Childcare costs survey: nursery fees rise by 6 per cent in a year

Key findings:

• average childcare costs are now more than £100 for a part-time place in many areas
• average annual cost for a child under-two is £5,103 a year
• the most expensive nursery from this year’s survey was £300 for 25 hours - £15,000 a year
• childminder costs have risen by 3.2 per cent for a child under two, and 3.9 per cent for a child aged two and over

The report by the Daycare Trust shows that childcare costs have risen above inflation by 5.8 per cent over the past year, while wages in the UK have risen by just 0.3 per cent.

There was also a shortage of nursery and childminder places for parents, particularly those who work outside the typical working day, with around half of all local authorities in England reporting that they did not have enough childcare places for all working parents.

The survey of family information services across Britain also found that there are significant gaps in the availability of childcare for disabled children – just 12 per cent of local authorities said they had enough childcare to meet their needs.

Childcare shortage

The report concludes, ‘Comparing this year’s findings to last year’s findings, we see that there has been no improvement in the proportion of local authorities that have enough childcare across the whole authority to meet the needs of these particular groups.

‘This systematic failure is evidenced through parents explicitly raising a lack of childcare availability to 53 per cent of Family Information Services who responded to our survey.’The trust also analysed statistics published by the HMRC, comparing April and December figures, and found that the average claim for the childcare element of the Working Tax Credit has fallen by more than £10 a week, since the amount parents are able to claim has dropped from 80 per cent of childcare costs to 70 per cent.

This also shows that 44,000 fewer families are receiving help for childcare costs through the tax credit system since the Government cut support for help with childcare costs last April.

The trust received responses from 160 local authorities and also carried out freedom of information requests in areas where FIS have closed to ensure a good response across all regions.

Daycare Trust chief executive Anand Shukla said, ‘These above-inflation increases in the cost of childcare are more bad news for families, heaping further pressure on their stretched budgets as wages remain stagnant and less help is available through tax credits.

‘Daycare Trust warned that the Government’s decision to cut tax credits would mean that some families found that they were no longer better off going to work once they had paid for childcare. The latest HMRC figures reinforce Daycare Trust’s fear that the loss of this vital lifeline is forcing families out of work and in to poverty.

‘Today we are calling on the Government to reverse its self-defeating childcare tax credit cut, and to deal decisively with the childcare affordability crisis for parents by pledging to provide free childcare for all two year-olds by the end of the current parliament.’

He added, ‘At a time when family and Government finances are so stretched, and the Treasury is looking to maximise tax revenues and reduce benefit expenditure, it is sheer folly that any parent has to leave work because they cannot afford to pay for childcare.’

Julian Foster, managing director of Computershare Voucher Services, who sponsored the research, said the survey highlights the growing gap between working parents and affordable childcare.

‘Employers can do their bit to support employees by making flexible working a reality and introducing childcare voucher schemes. Schemes are cost neutral for companies to run and allow a basic rate earner to save nearly £1,000 per year on their childcare costs.’

‘Computershare Voucher Services fully supports Daycare Trust’s recommendations for improving accessibility to affordable childcare.

‘We have been particularly heavily involved in the plan to extend childcare vouchers to self-employed and encourage entrepreneurship - a proposal that has already seen some Government support.’

Free entitlement

Purnima Tanuku, chief executive of the National Day Nurseries Association, said that wide variations in nursery funding for the free entitlement and the cost of overheads for nurseries, such as the rise in VAT and business rates, were pushing up fees for parents.

‘Current economic times are challenging for everyone. Nurseries know first-hand how families are under pressure and that childcare is a big part of household budgets, ' she said.

‘Government and local authorities must look at the free entitlement funding to ensure it is enough to cover the costs of childcare in all local authority areas.

‘A sufficient level of funding will stop nurseries having to increase the costs of paid-for hours to cover the shortfalls in free entitlement funding.’

The NDNA backed the call to reinstate the level of tax credit support to 80 per cent and to increase the value of childcare vouchers in line with inflation.

National Childminding Association joint chief executive Liz Bayram said, 'Making work financially worthwhile is a challenge for many working parents and the Daycare Trust’s survey highlights the compound effect of rising childcare charges, tax credit cuts and gaps in childcare provision on already over-stretched families.

'The issue becomes even more complex when you recognise that the majority of people working in childcare, do so for minimum financial reward.

'The majority of our 38,000 members earn an average of £10,000 pa. They choose a career in childminding because they love caring for children, not because they want to make their fortune.'

'We welcome the Daycare Trust highlighting that more needs to be done to subsidise the cost of childcare for working parents. But NCMA also wants more to be done to ensure the important role professionals providing childcare play in supporting young children to reach their full potential, is not left unrecognised or undervalued.'

Neil Leitch, chief executive of the Pre-school Learning Alliance, said, 'We share the Daycare Trust's concerns about the rising costs of childcare at a time when parents' incomes have fallen in real terms.

'Unfortunately, the report does not put into context the environment in which childcare providers have to operate within.

Over the past year day nurseries and pre-schools have faced a number of rising costs, including the 2.5 per cent increase in VAT from 17.5 per cent to 20 per cent, which they are unable to reclaim, increased staff training costs due to the severe withdrawal of local authority support for training, and an increase the national minimum wage - core costs that they have had to pass on to parents.'

June O'Sullivan, chief executive of London Early Years Foundation, said, 'The impact of good quality early years education has never been more clear, with many studies now recognising how you can improve a child’s long term life chances with the right care and education from the start.

However, this kind of good quality childcare needed by working parents has never been easily affordable, a fact even more true for those families from disadvantaged areas of London, where four in ten children still live in poverty.  

As a registered charity and social enterprise, our model is designed to help parents meet such rising costs. We work closely with local authorities and funders to bring down fees for these parents, as well as those studying, looking for work or starting a new business.

This report clearly reveals the increasingly desperate position in which our parents with young children find themselves - and how urgent it is we find a way to reverse this growing trend before it is too late.'