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  1. Business
9 March 2023

Childcare costs are failing mothers and the economy

New figures show the cost of full-time childcare has reached £15,000, which could be pushing thousands more women out of the workforce.

By Emma Haslett

Ramya had completed her master’s degree and was working as a chemical engineer earning £45,000 a year in 2019 when the project she was working on collapsed. A few months later, Covid happened, her industry shut down and then she discovered she was pregnant with twins. Now, faced with the prospect of a £10,000-a-year drop in her earnings because of the time she has taken off, and with childcare bills that would have added up to £3,000 a month for each twin, she has taken the decision not to return to work until the twins are old enough to qualify for free childcare. “It will have been five years [since I worked],” she says. “I keep thinking, what was the use of studying so much?”

Ramya is one of thousands of women who have left work since the beginning of the pandemic, pushed out by the cost of childcare. New figures published today by the children’s charity Coram show the average cost of full-time childcare in the UK is now just below £15,000 a year (£20,500 in inner London). Figures from the campaign group Pregnant Then Screwed show that for more than one in five parents (22 per cent), the cost of childcare is now more than half their household income, while almost a third of those who use formal childcare say they’ve gone into debt to cover the costs. In a ranking comparing life for women in work in the 38 “rich-country” members of the Organisation for Economic Co-operation and Development (OECD), the UK has slipped five places to number 14 because a lack of affordable childcare has created a “barrier to progress”.

In total, official data shows, there were just under 1.47 million women staying at home to care for their families in the three months between October and December last year, up from a low of 1.37 million in the three months between December 2020 and February 2021. And yet, when Jeremy Hunt steps up to deliver his Budget next week, a week after International Women’s Day, he is expected to announce measures aimed at getting the over-50s back into the workplace and targeting people with long-term illness by assessing what aspects of work they could still do, while ill. There has been no hand-wringing about stay-at-home mothers: they are the missing workforce the government forgot.

A survey by the Early Years Alliance found that nine out of ten nursery providers expected to increase fees this April, by an average of another £1,000 a year. In London the average cost for a full-time nursery place is already more than £19,000 a year. A graduate making typical pension contributions and earning the average UK salary will take home less than £23,000 a year.

[See also: Congratulations on being the Universal Woman – now leave the rest of us alone]

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Childcare is also becoming harder to access: today’s Coram figures show the number of local areas reporting that they have enough childcare spaces has fallen seven per cent to 50 per cent; Ofsted has reported that the number of childcare settings in the UK fell by 4,000 between March 2021 and March 2022. You can see why: a survey by the Early Years Alliance last March showed a third of providers were operating at a loss – while the parents of three- and four-year-olds are entitled to 15 free hours of childcare (30 free hours for working families), the amount the government pays providers for those free hours very often isn’t enough to pay their staff properly. The think tank the Women’s Budget Group estimates that there is a £1.75bn gap between how much the government pays for the free hours scheme and the amount it costs childcare providers.

But it’s not just that the Chancellor and the Prime Minister are uninterested in enticing mothers back to work – they have actively worked against it. Rishi Sunak’s first action this year was to abandon plans by his predecessor, Liz Truss, to reform childcare by increasing child-to-staff ratios and providing an extra 20 hours’ funding for three- and four-year-olds, saying the idea would cost “billions”.

Shevaun Haviland, the director-general of the British Chambers of Commerce (BCC), says that doesn’t have to be the case. “We’re always faced with the current administration telling us there isn’t any money anywhere,” she says, but she argues there is room in the tax system. “At the moment there is a tax-free childcare account, which is currently at £2,000. So can the chancellor look at increasing that level? Can he look at allowing the self-employed to use business expenses? Can he look at parents claiming tax relief against childcare, for example, against their joint income? Using the tax system more cleverly would help people offset costs.”

With inflation still stubbornly high, a cost-of-living crisis that is dragging on almost as long as the British winter and the spectre of a recession still looming over the economy, Hunt doesn’t face an easy task in his Budget next Wednesday. But with 1.5 million potential stay-at-home mums waiting to be enticed back into the workplace, this is a group he can’t afford to ignore. As Haviland says, casting Ramya and her peers adrift from the workforce is “just bad for the economy”.

[See also: Have the Conservatives done enough for women?]

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