Back to work plans threatened by high childcare costs, report warns

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The Centre For Social JusticeRadical welfare reforms should be followed-up by overhaul of childcare, a leading think-tank has said. High childcare costs should be tackled to ensure Government plans to make work pay reach their full potential, according to a new report from a leading independent think-tank.

The Centre for Social Justice (CSJ) report today highlights the scale of the bills for state childcare subsidies – from next year £2.3 billion annually or as much as £910 a month for a couple with two children.

The Government is starting to implement Universal Credit, which will make it easier for people to find work and keep more of their earnings. But the CSJ has said that the Government cannot stop there. It must bolster this move by reforming childcare, which is often unaffordable and can act as a barrier into employment.

Overall, 455,000 UK families are receiving state support towards their childcare costs and average payments amount to £232 a month. Despite the UK having the second highest level of childcare subsidy in the OECD, parents still struggle to find affordable childcare that meets their needs.

The report cites the example of how, without reform of childcare, a single parent with three children needing after-school care who would be 17p an hour worse off if they took a job. A single parent with two children would only be 2p an hour better off in work.

For some large families, the Government would find it cheaper to pay parents the minimum wage to stay at home and look after their children rather than pay childcare subsidy.

Christian Guy, Managing Director of the CSJ, said: “Finding suitable and affordable childcare in the UK is difficult and often hinders some of the poorest parents from working. We need to give people the tools to escape poverty – reforming childcare must be a political priority.

“Throwing more money at ballooning subsidies is unlikely to be the best use of public funds, what we need a sensible and thoughtful policy change.

“Helping parents to avoid the cost of childcare all together – for example, by fostering informal childcare networks, encouraging childminding circles and helping parents to work during school hours – would be hugely beneficial.

“Another challenge facing ministers is to drive down costs so that more parents are better off if they take a job.”

The CSJ calls for a pruning of the red tape covering the provision of childcare.

Regulations limiting the number of children a registered childminder can care for should be eased and schools should be given incentives to provide additional supervision of children before and after class.

The CSJ report concludes: “Work is the principal route out of poverty. But extortionate childcare costs are a major barrier in getting people into work and underline why this Government’s welfare reform is so essential. The next phase in this journey must be a more detailed review of high childcare costs.”

The report adds: “Supply side reforms are now crucial to reduce the cost of childcare for both parents and taxpayers  particularly urgent in a time of such public and private debt.

“Such reforms would ensure that it is economically worthwhile for more parents entering employment on the national minimum wage to combine work with paying for childcare.

“The Government needs to support parents to achieve the fragile balance of working and raising their child, while controlling the costs for both parents and taxpayers.

“Models of childcare such as extended schools and childminding circles should be encouraged in order to increase the availability and flexibility of childcare provision, without surrendering on quality and outcomes.”

Key recommendations include:

  • The affordable childcare commission should aim to lower childcare costs to below the breakeven cost of childcare in order to ensure that work always pays for parents that have to combine work with formal childcare.
  • The Government should  ask childcare providers for core and consistent information on all forms of provision, including costs, pricing and occupancy in order to better understand demand and gaps in provision in local areas.
  • The Government should consider a modest relaxation of childcare ratios during peak hours.  This would increase the flexibility of provision for parents and increase incomes for providers without putting children at significantly greater risk.
  • Schools should be encouraged and incentivised to offer regular childcare and after-school activities on the basis that extended schools offer low-cost options for childcare while also improving educational outcomes for the children who attend.
  • Schools should be encouraged and incentivised to provide extended service by communicating the benefits of improved outcomes for the children who attend; and allowing extended schools access to childcare subsidy where their provision supports parents into employment.
  • National and local governments must shorten the process of becoming a childminder to encourage parents to do so.
  • The Government should encourage childminding circles in order to raise demand and lower costs for out-of-hours care (before 8 am, after 6 pm) organised in conjunction with the breakfast or afterschool club, or with Jobcentre Plus.
  • Jobcentre Plus should discuss the option of becoming a childminder with parents on income support as they approach the point at which their youngest child reaches five years old.

Read the full report here, or comment below.

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6 thoughts on “Back to work plans threatened by high childcare costs, report warns

  • October 12, 2012 at 2:59 pm
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    So the CSJ think that childcare costs are “extortionate” , I just hope that their general conclusions on the subject are more accurate than their use of the English language . I run a 35 place nursery in a reasonably affluent area of a major city on the South west , our fees range from £45 to £57 per day depending on age & level of attendance . The nursery survives only because I provide the premises rent free , if I applied a commercial rent the business would not be viable . We employ 11 full-time nursery nurses , one of whom is deputy principal , a super numery principal , a general assistant , a cook , a qualified teacher, a part-time lunch cover nursery nurse, and a part-time office manager (the equivalent of around 15 full time employees in total). Of these only the principal and the teacher earn more than £10 per hour yet the salary bill still accounts for just under 70% of the nursery’s turnover . When set against the demands and “extortionate” responsibility that the job entails this must make nursery nurses just about the last group of workers who do it for the love of the job and in spite of the sadly inadequate remuneration .
    Our nursery grant is , on the face of it , a relatively generous £3.90 per hour but if our grant eligible parents opted en bloc for nursery grant only attendance , as is their right , that too would render us unviable . Fortunately the vast majority require full day attendance which gives us the opportunity to address the shortfall in the nursery grant rate.
    The inescapable fact is that children are expensive whether you choose to render yourself unemployed by looking after them yourself or whether you employ others to do it for you. I’m amused also at the proposal to loosen restictions for child minders and nannies at the same time as ever higher qualifications are being demanded of nursery nurses. Surely it is more acceptable to have trainees in an environment where they are
    supervised by a number of trained nursery nurses than it is to have relatively unqualified carers working on their own as child minders/nannies.
    I wonder what sort of hourly rate the members of of the CSJ panel who churn out this stuff expect to earn for their efforts ?

    Reply
    • October 14, 2012 at 2:32 pm
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      I could not agree more! Wholeheartedly support everything Peter has said. I own a nursery in the Hertfordshire area, 54 place, 25 members of staff, equivalent to 18 full time; the struggle is immense, it is becoming more and more difficult to maintain the standards, commit to the levels of staff salary that I want to pay the staff. Over the last 14 years, my philosophy has always been, ‘you pay peanuts, you get monkeys’, the Government needs to look seriously at providing subsidised child care just like is available in parts of Europe. If they really want to prioritise the child, maintain standards in the higher qualifications for staff now demanded, they will have to do more to subsidise the nurseries who are providing excellent services – they definitely should not be considering altering the restrictions to allow childminders to proliferate! Child-minder charges in our area are higher than nurseries,

      Can you imagine the outcomes if National and local governments shortened the process of becoming a child-minder – to encourage parents to do so! This is completely wrong and definitely unfair when as a nursery owner, staff are required to have higher qualifications and we are judged on their access to on-going professional development opportunities.
      As for ‘The Government should encourage child-minding circles … in conjunction …. with Jobcentre Plus’ begs belief of the CSJ panel’s ability to know just what they would be dealing with – say no more – I am utterly dismayed but their suggestions!

      Reply
  • October 11, 2012 at 4:02 pm
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    Brave call agreeing to “modest deregualation” but absolutely right. Deregualtion will lead to more affordable/flexible care

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  • October 11, 2012 at 2:49 pm
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    1. Agree with the poster above about the amount for a funded place not being enough in general but it is not enough in the north either! Where we are in Scotland, we get £3.37 for 12.5 hours a week – not nearly enough for our nursery to pay decent wages to qualified staff, rent, rates, bills, materials, etc. The highest quality nurseries cannot afford to run at this rate wherever they are situated.
    2. I am all for parents working but childcare is not just the government’s responsibility. Too many people produce children without thinking whether they can afford them or not and then expect someone else to pay for their child care.
    3. We should not be subsidising large families – there should be a system where help is given for the first few children only – don’t want to hear any more stories of families with 12 plus children getting huge amounts in benefit with parents who are not working!
    4. There is too much emphasis on the parents’ rights to childcare, a job, etc. and not enough thought for the child. School days are long enough for little ones – is it really in a child’s best interest to put them into school/ nursery every day at 7 am and collect them at 7pm so mum and dad can work long hours.
    5. Absolutely against any de-regulation and lowering of standards to allow unregistered child minding. This is a safe guarding issue and we should not be taking a step backwards. Anyone being paid in childcare or education needs to be monitored and vetted and standards should never be lowered.

    Reply
  • October 11, 2012 at 2:44 pm
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    £4 an hour would have been enough to keep our nursery open! We closed after struggling to survive on £3.46 an hour for the 15 hours “free offering”. Our target income to break even was £4 an hour. We know others who charge £7 an hour upward (like £12 an hour to cover their losses on funded time). The “free offering” at below break-even has distorted the market, reduced quality and diversity, and put me out of work!

    Reply
  • October 11, 2012 at 1:25 pm
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    One of the main reasons for high costs for childcare is that the Government only give the Pre-schools £4 an hour for 15 hrs per week. For a 3 hours session, this means the money that the pre-school receives for each child is £12.00.
    This cost does not cover staff salaries, let alone high rental fees in the south east of England, buying stock etc.

    If you Government gave more money for the grant and look at the different costs North/South, different areas etc. and relate the Grant payment for the area, then Pre-schools would not need to charge so much!

    Reply

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