Question to the Department for Education:

What estimate she has made of the potential impact of increases in employers’ National Insurance contributions on early years settings.

It is our ambition that all families have access to high quality, affordable and flexible early education and care, giving every child the best start in life. This is key to the government’s Plan for Change, which starts with reaching the milestone of a record number of children being ready for school. In 2025/26 alone, this government plans to spend over £8 billion on early years entitlements and we have increased the early years pupil premium by over 45%. On top of this we are providing further supplementary funding of £75 million for the Early Years Expansion Grant to help providers meet their local demand.

At the Spending Review 2025, the government announced that by 2028/29, it will provide an additional £1.6 billion per year, compared to 2025/26, to continue the expansion of government-funded childcare for working parents, boosting children’s life chances and work choices for parents.

This increase in funding reflects the expansion of childcare for eligible working parents to 30 hours and expected increases to funding rates across the spending review period.

The hourly funding rate for entitlement hours is intended to cover the core costs of providing 15 or 30 hours of childcare to parents. In setting funding rates, we take account of cost pressures facing the sector, including forecasts of average earnings and inflation, and the National Living Wage. HM Treasury have announced an increase to the rate of Employer National Insurance contributions by 1.2 percentage points, to 15%, and a reduction in the Secondary Threshold from £9,100 to £5,000 per year. They are also increasing the Employment Allowance to £10,500 and expanding this to all eligible employers.

Employment Allowance is being increased to protect businesses by providing relief of up to £10,500 per annum on their employer Class 1 National Insurance contribution liabilities from 6 April 2025.

Early Years childcare providers are entitled to claim the Employment Allowance if they are private businesses or charities and we expect the vast majority will be eligible to do so.

Receiving over 50% of your income from government-funded childcare places won’t stop you from being eligible to claim, but you should check your individual circumstances against the HMRC guidance.