluntary contributions. It is unrealistic to expect any business or charity to operate on a voluntary payment basis when they must pay rent, utilities, wages, National Insurance, business rates, and the same cost of living increases families face.

As a result, those cosy smaller nurseries sell to larger corporate groups who have the legal
infrastructure to navigate the restrictions, and even these organisations are now reaching breaking point. They should not need teams of lawyers to stay financially viable.

Most importantly, children are caught in the middle. Early years staff are the foundations of
healthy emotional development. Forming healthy attachments is crucial!  Yet underfunding keeps wages low and career progression almost non-existent. The people we want to attract to the sector cannot afford to stay in it. Settings lose their lovely staff to other careers (or increasingly to other countries). Parents understandably fear instability, but the funds aren’t there to keep teams together.

The childcare sector is not cracking. It is collapsing. And these are the facts ministers can no longer ignore.

Childcare underpins
• workforce participation
• economic growth
• children’s early development
• gender equality
• community stability

Parents are choosing between their jobs and their children. That is not a policy choice. It is a failure. They consistently report that childcare costs more than their rent, especially once their children turn three. They cannot find local places. Available hours do not match modern working patterns. Returning to work becomes financially irrational. The truth is that the system has never fully functioned, and it is now reaching the point of breakdown.

The Hard Numbers

Average wages in the early years have risen by over 100 per cent since 2017, driven by increases in the National Living Wage and the need to differentiate between experienced and inexperienced staff fairly. Government funding rates have risen by only 45 per cent in the same period.  Historically, the gap is even wider, and it grows every year.

This is not inefficiency. It is poor mathematics by the Treasury who work out funding based on low wages and a bizarre ratio multiplier. This completely ignores the overall increases in turnover required to cover all other costs, especially those supernumerary staff desperately needed, cover for holidays, sick pay, SENCO or safeguarding meetings. Settings need to be able to attract GOOD people. The sector needs to be able to attract GOOD people.
Providers understand the funding model does not work. Parents know that government
messaging about “free” childcare bears little resemblance to the fees they pay. Yet political
debate continues to focus on parental access rather than the root cause, which is the
government’s failure to fund the system it created.

The current funding calculations used by the Department for Education do not match the operational reality of running a safe, compliant, high quality early years setting. Providers cannot deliver care without supernumerary roles for safeguarding, ratios, special educational needs, leadership, administration, and maintenance, yet the model pretends these roles do not exist. As one provider put it, “Our wage bill has doubled since 2017, but funding increases have barely covered utilities.” Another commented, “No charity, business or social enterprise can survive when turnover is frozen by design.” Providers are not inefficient. They are operating under an unrealistic government framework that fails to recognise the legal and ethical responsibilities placed upon them.

The result is entirely predictable. More closures. More childcare deserts. More pressure on the settings that remain. School settings might fill a gap in some places, but more institutionalisation of young children is NOT in the interest of future mental health. While other countries, such as France, start at 3, countries with the healthiest mental health records invariably start much later, at 6. Earlier school starts are a cheap childcare solution, not a child-centred political choice.

Three Policy Changes the Next Government Must Deliver

1. A funding model built on real costs
The next government must replace the current formula with one that recognises the true cost of delivering childcare. This means acknowledging essential supernumerary staffing, allowing for turnover growth, enabling competitive wages and meeting the real cost of safeguarding, SEN provision and compliance. Anything else is superficial.7

2. Make childcare affordable without forcing providers to absorb the cost
To support families and stabilise the sector, funded hours must be costed properly, not politically.

A fair sliding scale subsidy should support middle income families. Single parents, students and those retraining need targeted help. Crucially, the government must stop shifting the financial burden onto settings through unfunded entitlements. Childcare cannot cost more than housing for families, but it also cannot be delivered at below cost by those providing it.

3. Embed emotional and SEN support in every setting Early years professionals already deliver wellbeing support, early intervention and trauma informed practice, but they cannot do so without the resources to back it up. The next government must provide dedicated early years mental health support, training, fair SEN funding and ratios that allow genuinely responsive care. This is early intervention, and it saves public money in the long term.

Why This Budget Matters

Childcare is not simply a matter of workforce participation. It shapes the next generation’s emotional and developmental foundation. If the government continues to rely on flawed models and underfunded entitlements, the consequences will be severe.

• More closures.
• Fewer places for families.
• Greater gender inequality.
• Increased pressure on health, SEN and social care.
• Poorer outcomes for children. 

If the government acts boldly, the UK could instead achieve a stable provider sector, a thriving professional workforce, improved family wellbeing, reduced inequalities and children who are emotionally and developmentally supported.

A Final Word
Providers have warned for years that the system is financially unsustainable. Parents have spoken. Providers have spoken. The data is clear.
The government must stop treating childcare as a cost and begin recognising it as a long term investment in the country’s economic and social future.
The Autumn Budget 2025 is the opportunity to rebuild the system on reality, fairness and the true cost of quality.

Childcare is not a luxury.
It is the infrastructure that keeps the country working.