Childcare: why is it so expensive to look after our kids?

The report, by the Family and Childcare Trust, reveals parents are handing over more than £7,500 a year for childcare for two children, around 4.7 per cent more than the average mortgage bill.

The study is based on information gathered by the trust from local authority family or children’s information services in England, Wales and Scotland.

Each authority was asked to give the cost of 25 hours and 50 hours of childcare as provided by nurseries and childminders.

They were also asked to give figures on the average cost of 15 hours’ childcare in an after-school club, or for a childminder picking youngsters up from school.

It found that a family with one two-year-old child attending nursery part-time (25 hours a week) and a five-year-old in an after-school club will pay out £7,549 a year on average.

This is higher than the UK average annual UK mortgage, which the report says is £7,207 according to official data.

For a family with two youngsters in full-time childcare the average yearly cost is £11,700, the report adds, 62 per cent higher than the average yearly mortgage bill for a family home.

Rising costs

The study found that since 2002, childcare costs have risen more than inflation each year and that international data shows that parents in Britain hand over a quarter of their salary (26.6 per cent), more than most other European nations.

In the last five years alone, the price of part-time nursery care for a child under two has risen by 27 per cent, with parents paying around £1,214 more in 2014 than in 2009.

England has seen the lowest price increase for nursery provision. Childminder prices have risen in England and Scotland, although not in Wales.

The costs of after-school clubs have fell in England and Scotland, although not in Wales, where prices have increased.

However the Department for Education cliam that the survey shows that the cost of nursery for a child over two was now £106.19, compared to £106.52 per week last year, which it said was a 2 per cent reduction in real terms.

It added that the survey also showed a 12.8 per cent real terms reduction in the cost of a childminder picking up and caring for a youngster after school.

Labour costs

The trust said much of the cost of childcare is due to wages, with recent government research suggesting that 77 per cent of group-based (nursery and club) childcare costs were staff costs.

At present regulations stipulate that for children under two in nurseries, there must be one member of staff for three children. In nurseries, too, the manager must have a relevant level 3 qualification – equivalent of an A-level.

While salaries for nursery workers are not high, the need to maintain safe supervision levels and deliver high quality childcare does, inevitably, mean that childcare cannot – and should not – be provided “on the cheap”.

Private childcare

The trust said that much of childcare is delivered by the private and not-for-profit sector: 91 per cent of nursery care, 94 per cent of sessional and pre-school education and 67 per cent of after-school clubs are delivered by the private and voluntary (not-for-profit) sectors in England.

Most private and voluntary sector providers are required to pay business rates, and many pay rent for their premises as where public sector childcare usually does not have the additional costs of rent, rates and servicing debts as well as profits.

However, the reliance on the private and not-for-profit sectors to deliver childcare in Britain is reflected in the differential costs of nursery provision.

The survey showed that nursery provision for a child under two is 17.5 per cent more expensive in the private and not-for-profit sectors than in the maintained sector in Britain.

If a parent buys 50 hours per week childcare in a nursery every year, the price difference between public sector provision and the rest will add up to over £1,500.

Funding

In England, central government, via local authorities, funds early years providers to deliver part-time free early education for all three- and four-year-olds, providing £3.80 per hour (adjusted by area) to local authorities to deliver to providers.

Many nurseries and sessional pre schools argue that this level of funding does not cover their costs. In order to break even, early years providers then charge working parents a higher rate for the additional hours that they purchase.

In some areas providers also operate other cross-subsidy systems, with the parents of three and four year-olds cross-subsidising childcare for babies, where
higher staffing requirements can make childcare too expensive for local markets to sustain.

Administrative costs

A further reason that childcare is expensive in Britain is that funding mechanisms for subsidising childcare are complex, the trust said.

Parents receive financial help directly, through the childcare element of working tax credit, through employer-supported childcare vouchers and through small schemes operated by Jobcentre Plus and colleges.

Other subsidies go from the government directly to the childcare provider through the free early education offer. All of these funding channels have administrative costs and there is considerable potential to simplify funding streams to reduce costs.