Question to the Department for Education:

To ask the Secretary of State for Education, what assessment her Department has made of the potential impact of planned increases to (a) National Insurance Contributions and (b) the National Minimum Wage on the viability of early years providers; and what steps she plans to take to ensure nurseries are supported to prevent closures.

Since July, this government has had to take some tough decisions to get our public finances back on track, but we are continuing to invest in the early years sector, supporting the delivery of the entitlements and recognising the vital role the sector plays in giving children the best start in life.

The department expects to provide over £8 billion for early years entitlements in the 2025/26 financial year, which is a more than 30% increase compared to 2024/25, as the department continues to rollout the expansion of the entitlements to eligible working parents of children aged from nine months.

On 10 December, the department published details of local authorities’ early years entitlements funding for 2025 to 2026. The funding rates for 2025/26 include funding to reflect the national living wage announced at the Autumn Budget 2024.

HM Treasury are also increasing the Employment Allowance to £10,500 and expanding this to all eligible employers, meaning some smaller providers may pay no National Insurance at all in the 2025/26 financial year. The government has confirmed that public sector employers, including those in the early years sector, will be compensated for the increase in their National Insurance contributions.

On top of over £8 billion through the core funding rates, the department is also providing an additional £75 million in an expansion grant for 2025/26 to support the sector in this pivotal year to grow the places and the workforce needed to deliver the final phase of expanded childcare entitlements from September 2025. This is in addition to the largest ever uplift in the early years pupil premium, increasing rates by over 45% to up to £570 per eligible child per year. This unprecedented increase is an investment in quality early education for those children who need it most, in the areas that need it most to tackle childcare deserts and give children the support they need to be ‘school ready’ at age 5 and go on to achieve and thrive.

The department has regular contact with each local authority in England about their sufficiency of childcare and any issues they are facing. Where local authorities report sufficiency challenges, the department discusses what action the local authority is taking to address those issues and, where needed, supports the local authority with any specific requirements through our childcare sufficiency support contract.