Sep 08, 2011

Making work pay

Yesterday there was a frenzy of discussion on the radio and television around the high cost of childcare, following publication of a report by Save the Children and the Day Care Trust stating that the costs of childcare were leaving many families in debt.

I spoke to Phil Watts on Radio 5 Live, along with Neil Leitch, head of the Pre-School Learning Alliance and fended off the usual questions about how could childcare be so expensive and surely we were all making a fortune at the expense of hard-up parents. Both Neil and I were quick to point out that many nurseries either barely break even, or in the most disadvantaged areas where the PLA operate nurseries, many are subsidised by other fund raising activities.

We all recognise that childcare fees are a huge cost for parents, but in the UK, where the Government does not see Early Years care as a high priority, parents have to pay the majority of fees. As a nursery provider, we see about 70p in every pound paid by parents go directly out on salaries, so with the running costs of the buildings rising for us, as for every household, the scope to be financially viable is ever more challenging. Yes, in some areas nurseries can charge a premium and have waiting lists for places, but it is far more common for a lot of nurseries to be working hard to increase occupancy and reduce costs, whilst paying staff a fair wage.

There are many things that could be done to help reduce the cost of childcare, including a review of business rates for nursery buildings, which are currently charged in the same bracket as retail premises. Nursery businesses still pay VAT on new builds, whereas school premises don’t. Employer childcare vouchers have been reduced to only cover lower rate tax payers, leaving the ‘squeezed middle’ who may be paying a large percentage of salary on childcare fees wtihout any help. Tax credits have been reduced, which certainly hurts those on the lowest incomes.  All in all, it is a bleak picture out there, with many parents considering whether it is worth going back to work at all.

The report published yesterday calls for the Government to ensure a minimum of 80% childcare costs are covered under Universal Credit up to current weekly limits and that over time this be increased to 100%.  We all know that in the current economic climate there are limited funds to go round, but if we want to support parents in returning to work and keeping their heads above water financially until their children go to school, we will have to think hard as a society about how we can do this.

To read the full report, visit

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