Families on National Living Wage crippled by childcare costs

The findings, published by the Joseph Rowntree Foundation, state that couples working full time on the living wage of £7.20 an hour, do not reach the minimum standard if they are paying for full-time childcare.

The organisation is urging the Government to undertake a ‘radical reform’ of the childcare system, to lighten the burden on lower paid families for whom childcare is among the ‘biggest barriers to reaching a decent living standard in modern Britain’.

The shortfall exists despite the fact some necessities such as food and fuel becoming cheaper in the past two years, according to the findings from the foundation’s Minimum Income Standard research, carried out by the Centre for Research in Social Policy at Loughborough University.

For a couple with two children aged four and seven, full-time work by both parents gives disposable income of £382 a week after paying rent and childcare.

This is £50 a week or 12 per cent short of the minimum budget of £432 that they require and a shortfall of £2,600 a year.

A lone parent in the same situation ends up with £299 a week, £55 a week or 18 per cent short of the £354 they require: a shortfall of £2,860 a year.

If childcare costs were covered in full, the couple family would have £446, £14 more than the minimum required. The lone parent would have £317, still short of what they need, but the deficit would shrink by a third, to £37 a week.

As part of its poverty-reducing strategy to be launched this September, the foundation is recommending a number of reforms, including:

• Offering the free entitlement funding for 48 rather than 38 weeks of the year and across the full working day.
• Make childcare free to families on the lowest incomes, with costs capped at 10 per cent of disposable income for those with low to middle incomes.
• Increasing the quality of childcare to support child development, by increasing investment to 0.85 per cent of GDP, up from allocated childcare spending of approximately 0.48 per cent in 2017/18 and moving to a graduate-led system of childcare workers.

Parents want to be able to choose between nursery and childminder options, according to the research.

School holiday cover was also in demand, especially for parents lacking the support of relatives such as grandparents.

Julia Unwin, chief executive of the foundation, said, ‘The cost and difficulty in balancing work and caring is felt by all families, especially as the summer holidays get underway.

‘But for parents earning low wages, the choice is even starker: struggle to make ends meet and sacrifice family time, or suffer an even lower living standard from working fewer hours.

‘Childcare has become the one of the biggest barriers to reaching a decent living standard in modern Britain.

‘Work should always be the best route to a better life, but these figures show that a comprehensive plan to bring down the high cost of childcare, and improve the returns from working more hours, is desperately needed.

‘Having promoted greater access to childcare, the Government now faces the challenge of ensuring that it truly becomes affordable and available to help ease the strain on parents’ juggling working and caring. A radical overhaul is needed.’

Abigail Davis from the Centre for Research in Social Policy, who led the research, said, ‘In generally tough times, parents are finding new ways of getting good deals to help meet their needs on a tight budget.

‘But they also emphasise new pressures that put some costs up. They increasingly recognise the importance to their children’s future of getting the right kind of childcare before school age, and of taking part in enriching after-school activities later on.’

A Department for Education spokesperson said, ‘We know that access to high-quality, affordable childcare is vital for millions of parents and carers across the country.

'We are doing more than ever before to support the families that need it most with the cost and availability of childcare, but we know that more needs to be done.  

‘That’s why we are increasing the support available to parents by doubling free childcare from 15 to 30 hours for working parents of three and four year olds, introducing tax-free childcare worth up to £2,000 per child per year and up to £4,000 for disabled children, and this government is increasing support for low-income parents on Universal Credit.

‘Councils must also provide childcare for children up to age 14 for parents who are working, studying or training and we are helping schools to offer after-school and holiday clubs.’

The department also highlighted the following increased support available to parents:

• Introduced 15 hours’ free childcare each week for all three and four year olds, worth up to £2,500 per child per year.
• Introduced 15 hours’ free childcare every week for the most disadvantaged two-year-olds, with around 70 per cent of eligible two-year-olds are taking up the entitlement.
• Help with up to 70 per cent of childcare costs for people on low incomes through working tax credits.
• Shared Parental Leave, giving parents the chance to share up to 50 weeks’ leave and up to 37 weeks’ parental pay in the first year following their child’s birth or adoption.
• Last year the department spent a record £5 billion on childcare support.

Neil Leitch, chief executive of the Pre-school Learning Alliance, said, ‘We recognise that many families continue to struggle with cost of childcare, and agree that more must be done by government to address this problem.

‘For many years now, government funding for so-called “free” childcare has not covered the cost of delivery.

‘As a result, many providers have been forced to charge parents higher fees for any additional hours they take up simply to stay afloat.

‘While recent research suggests that the rate of childcare cost rises is slowing down, this issue is still, as this research rightly points out, putting significant pressure on many families.

‘Unless the Government takes steps to ensure that the childcare sector is funded properly, this problem will continue.

‘As such, we look forward to working with the new education secretary and her team to ensure that the sector is given the level of investment necessary to support childcare provision that is both affordable and high-quality, and that this investment is sustained over the long term.’