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by Shannon Pite and Jess Gibson

Government spending could be higher than expected if current levels of take-up for the early years entitlement remain, according to the Institute for Fiscal Studies (IFS). 

According to a , government spending on the early entitlement expansions was almost £440 million (28%) higher than had been budgeted for, largely driven mostly by an almost 50% increase in planned spending on the entitlements for under-twos. It warns that staying on this same trajectory, spending in 2027-28 could end up £1 billion higher than was expected when the new entitlements were announced in March 2023.  

The briefing argues that upcoming increases in early years spending announced at the recent Spending Review – which will see spending on new entitlements for working families rise by £1.6 billion by 2028-29 – will ease, but probably not eliminate, future government funding pressures. It adds that “DfE will have to make difficult choices, either within the childcare budget or trading off this spending against other priorities”. 

Christine Farquharson, associate director at the IFS, said: “New childcare entitlements are proving very popular indeed. Spending in 2024-25 has already been revised upward by £440 million – 28% more than originally forecast. This left the Department for Education on track for a major hole in its budget in later years; once new entitlements are fully rolled out, spending could easily end up £1 billion higher than had been expected in March 2023. 

“The Spending Review announced a significant top-up to funding for these new childcare entitlements, with around £640 million more spending in 2028 than had been implied by the March 2023 plans. But it still leaves the country spending more than it had originally planned on new childcare entitlements. If that’s because there are more parents in paid work, it could be very good news indeed for growth – but it is too early to tell whether (or to what extent) that really is the cause of higher spending.”