The chancellor will promise to provide 30 hours of childcare a week to parents of one and two-year-olds, Sky News has learned.
The multi-billion pound announcement is set to be made in today’s “back to work” budget.
Families with children aged one and two do not currently receive support after parental leave ends and before free nursery hours are offered for three and four-year-olds.
Politics live: Chancellor to deliver a ‘back to work’ budget
Extending the provision could form a central plank in Jeremy Hunt’s pitch of helping with the cost of living and getting parents into work, according to Sky News’ political editor Beth Rigby.
UK childcare costs are among the most expensive in the world, with full-time fees for a child under two at nursery reaching an average of £269 a week last year – equivalent to around £14,000 annually.
Last month, the Early Years Alliance told Sky News nursery fees are expected to increase even further, going up by an average of 8% – higher than in previous years.
Responding to the expected funding boost, the organisation said that while it appears positive, “as always the devil is in the detail”.
Chief executive Neil Leitch said: “We know that the sector is facing its most challenging time in decades – settings are closing at record levels, there is a severe recruitment and retention crisis, and costs continue to soar.
“Unless the government puts in safeguards to ensure that funding for all early entitlement offers continues to meet the sharply rising costs of delivering places, not only now but in the future, what is currently a crisis will end up in catastrophe.”
Childcare has emerged as a key political battleground in the run-up to the next election, with Labour vowing to overhaul the “broken system”.
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Nursery providers in England have also raised concerns about underfunding, with complaints about the lack of government investment.
Currently all families of three and four-years-old qualify for 15 hours of free childcare a week, over 38 weeks, while households can qualify for 30 hours of free childcare if parents earn the equivalent of 16 hours a week at the national minimum or living wage.
Tory MPs have been pressing the chancellor to make childcare more affordable to reduce pressure on families and enable more women to re-enter the workforce.
The government is expected to pledge £4bn to expand free provision to one and two-year-olds, with details on where the money will come from to be laid out on Wednesday.
Labour MP Stella Creasy claimed that is only half of what would be needed, tweeting: “If this is true, it’s asking childcare providers to offer more hours at a loss as it’s only half the money needed to deliver this promise. (It) would be the same as (the) help to buy scheme which pushed up house prices because it didn’t increase supply.”
Paul Johnson, director of the Institute for Fiscal Studies, said that many would welcome the announcement but warned the “whole system is hugely complex”.
“As universal support has expanded, targeted support for children most in need has contracted,” he wrote.
What else is expected in Wednesday’s budget?
Mr Hunt is expected to announce a package of measures to help parents, including changing the rules so that those on Universal Credit are given more childcare and provided with the funding upfront.
The Treasury is also believed to be planning a cash injection of hundreds of millions into increasing the availability of the 30 hours of free childcare to three to four-year-olds.
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Plans are also being considered to loosen staff to child ratios for two-year-olds, which could make the cost of childcare a little cheaper.
However, Mr Leitch called on the government to “re-think this shameful plan”, saying: “At a time when we finally seem to be making some progress, policies that undermine the quality of care and education that children receive are the last thing we need.”
Few other “big bangs” are expected on Wednesday, with Mr Hunt likely to focus on measures to support the government’s plan to halve inflation, grow the economy and reduce public debt.
Central to that will be a package of measures to try to shift parents, the sick, disabled and older workers back into jobs.
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Announcements on energy bill support, benefits reform and pensions allowances are all expected, though Mr Hunt is likely to resist calls from Conservative backbenchers to go further on tax cuts.
Among some of the expected announcements:
• Insiders in the Treasury say there will be two parts to Mr Hunt’s budget: a short-term support plan to provide immediate relief on the cost of living crisis and then a long-term plan for growth.
• The government is expected to extend the £2,500 energy price guarantee for another three months from April (where there had been a planned rise to £3,000) to give people support on their bills.
• Action is also expected on prepayment meters with the chancellor set to use the Budget to scrap so-called “prepayment premium” from July.
• There will be a package of measures to try to encourage the over-50s, long-term sick and disabled people, and benefits claimants back into the workplace.
• The chancellor is expected to raise the lifetime allowance for pension savings from £1m to an expected £1.8m – a record level – in order to try to incentivise doctors and other professionals out of retirement and back into work.
• Mr Hunt could also lift the annual tax-free allowance for pensions from £40,000 to £60,000. It would cost £2bn a year.
• It is believed that the planned increase in corporation tax from 19p to 25p in April will go ahead and that the chancellor will offer business tax breaks to try to encourage growth instead.
• There is likely to also be policies targeting artificial intelligence, green energy and advanced manufacturing as part of the government’s long-term plan for growth.
The fiscal package comes in the wake of the autumn statement last November, which saw the chancellor hike taxes as he and Rishi Sunak sought to restore UK financial credibility after Liz Truss’ short-lived premiership.
Labour has said that the budget is an opportunity for the government to show some “real ambition” after years of “managed decline”.
Mr Hunt is expected to reference the “difficult decisions” taken to stabilise the markets following his predecessor’s disastrous mini-budget, as he sets out a road-map for the country’s economic future.
The chancellor is expected to say on Wednesday: “Today, we deliver the next part of our plan: a budget for growth.
“Not just growth from emerging out of a downturn.
“But long term, sustainable, healthy growth that pays for our NHS and schools, finds good jobs for young people, provides a safety net for older people… all whilst making our country one of the most prosperous in the world.”
