By Sara Rainwater, operations director
The cost of childcare isn't a tax, but it is still something I’ve been painfully aware of since having my first child almost 11 years ago. In fact if I tot up all the money I’ve spent on childcare in the past 10 years, we’re looking at an astronomical figure somewhere north of £150,000.
Of course, it was my choice to have children, raise them and cover the costs associated with them. But I wasn’t quite expecting childcare to cost the equivalent of a small property. It is no wonder that so many parents, mothers in particular, must make the tough decision between going back into the workforce after maternity leave (and facing these exorbitant bills) or giving up their careers to stay at home
So why is childcare so expensive, and what can we do to help hard working parents?
To start, let's look at the sums. The average cost of childcare has risen consistently in recent years, hitting £7,160 a year to send a child under two to a nursery for 25 hours a week and £6,893 for a two year old. This goes up to over £13,700 and £13,200 respectively for full time (50 hours per week). Childminder costs are hardly any better. The equivalent costs for an under two year old were £6,150 a year for part time and £11,845 full-time.
Amongst OECD countries, the UK has the highest childcare costs as a share of household income, coming in at 26 per cent - compared to Germany, where childcare costs account for one per cent of household income. But this isn't a stand alone statistic. Under all OECD comparable categories, the UK is in the top five for childcare costs, whether that be as a share of household income or average wages.
The government has implemented support to try and curb childcare costs. This includes 30 hours of free childcare for three to four year olds as well as more limited support for two year olds. The issue is that the average working week is 35 hours, and if you use all 30 hours of free childcare every week it only lasts for 38 weeks of the year. So, not only does it not cover all the hours parents are working, it also leaves out more than a quarter of the year.
Let's also not forget that ‘free’ childcare is not actually free - it's paid for by taxpayers. The cost of the 30 hours free childcare policy alone is £6 billion a year, despite being unsuitable for those with a full-time job, especially single parent families. When the government spends in this way t it must be effective and give taxpayers value for money - something the current system is failing to do.
In the past, there have been calls for even greater intervention, including from the TUC. Let’s remember childcare subsidies have been and are in use, yet costs have continued to rise - why would it be any different with more of them?
What parents need is a new approach that makes childcare affordable by cutting excessive bureaucracy. The UK has some of the strictest childcare regulations internationally, specifically when it comes to staff-to-child ratios, where there can only be three children under the age of two for each staff member. The government has indicated they plan to relax the ratio rules and it's easy to see why - the financial incentives are huge. Even a small change of allowing one extra child per staff member could reduce fees by between nine and 20 per cent.
The UK also imposes unnecessary regulations on the level of qualifications staff must have, to a far greater degree than other developed countries. Currently, registered childminders and staff in formal childcare settings must have an NVQ Level 2, despite the research showing that requiring teachers to have a high school diploma led to higher childcare costs of up to 46 per cent. Having high standards isn’t bad, but we shouldn’t make perfect the enemy of the good.
The benefits of sorting out the childcare system are immense. The OECD notes that high childcare costs can substantially weaken incentives to engage with the labour market. Meanwhile, a British Chambers of Commerce survey on the cost of childcare found that 28 per cent of firms saw employees reduce their working hours, 12 per cent report lower productivity, nine per cent saw staff leave their roles, and eight per cent have staff switch jobs. It’s clear that childcare costs not only have an impact on families but the wider economy.
So ministers should reform childcare regulations. Doing so would improve the economy as it recovers from covid and save families thousands of pounds a year, all while ensuring taxpayers aren’t fleeced.