The Centre for Social Justice (CSJ), founded by Iain Duncan Smith, says that high childcare costs need to be tackled to ensure Government plans to make work pay reach their full potential.
A report by the think-tank shows that from next year the cost of childcare subsidies will reach £2.3 billion annually or as much as £910 a month for a couple with two children.
While the think-tank acknowledges that the Universal Credit will make work pay for more parents, it says the Government must not stop there.
According to the CSJ, 455,000 UK families receive state support towards their childcare costs, with average payments of £232 a month.
The report warns that despite the UK having the second highest level of childcare subsidy in the OECD, parents still struggle to find affordable childcare that meets their needs.
Without reform of childcare it says that a single parent with three children needing after-school care would be 17p an hour worse off if they took a job. A single parent with two children in employment would only be 2p an hour better off.
For some large families it could even be cheaper for the Government to pay parents the minimum wage to stay at home and look after their children than pay a childcare subsidy, it predicts.
In order to make work pay, the report calls for a ‘pruning’ of red tape covering the provision of childcare. It suggests that regulations limiting the number of children a registered childminder can care for be eased and that schools should be given incentives to provide additional supervision of children before and after school.
Other recommendations made by the think-tank include:
For the Childcare Commission to aim to lower childcare costs to below the break-even cost of childcare in order to ensure that work always pays for parents that have to combine work with formal childcare.
Making sure the Government ask childcare providers for core and consistent information on all forms of provision, including costs, pricing and occupancy in order to better understand demand and gaps in provision in local areas.
The consideration of a modest relaxation of childcare ratios during peak hours to increase flexibility of provision for parents.
For schools to be encouraged and incentivised to offer regular childcare and after-school activities.
National and local government to shorten the process of becoming a childminder to encourage parents to do so.
Childminding circles to be encouraged by the Government to raise demand and lower costs for out-of-hours care (before 8am and after 6pm).
Jobcentre Plus discussing the option of becoming a childminder with parents on income support as they approach the point at which their youngest child reaches five years old.
Christian Guy, managing director of the CSJ, said, ‘Finding suitable and affordable childcare in the UK is difficult and often hinders some of the poorest parents from working. We need to give people the tools to escape poverty - reforming childcare must be a political priority.
‘Throwing more money at ballooning subsidies is unlikely to be the best use of public funds, what we need is a sensible and thoughtful policy change.
‘Helping parents to avoid the cost of childcare all together, for example, by fostering informal childcare networks, encouraging childminding circles and helping parents to work during schools hours, would be hugely beneficial.’