Thanks to @nuffieldfoundation.org for supporting much of the work that made this analysis possible - not something you want to tackle from scratch on Spending Review night!

ifs.org.uk/articles/pop...

What is clear is that higher-than-expected take-up = higher-than-expected costs.
Meeting childcare commitments looks much more expensive than we had thought in March 2023.
That adds to the pressure on other public services.

So where does that leave us?
Childcare entitlements are really popular.
Could be great news - if it's driven by more parents in work. But it's still too early to tell.

The Spending Review announced that spending would rise by £1.6bn in cash terms over the SR.

A bit over half of this reflects the entitlement rollout anticipated in March 2023.

But there's ~£600m to top up spending. That will meet most, but not all, of the spending pressures.

But - when these entitlements were first announced in March 2023, then-Chancellor Jeremy Hunt planned to spend £4bn a year from 2026-27 onwards.

So the long-term cost of childcare entitlements is on track to be £1 billion (!!) higher than we had originally thought.

A reasonable forecast for spending from 2026-27 onwards - once entitlements are fully rolled out - is around £5bn in today's prices.

Could easily end up several hundred million lower or higher.

But childcare entitlements are being rolled out over time. So the same % underestimate of take-up becomes a bigger deal in £ over time, as it applies to more hours.

Side note: almost all local authorities saw higher-than-expected take-up last year.

The exceptions were (almost) all in London, where there is some evidence that eligible and interested parents are less likely to actually find a childcare spot. Might point to capacity issues?

But we've already seen a BIG upwards revision in spending plans for 2024-25, driven by a big increase in expected take-up.

We now think spending on new entitlements last year was £500m - 28%!! - higher than we had thought in December 2023.

Forecasting demand for new childcare entitlements for working parents with kids under 3 was always going to be hard.

Depends on:
* how many families are eligible
* how many families will move into paid work so they become eligible
* take-up amongst eligible families

Difficult!

There are two issues here:
1) The big in-year revisions to spending we have already seen (for 2024-25)
2) What higher-than-expected take-up might mean for costs in future years, once entitlements are fully rolled out