‘Blanket childcare support won’t help with cost of living’

More than half of families with pre-school-aged children currently pay nothing in childcare fees, according to a report by the Institute for Fiscal Studies, which suggests that greater support with childcare costs could help families to use more formal childcare, but will do nothing to ease existing pressures on their budgets.

The study, which does not touch on the number of women who drop out of the workforce or take lower paid, more flexible roles because of childcare costs, finds that some families face childcare bills that are high in comparison with their earnings. However, it says many are not paying anything because they are using grandparents or other relatives as well as Government subsidies, including the 30 hours a week for three and four year olds which only covers term time.

It estimates that a quarter of families earning between £20,000 and £30,000 a year with a 1- or 2-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 – and that those with several young children could spend much more each week.

In 2019, 16% of families using formal childcare for a pre-school-aged child reported finding it difficult to manage these costs, although 26% of formal childcare users found meeting their current childcare costs ‘easy’ or ‘very easy’, and a further 41% of formal childcare users paid nothing at all.

The research shows families spend more on childcare the younger their children are. Among families using formal childcare for a 1-year-old, half spent more than £90 a week on childcare fees, compared with half spending more than £45 a week for a 2-year-old or under £5 a week for a 3- or 4-year-old. This is mainly due to government support for older children, but the IFS says the Government’s tax-free childcare policy is not functioning will with only four-in-10 parents with a pre-school-aged child even having heard of the programme in 2019.

The IFS says blanket programmes to reduce the cost of childcare (such as relaxing staff-to-child ratios) 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.

Harriet Olorenshaw, Research Economist at IFS and an author of the report, said: “If Ministers want to tackle the cost of childcare as part of their response to the cost of living crisis, they need to think carefully about how to target support to the families who need it most.”

Eleanor Ireland, Education Programme Head at the Nuffield Foundation, which funded the study, added: “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.”

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