Last reviewed 23 May 2022

The amount of money that working parents are having to pay for childcare has returned to the headlines as the cost of living crisis deepens, and the Government has agreed that it is an area it wants to address.

In this context, the Institute for Fiscal Studies (IFS) has examined how much families with young children are currently paying for formal childcare in England and its research has revealed that more than half of families with pre-school-aged children pay nothing in childcare fees.

This is because they either do not use formal childcare or because they use government-funded “free entitlement” childcare hours. It follows that greater support with these costs could help these families use more formal childcare, but will do nothing to ease existing pressures on their budgets.

However, the IFS highlights, some families face childcare bills that are high in comparison with their earnings. A quarter of families earning between £20,000 and £30,000 a year with a one or two year-old in formal childcare spent more than £100 a week on childcare fees for that child — more than 17% of their pre-tax income.

Those with several young children could spend much more each week.

Among families using formal childcare for a one year-old, half spent more than £90 a week on childcare fees, compared with half spending more than £45 a week for a two year-old or under £5 a week for a three or four year-old.

Advocates of childcare policies to tackle the cost of living crisis should, the IFS argues, be honest that a minority of parents would benefit — and that improving take-up of existing programmes is a good place to start.

Blanket programmes to reduce the cost of childcare (by relaxing staff-to-child ratios for example) will chiefly benefit families currently spending the most — typically those on higher incomes with younger children using many hours of childcare in expensive parts of the country.

Eleanor Ireland, Education Programme Head at the Nuffield Foundation, which sponsored the research, said that it was indicative of the dysfunctional nature of the current system of provision of early education and childcare, which is, she argued, problematic not only in relation to cost but also in terms of access and inequality.