In its report, ‘A Better Off Britain’, being launched at its conference today (10 November), the CBI calls for early education places to be extended to one-year-olds and all two-year-olds to make it easier for parents to afford childcare and remain in work.
In the longer-term it says the aim should be to increase the number of hours of free childcare.
The CBI claims that extending free childcare would reduce the cost of childcare for low-income and working families and boost child development.
It also recommends extending maternity pay from 39-52 weeks to close the gap between maternity leave and when free childcare becomes available.
According to the CBI, families have been hit by rising childcare costs since 2010 and falling incomes. It says that this has prevented working parents from increasing their hours, and in some cases stopped mothers and fathers from taking on employment.
It claims that the average couple with two children saw their income fall by £2,132 a year in real terms between 2009/10.
To further help low-income and working families, within its report, the organisation recommends raising the threshold at which employees pay National Insurance.
Raising the threshold to £10,500, from the current threshold of £7,956, in a series of steps until 2020/21, says the CBI, will be worth £363 to a dual-income household, and is more effective than raising income tax allowances.
Katja Hall, deputy director general of the CBI, said, ‘Cutting employee National Insurance and helping families with the cost of childcare will put more money directly into people’s pockets.
‘Overhauling childcare in the UK would be a triple shot in the arm for our economy, raising family incomes, getting more adults into work and improving the life chances of many children.
‘Many parents want to come back to work or put in more hours, but can’t because of soaring childcare costs. It’s ludicrous that the average working couple in the UK now spends over a third of their joint income on childcare.’
The report also outlines measures to raise pay sustainably, they include better routes into higher-skilled better-paid work, and measures to ensure young people don’t fall behind in school.
Purnima Tanuku, chief executive of the National Day Nurseries Association (NDNA), said, 'It’s great that business is prioritising investment in childcare, but providing 15 hours a week free childcare for all children from the age of one isn’t viable under the current system.
'It is a policy which will be welcomed by parents and employers, but for nurseries an increase in funded hours would be an increase in losses, unless a radically reformed funding system is put in place.
'Most nurseries make a loss on the free 15 hours because the money they get from Government doesn't cover their costs. NDNA data shows nurseries are losing an average of £900 per child, per year on funded three and four-year-old places. That pushes up the fees parents have to pay as nurseries have to charge more for the extra hours parents pay for.
'Any increase in free hours would only exacerbate the problem and ultimately, unless costs are covered, nurseries will not be able to offer more places. Politicians looking to expand free childcare must make sure that there is enough funding for free hours and local authorities are getting all the money through to nurseries at a local level.'
Deborah Lawson, general secretary of Voice the union, said, 'We would welcome an expansion of free childcare, as would many parents who often, despite the 15 hours of free early education for all three and four-year-olds and some two-year-olds, struggle to pay for childcare.
'The positive influence of pre-school provision on children’s educational development is clear and backed by recent evidence.
'However, alongside that investment in places, there must also be an investment in better training and qualifications for the workforce and a proper salary and career structure, with real opportunity to progress, that does not lead to a career cul-de-sac.'
A Government spokesperson said, 'The Government’s long-term economic plan is working, putting more people into work than ever before. As the CBI make clear, it’s not possible to create a sustainable rise in living standards with short-term sticking plaster fixes. That is why we must keep working through the plan that is building a resilient economy and has enabled us to announce the first real terms increase in the minimum wage since the great recession.
'We appreciate that the effects of the great recession are still being felt, which is why we have taken continued action to help hardworking people by cutting income tax, cutting fuel and energy bills, and helping local authorities to freeze council tax.
'Helping children get the best start in life by providing flexible, affordable and good quality childcare focussed on low-income families is a key part of our plan for education. As a result of our early years plan, more two-year-olds than ever before – around 260,000 from low-income families - are eligible for 15 hours a week of free childcare, saving their parents more than £2,300 a year per child.'