New research reveals extent of future childcare funding crisis

Published on Tuesday, 29 November 2011 11:32
Posted by Scott Buckler

The impact of growing childcare costs and reduced public support means that low income families in 2015 will have to find over 60% more of their own cash for childcare compared with 2006, new research published today by the Social Market Foundation finds

The SMF's report, The Parent Trap, is the first time all the different forms of childcare support have been analysed together with a projection of the future costs of childcare. It looks at the changing level of financial support and the rising cost of formal childcare between 2006 - the peak of public financial support for childcare - and 2015, to show how much of their own money families will have to find to fill the growing gap.

"Our analysis shows that for the same amount of childcare a low-income family in 2015 can expect to pay 62% more in today's money – almost £600 per year - from their own pockets, compared to 2006," said Ian Mulheirn, Director of the SMF and co-author of the report.

"For a family on £20,000 per year with typical childcare costs, this will take the proportion of their income spent on childcare to almost 8%, up from just 4.8% in 2006. Put in context, this means that the extra expenditure on childcare would wipe out the amount of money the average family currently spends on Christmas."

The research also finds that:

 

  • A middle-income family in 2015 is likely to pay 25% more, or £900 per year, for their childcare in today's money compared to in 2006.
  • A higher-income family in 2015 is likely to pay 42% more, or £1,400 per year, for their childcare in today's money compared to in 2006.
  • If underlying childcare costs continue to rise as they have done in recent years, the cost of a typical amount of childcare will be £104.16 per week in today's money, which is a 13.5% rise from 2006.


"Paying for high quality formal childcare is already a struggle for many parents, and affordability has been declining since 2006,"
continued Ian Mulheirn. "But the triple whammy of the ever increasing 'ticket price' for childcare, cuts to childcare support in the tax credit system, and the freeze in the value of childcare vouchers risks making formal childcare a luxury that many families will no longer be able to afford.

"This will put parents in an impossible position, forcing many to choose between going to work and incurring a large childcare bill, or staying at home. As well as having a detrimental impact on family budgets and on the labour market, these trends will price the poorest children out of the considerable social and educational benefits offered by quality formal childcare."


The analysis calculates that to return the generosity of childcare support to its 2006 level, the proportion of childcare costs covered in the new Universal Credit would have to increase to 82.4% (from the current 70%) and the value of vouchers would need to rise to £83 per week for basic rate tax payers (from the current £55). The SMF says this means the Government will have to find savings elsewhere or find other creative solutions to help parents negotiate the childcare funding trap.

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