Time to close the gap. Positive steps to reduce poverty, but more is needed to reduce disadvantage in the early years.

Positive steps to reduce poverty, but more is needed to reduce disadvantage in the early years

Lydia Hodges, Head of Coram Family and Childcare, reflects on the very welcome changes in the new Child Poverty Strategy but warns that the gap between funded early education entitlements for disadvantaged children and those with working parents is still wider than it has ever been.

With a record 4.5 million children in the UK living in poverty, the Child Poverty Strategy has promised very welcome improvements. Taken together, the measures in the Strategy are expected to lift around 550,000 children out of poverty by 2030. The biggest measure in the strategy is the plan to lift the two-child benefit cap from April 2026. This is estimated to lift 450,000 children out of poverty by 2030, at a cost of £3bn.

The size and importance of this change is not to be underestimated. Poverty directly affects children’s health, educational outcomes, and emotional wellbeing. The decision to lift the cap is testament to the hard work of a great many campaigning groups, and to the Government’s commitment to giving every child the best start in life.

Childcare costs

Childcare costs have long been one of the biggest barriers for parents who want to work. Many more children are now eligible for funded early education and the announcement that upfront childcare support through Universal Credit will be extended to those returning to work from parental leave will certainly help. But upfront support is not available through Universal Credit for holiday childcare costs, which can add up to over a thousand pounds per school-aged child during the summer holidays, and there is still a gap between funded entitlements for disadvantaged children and those with working parents, a gap that is wider now than it has ever been.

The benefits of early education are especially significant for children from disadvantaged backgrounds, so it seems counter-intuitive to give them fewer funded hours (15 per week instead of 30) and at a later age (two years old instead of nine months). This means that a child with eligible working parents will receive three times as much government-funded early education than a disadvantaged child, by the time they start school. High-quality early education boosts children’s outcomes in childhood and beyond while also enabling parents to work or train, improving circumstances for themselves and their children.

At Coram Family and Childcare, we believe that all children should have the same opportunity to benefit from early education, no matter their needs or family circumstances.

Last month, the Education Committee held its first session of their Inquiry into Early Years: Improving Support for Children and Families. I was joined on the witness panel by research and evidence experts Professor Eva Lloyd of UEL, Dr Tammy Campbell from EPI and Sarah Tillotson from EEF. All four of us voiced concern that despite the welcome expansion of government-funded early education, gaps for disadvantaged children are at risk of increasing, as many are excluded from the 30-hour entitlement due to their parents’ income or circumstances.

The final expansion of funded early education rolled out in September 2025, giving children with eligible working parents 30 government-funded hours per week, for 38 weeks per year, from the term after they turn 9 months old until they start school. But many children are not eligible for this, including:

• Children whose parents do not regularly earn enough to qualify
• Children who have a parent who cannot work due to terminal illness
• Children who have at least one parent in education or training
• Children whose parents are migrants and meet the work criteria but have no recourse to public funds
• Children of disabled single parents

To bridge the gap, families not eligible for 30 funded hours will need to pay for those hours themselves, if they wish to give their child the same amount of early education. For children under the age of two, for whom there are no other funded entitlements, this means paying for the full 30 hours. For two-year-olds, it means buying an extra 15 hours if the child is eligible for the 15 funded hours for Families Receiving Additional Support, or the full 30 hours if they are not eligible for any hours. All three- and four-year-olds are universally entitled to 15 funded hours so the cost to bridge the gap would be the cost of 15 extra hours.

Our September 2025 analysis shows these costs would be substantial: an average of £205 per week for a child under the age of two, between £100 and £193 per week for two-year-olds (depending on whether they need to buy 15 or 30 hours), and £96 per week for three- and four-year-olds.

Given that it is primarily low-income and non-working families who will be in this position, it is unlikely that many will be able to afford to make this choice and will instead be left with no option but to wait, and to receive fewer hours. What might this mean for these children, who will receive less of the excellent support available from our high-quality nurseries and childminders? With an ambition for more children to reach a good level of development by the time they start school, how will these children fare in comparison to those receiving more early education? The support available through Best Start Family Hubs may provide another option for some families, but can it deliver the same outcomes for children as regular, high-quality early education? Time will tell, but time is not a luxury that children under 5 have – the early years are a short and crucial window in a child’s life.

Rebalancing the system

Change is needed to redress the balance:
– Immediate action to extend the working parent funded early education entitlements to children whose parents are in training or education, are migrants who meet the work criteria, or who are unable to work due to terminal illness
– A longer-term plan to move to a universal right to 30 hours of funded early education for all children

While the expansion of funded childcare hours provides welcome support for many working families, the focus on parental income risks excluding the children who stand to benefit the most from early education and further widening the disadvantage gap. Our October 2024 research report into early education for disadvantaged children, including those from low-income families or with additional needs, also showed these families are less likely to benefit from funded early education due to a mix of structural and social barriers.

Extra costs for already struggling families

Under Universal Credit (UC), parents can receive up to 85% of their childcare bill paid by the government. Previously, parents were able to use Universal Credit childcare support towards additional charges levied by nurseries or childminders for consumables – such as nappies, wipes, and food – whenever these were included in the contract with the provider, which was the case for most settings. However, following a High Court judgement, Department for Education guidance was updated in February 2025 to clarify that charges for extras “must be voluntary for the parent” when in connection with taking up a government-funded place. This guidance came into effect in April 2025. So, consumables can no longer be included in the provider contract, and no longer meet eligibility for inclusion in Universal Credit childcare support. The DWP confirmed that these ‘additional extras’ such as nappies and food will not be reimbursed through the childcare element of Universal Credit for children taking up a funded place because these “costs are optional (non-mandatory) and the claimant is choosing to pay them.”

The reality for parents is that the concept of this as a ‘choice’ is highly questionable. Should they ‘choose’ not to pay, they must follow the alternative policy of their nursery or childminder, which may include buying and providing those extras themselves. By virtue of the income eligibility, parents on Universal Credit are on lower incomes, are less likely to be able to afford additional costs and more likely to struggle to provide alternatives. This also puts many providers in a difficult position, as they do not want to see children go hungry but are limited by the funding the receive, which does not cover these extras, and the guidance they must follow.

While some chargeable extras may not currently be easily identifiable, because of the presentation of invoices, this is set to change. In January, all providers must publish their fees on their website, or the website of their Family Information Service, and detail all chargeable extras on invoices to parents. This transparency is positive for many families but may have unintended consequences for parents relying on Universal Credit childcare support.

Comparison with Tax-Free Childcare 

In contrast, parents using Tax-Free Childcare (which has the same income criteria as the 30-hour funded early education entitlement, and therefore is mostly used by those on higher incomes) can use Tax-Free Childcare support towards the cost of voluntary additional consumable charges.  Not being able to use Universal Credit for these costs when other families can use Tax-Free Childcare feels very unfair to parents on UC, given that both schemes are government-funded financial support aimed at aiding parental employment. It risks another barrier to childcare for disadvantaged families that is not there for working parents with higher incomes.

Impact 

Families on lower incomes are already more likely to experience food poverty. Previous access to a nutritious hot meal through their nursery, supported by childcare help through Universal Credit, may be something that not all families can afford to replace, or they may ‘replace’ with cheaper, less nutritious options.

There’s no doubt that the Child Poverty Strategy, like the Best Start in Life Strategy, is a moment for celebration. However, the questions of fairness in children’s opportunity to benefit from early education, no matter their needs or family circumstances, remains.

It is time to close the gap.

For more information about our work visit: www.coramfamilyandchildcare.org.uk/