The chancellor is expected to deliver a multibillion-pound “cradle-to-grave giveaway”, using his budget on Wednesday to announce childcare and pension reforms.
Jeremy Hunt is to relax the rules on the ratio of staff to children in nurseries as part of a package of reforms that will make childcare more “flexible and affordable” for millions of families.
To address concerns that the sector is understaffed and underfunded, Hunt is considering a big rise in the subsidy childcare providers receive from the government to cover free childcare to which parents are entitled. It is understood the payments will increase by hundreds of millions of pounds.
To encourage more people to work in childcare, a sign-up bonus of several hundred pounds is being considered.
Hunt will announce that the number of children per staff member allowed in nurseries will increase from four to five, bringing England into line with Scotland.
He will raise the sum that parents on universal credit can claim for childcare, from £646 a month for a single child to £950, and from £1,108 for two children to £1,630. It has been frozen since 2006, a large real-terms cut.
Hunt has also tasked officials with re-examining a proposal put forward last month by the Department for Education to extend the 30 hours a week in term time to which parents of three and four-year-olds are entitled to those with children aged one and two. He came under pressure to look again at the proposal after Labour signalled it would make a transformational offer to parents at the next election. The shadow education secretary, Bridget Phillipson, used a speech last week to promise parents reduced childcare costs.
The chancellor is expected to announce three pension giveaways to encourage the over-50s to return to work or delay their retirement plans. One will allow workers to contribute up to 50 per cent more to their pensions each year, with the annual allowance increasing from £40,000 to £60,000.
The lifetime allowance, which was due to remain at £1.07 million until 2028, will increase. If a pension pot is worth more than this, a penal tax charge results. Many NHS doctors have retired early as a consequence.
Hunt is preparing to raise the money purchase annual allowance from £4,000 to £10,000, which largely affects older people returning to the workplace. The allowance limits the tax relief people can receive on contributions made after they have started drawing from a defined-contribution pension.