Childcare costs rise by 3 per cent in a year

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Coram Family and Childcare has called on the Government to do more to help parents access childcare, as costs continue to rise.

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Families are paying an average of £127 per week or over £6,600 per year for a part-time nursery place for a child under two

The charity's 19th annual survey found childcare costs in England, Scotland and Wales had risen again for families, with a 3 per cent hike in prices in the last year.

Families are paying an average of £127 per week or over £6,600 per year for a part-time nursery place for a child under two, according to the research.

CHILDCARE PRICES FOR PART-TIME CHILDCARE (25 HOURS A WEEK)

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Source: Coram Family and Childcare, Childcare survey 2019

The report also recommended a number of short-term actions to the Government to make it easier for parents to find and afford childcare.

These include:

  • increasing the maximum amount of childcare costs that are supported by Universal Credit to make sure parents are better off for every extra hour worked, and switch to upfront payments so that parents can afford to move into work
  • providing start-up grants and responsive funding for childcare providers to increase the availability of childcare places
  • extending the 30 hours entitlement to parents undertaking training to make sure childcare costs do not prevent parents from developing skills and employability which drive social mobility
  • regularly review the funding rate for early years entitlements to make sure that they meet the cost of delivering high quality childcare
  • improving access to early education for disadvantaged children by doubling the early years pupil premium
  • considering how current spend on childcare could be reallocated to better meet the needs of disadvantaged and low-income children, including current underspend of the Tax Free Childcare budget

COSTS VARY WIDELY

The survey - based on responses from 193 councils in England, Scotland and Wales - found prices varied significantly across the country. In inner London, the most expensive region in the UK, the price of a part-time nursery place for a child under two was £175 per week, or £9,100 per year, compared to an average £108 per week or £5,600 per year in Yorkshire and Humberside.

Even if they can afford it, many parents struggle to find the childcare they need, according to the survey. In England, the research found only just over half of local areas had enough childcare for parents working full time. Some families faced even bigger gaps, with less than a quarter of local areas providing enough places for disabled children.

Coram Family and Childcare also asked local authorities what impact the 30 hours had on their childcare market, with the majority saying either there had been no impact or they didn’t know.

Other responses included:

  • One in four local authorities (26 per cent) said 30 hours was pushing up childcare prices for three- and four-year-olds outside funded entitlements
  • One in three local authorities (36 per cent) reported that 30 hours was having a negative impact on the financial sustainability of childcare settings
  • One in four local authorities (28 per cent) said 30 hours will have a positive impact in future on the quality of early education and childcare

The survey found some Government support has failed to keep up with childcare price inflation. In 94 per cent of local authority areas, a full-time nursery place for a child under two was more expensive than the maximum costs supported under Universal Credit and Working Tax Credit.

Megan Jarvie, head of Coram Family and Childcare, said, ‘Recent Government investment is welcome, but as prices continue to rise, families remain at risk of getting left behind. For many parents, making work pay is an uphill struggle. The Government needs to streamline the current maze of childcare support schemes so that families can understand what they are entitled to and access the childcare they need. We need a simple and responsive childcare system that makes sure every parent is better off working and childcare quality is high enough to boost children’s outcomes throughout life.’

Purnima Tanuku, chief executive of National Day Nurseries Association (NDNA), said, ‘Although we have seen an above inflation increase in childcare fees, the costs to providers are much higher too. On top of 2 per cent inflation, that affects the price of everything from food to utilities and resources, employers have an increase in pension contribution and an almost 5 per cent rise in minimum wages to accommodate. 

‘Most providers have also seen a big hike in their business rates bills which puts further pressure on their nurseries. The fact that the fee increase is being kept to a minimum shows how hard childcare providers are working to make their services affordable.’

Ms Tanuku welcomed the recommendations to simplify the way childcare support is delivered.

‘We also believe that Universal Credit needs an urgent overhaul so that payments are made up front to prevent parents and providers getting into debt trying to secure childcare so they can return to work.

‘Finally, the Government must review all the costs that childcare providers face to understand why these are rising and how their own policies impact on this. Only by ensuring funding covers costs can they start to undo all the damage being caused to the sector.’

Chair of the Local Government Association’s children and young people board, Anntoinette Bramble, said while the intention behind the 30 hours scheme was good, Government funding often does not cover the costs for providers.

‘In this year’s Spending Review, the Government must make sure that councils have enough funding to make sure that all families can access the high quality early education that meets their needs.’

Neil Leitch, chief executive of the Early Years Alliance, said local authorities were right to warn that the 30 hours was not only causing prices to rise, but also having a negative impact on the financial sustainability of childcare settings.

‘Given that childcare funding continues to fail to meet the costs of delivering funded places, it comes as no surprise that we are seeing costs across the country continuing to rise - though given the current pressure on the sector, providers have done well to limit the increases to the levels outlined in this report. 
 
‘Enough is enough. It's time for the Government to commit not only to investing properly into the sector, but also reviewing funding level on an annual basis, an Alliance recommendation that has been echoed by the Treasury Select Committee. Without this, prices for parents will continue to rise, and more and more providers will be forced to close their doors for good.’

PACEY chief executive Liz Bayram said, 'Whilst this report highlights that childcare costs for families in the UK have continued to rise, it is only half the story. The cost of delivering childcare has also increased substantially for childcare providers in the past year – minimum wage increases, pension costs.

'All this is against a backdrop in England of underinvestment in government’s flagship childcare policies that now provided eligible families with up to 30 hours of funded early education a week. This report rightly highlights the negative impact on families, in particular parents with disabled children but has to be viewed against a backdrop of ongoing underfunding in England. Until that is addressed – as they are managing to do so in Wales – these issues will not go away.'

Steven McIntosh, Save the Children’s director of UK policy, advocacy and campaigns, added, ‘Today’s figures provide more compelling evidence that to help the most disadvantaged families benefit from quality childcare, the Government must end upfront childcare costs within Universal Credit and boost support for families on the lowest incomes.’

Ryan Shorthouse, director of Bright Blue, said, 'Formal childcare is the most important part of the education system but, unlike compulsory and tertiary education, families face fees that can make it unaffordable.

'If parents are struggling with childcare fees, they should have the opportunity to take out government-backed, income-contingent loans to smooth the costs they face over a long period. This would be a voluntary option and complimentary to existing government support such as the Early Years Free Entitlement and Tax-Free Childcare. This would make childcare affordable for all families overnight.'

A Department for Education spokesperson said, 'Next year we will be spending a record amount on childcare support – around £6 billion a year, including funding for our free early education offers on which we will spend around £3.5 billion this year alone. More than 700,000 of the most disadvantaged two-year-olds have benefited from 15 hours free childcare since 2013, and more than 340,000 three and four year olds benefitted from our 30 hours offer in its first year, meaning parents are spending less on childcare or are able to work more flexibly.'

Th DfE said the study was one of several pieces of research on various aspects of the provider market, which it would be considering in the run up to the Spending Review, and it would look closely at this extra evidence on the costs of delivering childcare.

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