Parents with younger children are hardest-hit by a lack of Government support, says the IFS.
20 May 2022
Parents are paying up to £10,000 per year for childcare, according to a new report from the Institute of Fiscal Studies (IFS).
It finds that “a significant minority of parents of younger children” pay high amounts for childcare, with 15% of families with a one-year-old in formal care paying more than £200 a week on childcare, equal to more than £10,000 per year.
Half of families with a one or two-year-old in full-time formal care of 40 hours per week or more were spending more than £240 a week on childcare fees.
“Even among families with a one-year-old where all parents are in work, median weekly earnings in 2019 were £900 – so these childcare expenses may cause significant pressure,” the report says.
It notes that England “remains an expensive country for childcare”.
The report shows that over half of families with a pre-school-age child did not pay for childcare in 2019, with families of one or two-year-olds either not using childcare or using informal help from grandparents, whereas 85% of children aged three or four use some form of formal childcare.
This may be because three and four-year-olds are entitled to either 15 or 30 hours a week of funded childcare, and two-year-olds in the poorest families can access 15 hours of funded childcare a week, which could increase take-up.
Using data from the 2019 Childcare and Early Years Survey of Parents, it shows that some families end up paying “very high amounts”, especially those with younger children using childcare.
It says that among families using formal childcare, the median family with a one-year-old spent over £90 a week in 2019, falling to around £45 among two-year-olds and less than £5 for three- and four-year-olds.
For nearly two thirds of parents of three and four-year-olds, childcare “expenses are typically less than £20 a week”, the report says.
But a quarter of families using formal childcare and earning between £20,000 and £30,000 a year spent more than £100 a week on childcare for their one to two-year-old, equal to more than 17% of their pre-tax income.
For 16% of families using formal childcare for pre-school-aged children, they say it is very difficult or difficult to manage the costs, and a fifth of families earning between £30,000 to £65,000 say they struggle to manage.
Some families will be paying more than £1,000 per month in childcare costs – at the 90th percentile, weekly childcare spending in London was nearly £350.
While for parents of three or four-year-olds, it is higher earners who pay the most – because they work longer hours on average and are willing to pay higher costs – the IFS notes that for those with younger children, high costs are common even for those on lower salaries.
Prices have also risen over the past decade – from 2010 levels, the cost of a part-time childminder place had risen 43% by 2021 while for a part-time nursery place, the cost increase was 59%, a 16% and 30% rise in real terms respectively.
The report shows that childcare ratios are tighter in England than in most other European countries, especially for younger children, with England and the other UK nations allowing the smallest number of one-year-olds per staff member in Europe, with only Norway having tighter ratios for two-year-olds.
Eleanor Ireland, Education Programme Head at the Nuffield Foundation, said: “Increasing take-up of existing financial support for childcare would benefit both children and parents, particularly as the cost-of-living crisis means that parents who are currently able to meet their childcare costs won’t necessarily be able to do so in the near future.
“As this IFS research highlights, less than half of parents with pre-school-aged children even know about the full range of support that is available. This is indicative of the dysfunctional nature of our current system of provision of early education and childcare, which is problematic not only in relation to cost, but also in terms of access and inequality.
“A move towards a fairer and more sustainable funding model needs to be considered in the wider context of who the system is for and how it can make a difference to the children and families who need it most.”