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Hundreds of thousands of high-earning parents could face a childcare “cliff edge”, leaving them with less money after a pay rise, experts have warned.

Jeremy Hunt, the chancellor, announced in his budget on Wednesday that he was extending free childcare hours to the parents of one and two year olds. However, he will retain the rule under which the entitlement is available only to families where no parent earns £100,000 or more.

It means that the government is significantly expanding one of “the most severe distortions you will ever see within a tax and benefit system”, the Institute for Fiscal Studies (IFS) said.

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