3 May 2022

Cutting the cost of living? It’s child’s play…


The UK has some of the most expensive childcare in the world. For a couple where both parents earn median incomes, a full-time nursery place costs 52% of the mother’s earnings. If we’re to tackle the cost of living, we simply can’t ignore childcare.

Expensive childcare is probably one of the greatest drivers of inequality between the sexes. After tax, national insurance, student loan repayments, travel costs, and more than half of her income spent on childcare, a mother could end up worse off by deciding to work. Some mothers choose to stay in work even though it makes them poorer, perhaps because it helps them maintain their sense of self or set a good example for their children. And according to a Department for Education survey, over half (60%) of mothers who don’t work say that they would prefer to be in employment.

Why is British childcare so expensive?

Comparing different countries’ childcare provision is difficult because we have very different systems. The Swedish government, for example, spends 1.6% of GDP on pre-primary childcare, but children in Sweden don’t go to school until they are six. Insofar as these comparisons are useful, however, the UK spends the OECD median amount on early-years childcare and education. So, public spending is not really the issue here.

The problem is on the supply side. A survey of the Professional Association of Childcare and Early Years (PACEY) members found that they turn away 16% of parents because they lack capacity. In most markets when demand outstrips supply, high prices draw new suppliers and costs eventually fall. In childcare, however, this is not happening.

The average cost of a nursery place in London is £280 per week, so you might expect to see enterprising entrepreneurs undercutting their local nursery. Unfortunately there are a lot of barriers in place that would make that illegal.

If you want to be paid to take regular care of a child under the age of 8 for more than three hours, outside of the child’s home, and between the hours of 3am and 6pm, you have to be registered with Ofsted, a process that takes about 12 weeks.

The UK’s excessive regulation for childminders is unusual by international standards. It is normal to require that childminders be DBS checked and first-aid trained. But on top of that they have to deal with the Early Years Foundation Stage, which asks that childminders monitor the educational development of children in great detail. It is more prescriptive than curriculums for pre-school children in other countries and involves a lot more bureaucracy. Rather than focus their energy on reading and playing with children, childminders have to document how well a child is able to catch a ball or talk with other children.

We also have the highest staff to child ratios in Western Europe. For children under two, we require one staff member for every three children. For two-year-olds, it is one adult for every four children, and for three and four year olds the ratio is usually one to eight. The UK’s ratios are much stricter than in other countries. Countries like Sweden, Denmark and Spain have no such prescriptive ratios at all. Economic analysis suggests that if we relaxed our ratios to one adult to nine children, we could halve childcare costs. If that were the case, adopting looser regulations would reverse much of the damage caused by the past two decades of sky-rocketing costs.

Something has to be done

A curriculum and generous staff ratios are great for the children who can benefit from them. But the extortionate costs of childcare mean many parents can’t afford it.

And excessive regulation makes informal childcare harder to find. For example, it means that a woman who has decided to stay at home to take care of her own children can’t also take on a few of her friends’ kids to earn some extra cash. It means community groups can’t set up childcare-sharing arrangements without accidentally setting up ‘illegal’ creches and nurseries. The overall result is that women are dropping out of the workforce.

I find it difficult to believe that this is better for children, parents, or society as a whole.

The Government is keen to tackle the cost of living, and childcare is high up on the agenda. Boris Johnson has called for relaxed staff to child ratios, which should allow for a lot of extra supply. But if the other restrictions remain in place, it will only make a small dent in the spiralling costs. Unless we’re more ambitious about reform, we’ll end up a poorer and less equal country.

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Aria Babu is Senior Researcher at The Entrepreneurs Network.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.