By Elizabeth Walker

Introduction

Spiralling childcare costs are now seen as one of the most pressing issues facing families under pressure over living standards. According to government research, the cost of childcare has risen dramatically and parents now spend around a quarter of their annual income on childcare for under-fives — more than almost any other developed nation.

Rising childcare costs mean having a full-time job is no longer worthwhile for many second earners and the proportion of new mothers who are choosing to stay at home has risen sharply as there is often little, if any, financial benefit in returning to work. Many professional women find themselves in a "pay-neutral" position, and they are often forced to take lower-paid part-time jobs to fit around their children.

Childcare costs survey

The Daycare Trust’s survey in 2012 showed that nursery costs rose by nearly 6% and in the same period salaries remained static. Since the tax credit cut (which lower-paid parents can claim to pay for childcare), 44,000 fewer families are getting help with childcare costs and there are major gaps in childcare availability across Britain. The survey also revealed that there is a worrying lack of childcare for disabled children and parents who work outside normal office hours. More than half of local authorities revealed that parents had reported a shortage of childcare.

The Daycare Trust made the following key policy recommendations to the Government.

  • Increase the proportion of costs that can be claimed under the childcare element of Working Tax Credit to 80%, with a higher rate of 100% for families on the lowest incomes and those with disabled children.

  • Extend provision of the free early education entitlement to all two-, three- and four-year-olds by 2015 and increase the number of hours available per week to 20 by 2020.

  • Promote the business case for employers helping parents with their childcare needs, eg flexible working arrangements, providing childcare information to parents and offering childcare vouchers to employees.

  • Extend childcare vouchers to the self-employed.

Childcare ratios

The Department for Education (DfE) has now published its long-awaited report, More Great Childcare — Raising Quality and Giving Parents More Choice, which includes changes to regulation and childcare ratios.

The report highlights the fact that England’s current staffing rules drive up costs for parents and mean lower pay for staff. In other countries, providers can use the extra income they earn from taking on more children to reduce fees for parents and pay staff more, but this is not possible in England.

The proposed new rules mean that the staff:child ratios will be relaxed, but only if carers’ qualifications meet new standards. The report suggests that this will increase the supply of affordable, high-quality childcare to more parents. The Government has launched a consultation on the qualification requirements required to allow childcare providers to relax their ratios. These ratios will be maximum legal limits — providers are not obliged to use higher ratios, and parents will still be free to choose nurseries that operate on existing ratios if they prefer.

The changes in childcare ratios in England are due to come into force in September 2013 and are outlined below.

Nurseries

Current ratios

Proposed ratios

Babies and one-year-olds

1:3

1:4

Two-year-olds

1:4

1:6

Three years and older

1:8 or 1:13 (if graduate-led)

1:8 or 1:13 (if graduate-led)

Childminders

The Government also proposes to give childminders greater flexibility with ratios and argues that this would improve the availability and affordability of their services.

Childminders will still only be able to look after a total of six children but the number of babies and under-fives they can care for has increased as outlined below.

Childminders

Current ratios

Proposed ratios

Babies

1:1

1:2

One-year-olds

1:3

1:4

Two-year-olds

1:3

1:4

Three-year-olds

1:3

1:4

Four-year-olds

1:3

1:4

Five-year-olds

1:3

1:4

Six-year-olds

1:6

1:6

Critics argue that the proposals of relaxing ratios could compromise the quality of childcare and the National Day Nurseries Association, the Pre-school Learning Alliance and the National Childminding Association have all spoken out against the plans. There is also concern as to whether the ratio changes will, in practice, significantly reduce childcare costs and parents are worried the plans will have a negative impact on the individual attention and the quality of care their children receive.

Childcare Commission

Further to the reforms in the More Great Childcare report, the Government set up a commission on childcare to look at how to reduce the costs of childcare for working families and the burdens on childcare providers, without compromising the safety or quality of the provision. It is looking broadly at relevant issues and in particular will consider three key themes as follows.

  1. Ways to encourage the provision of wraparound and holiday childcare for children of school age.

  2. Identifying any regulation that burdens childcare providers unnecessarily because it is not needed for reasons of quality or safety.

  3. How childcare supports families to move into sustained employment and out of poverty.

The commission will draw on the knowledge and views of a wide range of experts in the field, together with international evidence on high-quality, affordable childcare.

The commission was due to report in the autumn of 2012 but its proposals are yet to be published. The Department of Education has confirmed that the report should be available soon.

Free nursery places for two-year-olds

From 2013, around 20% or 150,000 of the most disadvantaged two-year-olds will be eligible for 15 hours of free childcare a week, with double that number set to benefit the following year. The Government has confirmed that two-year-olds who live in households that meet the eligibility criteria for free school meals will be entitled to a free early education place, along with children who are looked after by the state. In October 2012, the Local Authority (Duty to Secure Early Years Provision Free of Charge) Regulations 2012 were published and set out the eligibility criteria for the first phase of the two-year-old entitlement to free early education from September 2013.

This funding will help to ensure that more nurseries retain the best staff and more children can access high-quality early education. Research suggests that the participation of disadvantaged two-year-olds in high-quality early education and childcare has clear benefits for their development. The Government’s aim is for all eligible two-year-olds to receive early education in good and outstanding settings.

Local authorities are expected to pass on the funding for eligible two-year-olds in full to schools, nurseries and childminders. At the moment there is criticism that not all of the free entitlement funding for three and four-year olds is reaching childcare providers and that this shortfall is contributing to the crisis in childcare costs.

Childcare vouchers

Some employers offer childcare vouchers which can be used towards to the cost of qualifying childcare. The scheme involves parents sacrificing some of their salary per month before tax and national insurance deductions are made. In exchange, parents receive vouchers at the childcare provider of their choice which must be Ofsted-registered. The amount of childcare vouchers that can be received without having to pay tax or NICs depends on when the employer’s scheme was joined and the employee’s level of salary.

Childcare vouchers may affect the amount of tax credits available to some parents. HMRC has an online calculator on their website which can help parents work out if they will be better off taking childcare vouchers or not.

Grandparents’ role

Rising childcare costs are affecting not only parents but other members of the family. Recent research reveals that 5.8 million grandparents in the UK spend around 10 hours a week looking after their grandchildren, with just 3% receiving any formal payment for their time.

Support from grandparents is critical for some parents to be able to return to work or to work extended hours when they are facing soaring childcare costs and problems accessing quality childcare. Families across the social spectrum use grandparent care for their children although it is particularly mothers from low-income backgrounds who rely on extended family so that they can return to work. Grandparents are also helping towards the costs of formal childcare where parents are struggling to meet payments.

The year ahead

In 2013, the political debate over childcare costs is set to continue and the issue will remain a huge concern for most families in the UK. The More Great Childcare report is part of wider reforms in the early years sector and the Childcare Commission is now preparing its recommendations on future policy including support with childcare costs. Both childcare professionals and parents are eagerly anticipating the long-awaited proposals.

Further information

Last reviewed 14 February 2013