The amendments aim to largely maintain the status quo by protecting eligibility for households that have seen an increase in their earnings due to the increase in the National Living Wage. We understand UK Government intend to increase the National Living Wage annually until at least 2024. This is based on their policy aim for the rate of the National Living Wage to reach a target of two thirds of UK median earnings by 2024. The Low Pay Commission published their Low Pay Commission Report in December 2020 which sets out the methodology and rationale for up-ratings over the next 3 years: National Minimum Wage (publishing.service.gov.uk).
Household circumstances for these families will not have materially changed as a result of the increase in the NLW, as a small increase such as this is necessary for low-income households to maintain living standards while the cost of living increases across the country. Labour market trends show that the distribution of low paid jobs has been broadly stable with a similar percentage of workers earning at and just above the NLW.
We do not anticipate there being any significant increase in the number of 2 year olds becoming newly eligible as a result of this change. If we make no changes to the threshold, we estimate the eligible population decreases by around 1,000 children. This represents 7% of that eligible population.
It is important to note however that no 2 year old currently accessing the funded entitlement will lose out, as eligibility is only assessed once before the child begins provision. Once the child is accessing their funded place they will retain it, even if their family's circumstances change.
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