The cost of full-time childcare for children under two in England has been slashed by more than half compared to last year, according to new data that reveals the dramatic financial impact of the government’s expanded free hours policy. The 25th annual survey by the children’s charity Coram found a 52% drop in costs since 2024, and a 39% fall since 2025, offering significant relief to eligible working families.
The Eligibility Divide
This substantial saving, estimated at an average of £8,000 per child annually, stems from the policy offering 30 hours a week of state-funded childcare from nine months old until school age. Coram’s report indicates it is already having a tangible effect, with nearly a third of parents able to increase their working hours as a result. However, this financial boon is not universal, creating what experts warn is a deepening chasm between eligible and ineligible families.
The crucial barrier is parental employment. To qualify for the full hours, parents must each earn at least £10,158 annually—approximately £195 per week for a two-parent working household. Those who do not meet this threshold, including parents who are out of work, studying, or dealing with health issues, are not eligible until their child turns three, and even then receive only 15 hours. For them, the cost remains punishingly high, with a part-time nursery place for a child under two averaging £189 per week.
Kellyann Maguire, manager of an Early Years Alliance nursery in Newark, observes the consequences daily. She described a three-year-old boy who arrived with no speech, only grunts, but after six months of nursery was forming three-word sentences. “A huge advance,” she said. “But if we’d had him from nine months he’d have caught up by now.” She warns that as most children surge ahead with more nursery time, those deemed “ineligible” risk falling irreparably behind during their most vital developmental years.
A System Under Strain
Beyond this eligibility cliff-edge, the early years sector faces other profound pressures. A desperate and worsening shortage of places for children with Special Educational Needs and Disabilities (SEND) persists. In March 2026, only 6% of local authorities in England reported having enough childcare for disabled children, a sharp fall from 18% the previous year, with Inner London particularly affected.
Furthermore, the landscape of provision itself is shifting. A growing portion of the market is now owned by private equity firms and foreign investors, whose nurseries are disproportionately located in wealthier areas. This contributes to “childcare deserts” in more deprived neighbourhoods. Meanwhile, voluntary and not-for-profit providers, such as the Early Years Alliance which has shrunk from 132 nurseries to just 27, have struggled to remain sustainable amidst rising costs.
These systemic strains may be linked to a growing crisis in school readiness. A 2025 survey by the charity Kindred Squared found 37% of children in England starting Reception were not deemed ready for school, up from 33% in 2024. Teachers reported that 26% were not toilet trained, 28% could not eat and drink independently, and 25% struggled with basic language skills, leading to an average loss of 2.4 hours of teaching time per day for catch-up support.
Historical Progress and Future Pledges
The current debate unfolds against a backdrop of radical change over the past quarter-century. In 1995, only 4% of children under five were in nursery, with childcare widely seen as a family, not a state, responsibility. The election of a Labour government in 1997, with a strong cohort of women MPs led by Harriet Harman, began a concerted push for expansion. Childcare tax credits arrived in 2003, followed in 2004 by free part-time nursery places for all three- and four-year-olds—a landmark moment. Today, attendance stands at 84% of three-year-olds and 93% of four-year-olds.
The Labour government has signalled its intent to address the system’s inequities. Education Secretary Bridget Phillipson has identified early years as a top priority, committing to end the discrimination in nursery hours that excludes the poorest children. The party’s manifesto pledges high-quality early education “to transform life chances,” alongside plans to improve staff recruitment, create new nursery places in unused classrooms, and bolster early intervention for SEND.
However, as with the recent abolition of the two-child benefit cap, funding such a reform requires significant treasury commitment. Advocates point to the Coram data as evidence of the economic return, showing how subsidised childcare enables greater parental workforce participation. Until the eligibility divide is bridged, campaigners argue, the remarkable progress towards a universal, cradle-to-grave education system will remain frustratingly incomplete.
