Childcare costs have risen four times faster than wages

The research by the TUC, a federation of trade unions, published today (20 October) reveals that in England the average wages of those with a one-year-old child rose by 12 per cent between 2008 and 2016 in cash terms, although pay is still falling in real terms. However, during the same period, childcare costs rose by 48 per cent.

It finds that in some parts of the UK, the cost of childcare has risen by even more. For example, in London, childcare has risen 7.4 times more quickly than pay, in the East Midlands seven times, and in the West Midlands 4.8 times.

The figures for wages are taken from the Labour Force Survey and from the Family and Childcare Trust for childcare costs. They are based on parents using an average of 21 hours of childcare a week for pre-school children, as indicated in the Department for Education’s Childcare and Early Years Parents’ Survey 2014-15.

The TUC warns that these rising costs have huge implications for the around 950,000 working parents across the UK with a child aged one as they are spending an increasing portion of their pay on childcare.

The analysis goes on to provide a number of scenarios based upon family type. In each scenario, the child is aged one and attends childcare for 21 hours a week.

It shows that a single parent working full-time, spent more than a fifth (21 per cent) of their wages on childcare in 2016, up from around a sixth (17 per cent) in 2008.

A family with one parent working full-time and the other part-time, spent a seventh (14 per cent) of their salary on childcare in 2016, up from around a tenth (11 per cent) in 2008.

A family with two parents working full-time, spent around a tenth (11 per cent) of their wages on childcare in 2016, up from around a 13^th (8 per cent) in 2008.

When increasing the number of hours of childcare to 40 hours a week, the analysis shows that a single parent would need to spend two-fifths (40 per cent) of their pay on childcare, which the TUC says demonstrates how difficult it is to balance work and family life without working fewer hours or getting support from friends and family.

To address what it calls an ‘increasing pressure on working families’, the TUC is calling for:

• universal free childcare from the end of maternity, which would help single parents and families- especially younger mums and dads with less seniority and lower pay – to stay in work and progress their careers after having children;
• more Government funding for local authorities to provide nurseries and childcare;
• a greater role for employers in funding childcare. This would either be through a direct subsidy to employees or the provision of on-site childcare settings.

TUC general secretary Frances O’Grady said, ‘The cost of childcare is spiralling but wages aren’t keeping pace. Parents are spending more and more of their salaries on childcare, and the picture is even worse for single parents.

‘Nearly a million working parents with one-year-old kids have eye-watering childcare bills. There is a real gap in childcare support for one-year-olds until government assistance kicks in at age two.

‘Parents need subsidised, affordable childcare from as soon as maternity leave finishes to enable them to continue working, and so mums don’t continue to have to make that choice between having a family and a career.’

Children and families minister Robert Goodwill said, 'Helping families access affordable childcare is at the heart of this government’s agenda, which is why we are investing a record £6 billion every year by 2020 in childcare.

'As well as providing tax-free childcare to around 2 million households to help pay for childcare costs, we have doubled the free childcare available to working parents of three and four years olds to 30 hours a week, saving them thousands a year and helping them get back into work. Indeed, an independent evaluation of the early delivery of 30 hours free childcare found that 84 per cent of parents reported improved family finances as a result of the free childcare.'

Sector response

Neil Leitch, chief executive of the Pre-School Learning Alliance, said, ‘We know that rising childcare costs remain a significant challenge for families across the country, and this is particularly true of those parents with younger children, who do not qualify for Government funding and attract higher fees as a result of stricter staff: child ratios

‘Unfortunately, this financial pressure is only likely to get worse with the rollout of the 30-hour offer for three- and four-year-olds, as struggling providers are forced to try and recoup the losses they make as a result of Government underfunding elsewhere, which often means increasing the cost of care for under-twos.

‘The TUC is completely right to call on the Government to increase childcare funding, and of course, the private and voluntary sector is absolutely vital to this. Ultimately, unless the Government invests what is needed into the early years sector, it is those working families it has promised to support who will end up paying the price.’

Ellen Broomé, chief executive at the Family and Childcare Trust, said, ‘Childcare is as vital as the rails and roads to making our country run: it boosts children’s outcomes, supports parents to work and provides our economy with a reliable workforce.

‘For too many parents, however, high childcare costs mean that it does not pay to work. Low-income families claiming Universal Credit typically take home just £1.96 per hour after childcare costs have been paid, and some get even less than this. We must make sure every parent is better off working after childcare costs.’

Purnima Tanuku, chief executive of National Day Nurseries Associatio (NDNA), said,'These statistics which make shocking reading are the result of the Government’s policy to extend "free" childcare for three- and four-year-olds to 30 hours without adequate investment.

'Our latest research showed that 83 per cent of nurseries were putting up their fees this year by an average of 4.5 per cent.

'NDNA has been warning Government that because this policy has been woefully underfunded for years, nurseries have had to push up their fees year on year to parents with children aged two and under.

'Although this policy boasts of giving free childcare to parents, it is not free to the parents or the nurseries.

'Only some disadvantaged two-year-olds receive 15 hours funded childcare. Parents of newborns, particularly in the worst areas of London and the Midlands, are faced with the stark choice of giving up their career or seeing the majority of their wage paying for childcare costs. This is no incentive to get new parents back into the workplace.

'It’s time the Government had a re-think and invest properly to make it work. The current hourly rates are inadequate for nurseries to deliver high quality early years education.'

Susanna Kalitowski, Policy and Research Manager at PACEY (Professional Association for Childcare and Early Years), said, 'Sadly it comes as no surprise to PACEY that childcare costs are rising, and are outpacing the increase in wages. Childcare providers have been just as affected as everyone else by inflation and the increase in the cost of living. Larger providers have also been hit by an increase in business rates, rises to the minimum wage and new pension requirements.

'On top of this, the ‘free’ childcare entitlements for 3- and 4-year-olds have been seriously underfunded in many areas for years, leaving a gaping hole in providers’ budgets. The problem is now set to get worse with the doubling of the entitlement to 30 hours for working parents. Recent PACEY research found that it is underfunded by an average of £400 per year for every place. In places like London and the South East, the shortfall is much larger.

'Childcare providers are acutely aware of how much parents struggle with childcare costs, and raising fees is usually a last resort. They have now been forced into the unenviable position of raising the cost of caring for babies and toddlers or charging parents of 3- and 4-year-olds for meals and trips. Either way it is hard to see how childcare costs will go down.

'What we desperately need is a recognition from Government of the true cost of providing childcare, and a long-term sustainable funding settlement for providers that offers families the affordable, high quality childcare they need.'