Question to the Department for Education:

To ask the Secretary of State for Education, what steps she is taking to support privately run children's day nurseries with costs.

It is the government’s ambition that all families have access to high quality, affordable and flexible early education and care, giving every child the best start in life and delivering on our Plan for Change.

Local authority-maintained schools provide education for no charge, so are outside the scope of VAT. Additionally, some other providers are exempt from VAT. The provision of nursery services by a provider registered with Ofsted, as a supply of welfare rather than of education services, is also exempt. Local authority-run schools and nurseries can recover some of their VAT through the Section 33 scheme, which aims to ensure that VAT does not divert locally-collected taxes away from their intended use. Private nurseries, like private schools, cannot recover their VAT. Any change to this approach would come at a cost to the exchequer and any reduction in tax paid is a reduction in the money available to support important public services, including the NHS and policing. The government therefore has no plans to change the VAT treatment of nurseries. However, all taxes are kept under constant review.

From this year, we plan to provide over £8 billion for the early years entitlements, a more than 30% increase compared to 2024/25. The early years pupil premium rate has increased by over 45% compared to the 2024/25 financial year, equivalent to up to £570 per eligible child per year. We are also providing further supplementary funding of £75 million for the early years expansion grant and £25 million through the forthcoming National Insurance contributions grant for public sector employers in early years.