UK childcare most expensive in Europe

Yesterday the results of a survey by the Daycare Trust and Save the Children were published which highlighted the true cost of childcare. It revealed that nearly 2/3 of parents now fall in to the so called ‘childcare trap’. A situation where the cost of childcare inhibits their ability to work, to the point that they would be no worse off financially if they were to look after their child themselves and live on benefits. Obviously this is not a healthy position and must be detrimental to the government’s drive to decrease welfare dependency. A quarter of parents in severe poverty who took part in the survey revealed that they have given up their job primarily because of high childcare costs. Moreover a third of those living in poverty have turned down a job offer for the same reason. It is not just those with low household incomes that have felt the impact of high childcare costs. Of the 4000 parents who took part in the survey a quarter stated that the cost of childcare had caused them to take on debt.

Statistics produced by the Organisation for Economic Co-operation and Development (OECD) suggest that parents in the UK spend on average 33% of their income on childcare. Childcare costs have risen year on year over the last decade and they are now the highest in Europe. Forty one percent of those who took part in the survey said that their childcare costs were on a par with their mortgage payments or rent.

Providing high quality childcare is a costly business. Skilled staff and good facilities do not come cheap. However, there is a higher rate of subsidy in every other European country which softens the financial impact on parents. UK parents contribute more towards childcare. Changes to the Working Tax Credit introduced in April have seen the maximum level of childcare support available drop from 80% to 70%.

On the back of this survey the Daycare Trust and Save the Children are lobbying for changes. They would like the government to introduce a level of childcare support within the Universal Credit (set to be introduced in 2013) which provides an incentive for parents to work. In particular they would like the government to fund 80% of childcare costs for all eligible parents. This would cost around £600m per year but it is thought that it could save a family with two or more children over £500 a week. The arguments for this move are quite compelling. Reducing family debt, encouraging parents to work and lifting children out of poverty carries a strong social value. It could be argued that it also carries a strong economic value. The £600m added to the welfare bill would be tempered by a decrease in unemployment benefit and by putting more money in the pockets of families it could encourage spending which would help to support the wider economy.