Tax increase will impact nursery costs - minister

Raising the National Insurance (NI) rate for employers will impact the cost of childcare, Home Office minister Jess Phillips has said.

The Birmingham Yardley MP told BBC Politics Midlands funding shortfalls in nurseries had fallen on parents since her own children went nearly 20 years ago.

Asked if the rise in employers’ contributions would make that situation worse, Phillips replied “undoubtedly”, but added the government had announced further investment in childcare.

The rise was announced in last month's budget, when Chancellor Rachel Reeves said it was needed to "put the public finances on a firm footing".

“There is no easy way to raise the kind of money that our public services desperately need," Phillips said.

She agreed the higher rate of employers' contributions could worsen the shortfall in nursery funding which parents have to pay, but said further investment had been announced.

The minister added: “The secretary of state for education will be looking across the piece at exactly where the money that she has been allocated will be prioritised.”

Challenged by Conservatives in the Commons earlier this month to fund the rise, Education Secretary Bridget Phillipson said: "We will set out more detail on funding rates in due course."

However, the Early Years Alliance said 95% of childcare providers were set to increase fees if the government did not mitigate the combined impact of NI increases and the rise in the minimum wage.

Chief executive Neil Leitch said: "We are in the middle of the biggest expansion in the history of the early years sector, one that the government says is key to supporting parents to work and, in turn, boosting the economy.

“It makes absolutely no sense, therefore, for the Treasury to turn a blind eye to the potential impact of these changes on our sector.”