The Treasury is quietly drawing up plans for a British-style pro-natalist policy after a flagship international experiment in boosting birth rates was declared a failure. Officials have been monitoring the outcome of Hungary’s heavily subsidised fertility programme, which offered families loans, tax breaks and housing grants if they committed to having three or more children. Five years in, the numbers are stark: Hungary’s total fertility rate has barely budged, hovering at 1.5 children per woman – well below the replacement level of 2.1.
Sources inside the Treasury confirm that the collapse of the Hungarian model has accelerated internal discussions about what a UK version might look like. “We are looking at everything from direct cash payments to mortgage relief,” one official said. “But the Hungarian experience tells us that policy alone cannot reverse a cultural shift. You cannot bribe people into parenthood.”
The Hungarian scheme, launched in 2019, was the most ambitious in Europe. Couples could take out a zero-interest loan of up to 10 million forints (£23,000), which was written off entirely if they had three children. Additional subsidies included a lump sum for grandparents, plus a dedicated housing allowance. Prime Minister Viktor Orbán framed it as a demographic defence of the nation against migration. Yet the latest data shows the fertility rate has actually fallen since the policy began. Critics argue that the scheme primarily benefited the wealthy and did nothing to address the fundamental reasons young people are delaying or forgoing children: housing costs, insecure work and the high price of childcare.
Here in Britain, the situation is similar but worse. The UK fertility rate dropped to 1.49 in 2023, the lowest on record. The average age of first-time mothers nudges 31. The north-south divide is stark: in some parts of the South East, the rate is below 1.2. Economists warn that a shrinking working-age population will pile pressure on public services and pensions within a decade. “We have a demographic time bomb,” said Dr. Alice Thornhill of the London School of Economics. “The question is whether the Treasury is prepared to defuse it with cash or structural reform.”
Labour unions have already raised concerns that any UK policy must tackle inequality first. “You cannot offer a baby bonus when families are choosing between heating and eating,” said Maria Fox of the Trades Union Congress. “We need affordable housing, decent wages and a childcare system that doesn’t cost a second mortgage. Throwing money at births without fixing the economy is like trying to fill a leaky bucket.”
Treasury insiders acknowledge the risk. The early thinking centres on a mix of universal child benefit increases and targeted support for second and third children. One proposal would see the state contribute to a junior ISA for every new baby, redeemable at age 18. Another, more radical idea is a “parental salary” for the first two years. But the cost is prohibitive: experts estimate a 50% boost to child benefit would cost £4 billion a year. The Treasury is also wary of creating a two-tier system that benefits better-off families, as happened in Hungary.
The failure of the Hungarian experiment has made officials cautious. “It’s a sobering lesson,” the source said. “We know we need to act, but we also know that simply replicating their model won’t work. We have to address the real economy: stagnating wages, job insecurity and the astronomical cost of childcare.”
With an election looming, the Conservatives are reluctant to commit to expensive new entitlements. Labour has promised a national childcare strategy but has been silent on direct financial incentives. The clock is ticking. The Office for Budget Responsibility will release updated population projections in the autumn, and the numbers are expected to be grim. The Treasury hopes to have a consultation paper ready by the end of the year. But as Hungary has shown, buying babies is not as simple as it sounds.
