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Cost of a child's nursery place rises to double the rate of inflation

Article By: Angeline Albert

The cost of a part-time nursery place for a child under two-years-old is double the rate of inflation, hitting parents’ wallets hard, according to the Family and Childcare Trust (FACT).

Credit: FACT

A part-time nursery place for a child this age is on average £122 a week (more than £6,300 a year) and has risen by seven per cent, according to FACT’s 2018 childcare survey.

Average inflation has been around 2.3 per cent per year with childcare price rises about twice this. With nursery places rising above inflation and wages, the Trust’s report reveals that although many parents using the new tax-free childcare and 30 hours free childcare offer will spend less on childcare this year, savings will go quickly if prices continue to rise at the same rate.

'Families left just treading water'

It is families with lower incomes and younger children who are most likely to be squeezed by the price rise. The highest prices for childcare are for the youngest children (between the end of paid parental leave and the child turning three) – and that’s when the least financial support is available to parents.

Ellen Broomé, chief executive at FACT, says: “Childcare is as vital as the rails and roads, it supports parents to work, boosts children’s outcomes and provides our economy with a reliable workforce. Too many parents remain locked out of work by high childcare costs and low availability. New Government investment is welcome, but this year’s childcare price surge shows that without root and branch reform, many families will be left just treading water.”

All three and four-year-olds and some two-year-olds in the UK are entitled to funded childcare. But following the roll-out of the Government’s ‘free’ 30 hour childcare scheme, FACT argues seven different types of support means parents are at risk of missing out on the help they need.

The chief executive adds: “The Government need to streamline the current hotchpotch of childcare support schemes. We need a simple and responsive childcare system that makes sure every parent is better off working and childcare quality is high enough to boost children’s outcomes throughout life.”

The survey also reveals how prices also vary significantly across the country. In Inner London – the most expensive region in the UK – the price of a part-time nursery place for a child under two is £184 per week or £9,500 per year, compared to an average £102 per week in the North West or £5,300 per year.

The price of 25 hours a week childcare for children under three Credit: FACT

Worryingly, only 45 per cent of councils in England say they have enough childcare places for working parents to access their free 30 hours place for three and four-year-olds. This contrasts with half of councils in Wales confirming they have enough places and 86 per cent of councils in Scotland.

“Many of this report’s findings are a serious concern”, says Purnima Tanuku, chief executive of National Day Nurseries Association (NDNA).

“We have been warning the Government that current childcare policy is causing problems for parents and providers alike. NDNA has been campaigning hard for the Government to review its hourly funding rate for ‘free’ childcare places because our research shows that it doesn’t cover costs for many providers.”

The NDNA’s own research reveals the average nursery makes a loss of more than £900 per child on 15 hours funded places. Ms Tanuku adds: “Because this isn’t sustainable, nurseries have no choice but to push up fees for younger children who aren’t funded. Many are also deciding not to offer 30 funded hours or are limiting places because they can’t balance their books.”

FACT wants the Government to:

• Provide start up grants and responsive funding for childcare providers to increase the availability of childcare places and meet disabled children’s needs.

• Increase the maximum amount of childcare costs that are supported by universal credit to ensure parents are better off for every extra hour worked and change to upfront payments so that parents can afford to work.

• Extend the 30 hours offer to parents undertaking training to make sure childcare costs do not prevent parents from developing employability.

• Improve access to early education for disadvantaged children by doubling the early years pupil premium.

But while the NDNA welcomes any increase to the Early Years Pupil Premium which is currently lower for early years than for school age pupils, Ms Tanuku says: “Start-up grants are not the solution. We need to increase the hourly funding rate so that we can unlock more places within established nurseries to make them more sustainable.

“We agree that the childcare support system is too complex and offers nothing for younger children. Parents need one account which pools all funding streams so they can pay their choice of provider directly.”

NDNA's workforce survey shows financial woes add to staffing crisis

Published on 1 March, the NDNA’s Annual Workforce Survey highlights the staffing crisis in the early years sector, with qualified staff leaving the sector. Financial pressures limit the sector’s ability to pay good wages with knock-on consequences for staff recruitment and retention.

The NDNA warns if nurseries are unable to recruit, they will have to reduce the amount of places they can offer. Government funding rates for 30 hours childcare for three and four-year-olds are frozen in 70 per cent of local authority areas in 2018/19, in spite of the costs rising significantly as a result inflation, National Minimum and Living Wage increases and rises in pension contributions.

Some 47 local authorities will receive the lowest possible childcare funding rate from central government - £4.30 per hour.

Childminders an 'untapped source' for funded places

Research by PACEY (Professional Association for Childcare and Early Years) has found half of childminders have at least one spare childcare place they would like to fill but 40 per cent of childminders haven’t been asked to provide a free entitlement place – despite the more flexible service they offer.

The FACT survey found only 53 per cent of childminders are delivering funded places compared to 82 per cent of nurseries.

“It has become a truism of our time that there is not enough affordable, flexible childcare to go around, fuelled by regular reports such as these” says PACEY chief executive Liz Bayram.

“However, childminders remain a great untapped source of potential for funded places.”

PACEY believes childminders could deliver substantially more funded places if four key barriers were removed: the low hourly rate for funded places; delayed/uncertain payments and red tape associated with the administration of the entitlement; and low levels of parental awareness about childminders.

To read FACT's 2018 Childcare survey visit the Family and Childcare Trust's website.

click here for more details or to contact National Day Nurseries Association


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