Childcare costs rise above inflation

Britain’s parents are paying 5 per cent more for childcare for the under-twos than they were a year ago, according to a survey.

Parents are paying 5 per cent more for childcare than they were a year ago
Parents are paying 5 per cent more for childcare than they were a year ago

Coram Family and Childcare’s 20th annual childcare survey has found parents have been hit by childcare costs rising ahead of inflation.

Parents pay an average of £131.61 per week, or over £6,800 per year, for a part-time nursery place, the survey said.

They also face a ‘postcode lottery,’ according to the findings, with childcare prices and availability varying significantly across the country.

The most expensive regions in the UK are London and the South East, where the cost of a part-time nursery place for a child under two is £165.47 and £144.90 per week respectively.

In the least expensive regions, the West Midlands and Yorkshire and Humberside, the costs are £116.25 and £113.76 respectively.

Source: Coram Family and Childcare, Childcare Survey 2020

Even in areas where parents can afford childcare, many may struggle to find it, with availability little improved on the findings of last year’s survey, Coram Family and Childcare said.

In England, just over half (56 per cent) of local authorities had enough childcare for parents working full-time, compared to 57 per cent in 2019.  

The 30 hours extended offer was not found to have eased the pressure on childcare places, as between 38 per cent and 56 per cent of local authorities reported the offer had no impact on childcare availability.

Half of local authorities said the 30 hours had a negative impact on the financial sustainability of childcare providers, while just 8 per cent saw it as having a positive impact.

Although relatively few local authorities provided data regarding additional charges, those that did respond reported around half of childcare providers charging for extras.

Claire Harding, head of Coram Family and Childcare, said, ‘Good childcare is essential: it enables parents to work and boosts children’s learning. But for far too many families in the UK, it just isn’t working.

‘Recent Government investment is welcome, but many families still face crippling costs, especially in the period from the end of parental leave to when a child turns three.

‘There are seven different types of childcare support depending on families’ individual circumstances, and many parents find it difficult just to find out what’s available to them.

‘Investing in childcare support is good for us all because it helps parents to work now, and boosts children’s learning and skills for our future. We’re calling on Government to reform and simplify the childcare system so every parent is better off working after paying for childcare, and every child has access to childcare which supports their learning and development.’

In the survey, Coram Family and Childcare called on Government to:

  • reform Universal Credit so it doesn’t lock parents out of work: increase the maximum amount of childcare costs paid under Universal Credit and move to upfront payments for childcare
  • regularly review the funding rate for free early years entitlements to make sure that they meet the cost of delivering high-quality childcare
  • extend the 30 hours free childcare for three- and four-year-olds in England and Wales to families where parents are in training to help parents get better jobs
  • double the early years pupil premium to boost outcomes for the most disadvantaged children
  • reallocate any underspend against the budget for Tax-Free Childcare to other parts of the childcare system and focus this on the most disadvantaged children

Neil Leitch, chief executive of the Early Years Alliance, said, ‘Every year, the cost of delivering childcare places gets more and more expensive, and yet Government funding has consistently failed to keep up. In April, nurseries, pre-schools and childminders across England will see their staffing costs increase hugely as a result of national living and minimum wages rises of more than 6 per cent - but the biggest increase in funding any provider is likely to see is 2 per cent, and that's on the back of years of stagnant funding.

‘Ministers cannot continue to ignore the impact that chronic childcare underfunding is having on both the early years sector and the children and families it promised to support. As such, with both the Budget and Spending Review on the horizon, we urge the Government to commit to ensuring that “free childcare” schemes are adequately funded, both now and in the future. Neither providers nor parents should have to pay for a pledge that the Government chose to make.’

Purnima Tanuku, chief executive of National Day Nurseries Association, said, 'Today’s report is no surprise. Every year nurseries have to take difficult decisions when reviewing their fee structures. The rising fees for parents reflect the rising costs childcare providers face. Nursery businesses are facing above-inflation cost increases mainly due to the minimum and living wage rises in the region of 6 per cent from April. On top of that, nurseries face other cost increases such as business rates.

'Half of local authorities now agree with what we have been saying for years, that underfunding the policy is harming nurseries’ sustainability. By short-changing childcare providers, the Government is selling families short on their promises. Parents are seeing fees for additional hours and for under-threes go up as a result.'

Tulip Siddiq MP, Labour’s shadow minister for early years, said, 'The Government’s failure to provide enough free and affordable childcare is making it more difficult for some parents to work and locking women out of the labour market, as costs surge twice as fast as inflation.

'It is deeply concerning that there are still not enough childcare places in over half of local authorities. Parents are struggling to get the childcare they need, and they face a "postcode lottery" with the availability and cost. 

'Families are paying the price for the Tories’ chronic underfunding of early years.' 

Liz Bayram, chief executive of the Professional Association for Childcare and Early Years (PACEY), commented, 'It is no surprise that childcare costs are continuing to increase for families, especially if their child is two or under. Continued underfunding of Government’s early education entitlements in England and variations in the rates paid to funded providers in Wales, as well as increasing business costs like minimum wage increases, pension costs – are placing childcare providers between a rock and a hard place. This combined with a growing lack of places, especially for disabled children and for families working atypical hour, is placing increased pressure on childminders, nurseries and pre-schools who are already struggling to remain sustainable.

'Addressing the on-going underfunding of early education places has to be a priority for the new Chancellor in his imminent budget. Alongside this, ensuring additional support for local authorities to improve how they manage their local childcare market to ensure children and families are able to access the high-quality childcare they need.'

A Government spokesperson said, 'We are planning to spend over £3.6 billion on our early education and childcare entitlements in 2020-21, meaning parents are spending less on childcare and can work more flexibly. More than one million children a year are already benefitting from this investment.

'We recently announced an increase in our hourly rates for councils to provide high-quality and free childcare places. And through our £1 billion manifesto pledge, we will create even more wraparound and holiday childcare places to support working families.'

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