Annual survey shows rocketing cost of childcare

Katy Morton
Tuesday, March 5, 2013

Childcare is now 77 per cent more expensive in real terms than it was ten years ago, according to the latest Annual Childcare Costs Survey.

NOTE: The table shows weekly childcare costs for 25 hours a week and the percentage change since the 2012 Annual Childcare Costs Survey.

The Daycare Trust and the Family and Parenting Institute’s Childcare Costs Survey 2013, compiled from figures submitted by Family Information Services, shows that over a ten year period from 2003-2013, a nursery place for a child aged two or under is now 77 per cent more expensive in real terms, with similar rates of increase for childminders.

The average cost of provision for under-fives is now £4.26 per hour, rising to £5.33 per hour in London.

According to the survey, the cost of a nursery place for a child under two has risen by 4.2 per cent from £102.05 in 2012 to £106.38 per week for a part-time place (25 hours).

Costs for a part-time place for a child over two have increased by 6.6 per cent from £97.51 12 months ago to £103.96 per week, more than double the rate of inflation.

Childminder costs in Britain have also risen from £92.60 in 2012 to £98.15 for a child under two, an increase of 5.9 per cent. While for a child aged two and over the cost of a childminder has increased from £91.87 to £96.67.

The survey also shows the rate in which childcare costs vary depending on region. Childcare continues to be most expensive in London, the South-East and South-West, and cheapest in Wales and the North-West.

The figures in the Annual Childcare Costs Survey provide little support for the economic case for the proposed changes to ratios, as costs have continued to rise above the rates of inflation, regardless of ratios remaining the same. The survey goes on to say that there is little evidence to suggest that childcare providers, many of whom have extremely tight margins, will pass on any savings to parents if they relax their ratios.

While childcare costs have risen, real earnings have fallen, meaning that childcare is now taking an increased proportion of parents’ income. The Office for National Statistics’ Annual Survey of Hours and Earnings data shows that average earnings in late 2012 were at similar levels to those of 2002-03.

Source: Daycare Trust

According to the charity, after-school club costs have also risen, with a place costing an average of £49.67 per week across Britain, a rise of 9 per cent over 12 months.

Anand Shukla, chief executive of Daycare Trust and the Family and Parenting Institute, said, ‘Childcare is as essential as food and heating for working families. Yet while wages stay still and childcare becomes more expensive, it’s increasingly difficult for parents and mothers in particular to make work pay.

‘We know that the Government wants to reduce the cost of childcare to parents. But we are deeply concerned about proposals to relax ratios because this risks compromising quality, safety and children’s development. We urge the government in this year’s Budget to find ways to support parents with the costs of childcare – without compromising quality.’

He added, ‘The funding system for childcare is complex and our average figures may differ from the actual cost to childcare providers of providing high quality care. Yet, the survey makes clear that from a parent’s perspective costs are increasingly difficult to manage which is a finding that should concern us all. Families are being expected to pay more for their child’s nursery place, an average of £14,000 per year in London, than the fees for many private schools and this cannot continue’

Julian Foster, managing director of Computershare Voucher Services, sponsors of the survey, said, ‘The Government recently announced it wants to do more to support working parents with childcare costs. Well, this survey tells us that this help can’t come quickly enough and needs to be broad enough to help all parents and not just those with nursery-age children.
‘I would ask the Government to take the opportunity at the forthcoming Budget to increase the limits for childcare vouchers, to extend the scheme to the self-employed and those on the National Minimum Wage, and to give all employees the right to request as scheme from their employer.’

Research carried out at the end of last year by the Childcare Voucher Providers Association, whose members include Computershare, Busy Bees Benefits and Edenred, revealed that over 100,000 working mothers and fathers would have to leave employment if they no longer had access to childcare vouchers. A further 300,000 would have to cut the number of hours they work.

A Government spokesperson said,  'Many parents are concerned about childcare costs.

'We are reforming the childcare system so that providers have more flexibility when they have highly qualified staff and childminders are better supported. Ratio changes, which are not compulsory, will allow providers to have the flexibility to increase pay for better qualified workers. High quality providers will be able to expand and more childminders will enter the market,  this will mean parents have more affordable childcare. 

'Ofsted will be the only arbiter of quality, removing any council duplication. As a result more taxpayers’ money will go to the frontline.
'We want to help working families with costs and accessibility, and will make an announcement soon.'

Sector response

Sharon Hodgson MP, Labour’s shadow children’s minister

‘David Cameron has created a childcare crisis. On his watch, we’ve seen costs spiral, support for families cut back and over 400 children’s centres close.
‘We’re paying a big price as a country. While this Government cuts taxes for millionaires, mums are being put off going back to work because of childcare costs – a real waste of talent and potential.’

Neil Leitch, chief executive of the Pre-School Learning Alliance

'Although average childcare costs have gone up by 4.2 per cent over the past year, the early years sector has continued to incur additional costs over and above expenditure compared to previous years.

'As providers continue to receive inadequate amounts to fund the Government’s free early years entitlement for three-and four-year-old children, it is inevitable that this places more pressure on those parents who purchase additional hours to subsidise the Government’s shortfall.

'However, as the Daycare Trust indicates, the simple solution offered by Government to make childcare cheaper for parents by relaxing childcare ratios and allowing settings to take more children without employing additional staff, is not the answer.'

Deborah Lawson, general secretary of Voice the union

'Reconciling cost, quality and affordability is the greatest challenge facing the childcare industry and the Government’s early years policy.

'If childcare providers charged true costs, very few people would be able to afford them and the industry would collapse.

'The Department for Education claim that their proposals on ratios and qualifications, More great childcare, will reduce costs, but what they are proposing will not reduce the price parents pay for childcare, while changing the ratios will cut corners and compromise children’s safety and the quality of provision.

'The Government should stop tinkering around the edges and invest in the childcare sector if it really believes in delivering ‘more great childcare’  by funding more free or highly subsidised childcare places.

'It must stop relying on the sector to subsidise training and development with goodwill.'

Ryan Shorthouse, researcher at the think tank Social Market Foundation

‘For nearly a decade, childcare costs have been rising above inflation, leaving families across the income spectrum struggling. The Social Market Foundation has forecast that the pressure on parents will worsen in the years ahead, with a typical middle-income family set to pay £900 more in today’s prices in 2016 compared to in 2006. Despite government promising further support for families, we are still waiting for a significant policy to be announced to improve the affordability of childcare.
‘In the current fiscal environment, any increase in subsidy level is likely to be marginal. Meanwhile, the impact of looser regulations, as announced by the Minister for Education and Childcare earlier this year, is unlikely to make a radical difference to the cost of provision.’

The Social Market Foundation last year proposed introducing a scheme to enable parents to borrow up to £10,000 to pay for the cost of childcare.

Purnima Tanuku, chief executive of the National Day Nurseries Association

‘Just like families, nurseries are facing rising costs on essentials such as food and utilities which are pushing up the cost of childcare. Increases in business rates are also pushing up fees for parents. A large proportion of nursery fees go directly on paying the salaries of the staff caring for children and wages must be maintained to keep qualified and high quality staff.

‘We are recommending three measures to Government – action on childcare vouchers, ensuring Government funding for free nursery education reaches the front line in nurseries, and longer-term funding reform to improve efficiency and stop wastage.’

Denise Burke, director of United for All Ages and founder of the new campaigning website, Childcare Champions 

'Childcare can’t be delivered on the cheap. The Government needs to provide more help to parents and make better use of all the funding that currently exists for childcare.

'Improving childcare vouchers and proper funding of the free entitlement are critical steps. But we could do much more with all the current funding streams through an online payment system, bringing together all the difference sources of funding available to parents.

'The Government has to act urgently because the childcare system is in crisis. Nurseries, children’s centres and childminders are closing and parents can’t afford to work and pay for childcare.' 

Liz Bayram, joint chief executive of the National Childminding Association

'We join with Daycare Trust in their call to maintain affordable childcare, without losing the quality. We are particularly keen to hear how the government plans to support parents with childcare costs in the forthcoming budget.

'The findings from Daycare Trust research only tell half the story about the cost of childcare. Those working in childcare also face an increasingly tough situation with increases of just 36p per child, per hour recorded last year and ongoing rising costs to many childcare workers. Action must be taken to support those working in the industry, as well as parents.'

Anne Longfield, chief executive of 4Children

'The soaring cost of childcare is taking high quality early years support out of reach for many families whose finances are already stretched to the limit. That’s why our Fair4Families campaign is calling on the Chancellor to seize Budget Day as an opportunity to support families through these hard times.

'We want the Chancellor to offer a new "triple lock" to families, with no further cuts to services or benefits for families with children, and a positive offer for the future on major expenses such as childcare and housing.'



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