Priced out of work by childcare, could UK parents hold key to growth?

LAST year, mother-of-two Louise Sharples found herself turning down a new job she knew she would love because when she added up the cost of full-time childcare for her young daughters, it was more than she would have earned. After 12 years as a charity shop manager, Sharples, 35, has now taken what she views as a step back in her career, moving to a part-time but slightly better paid cleaning job until her children are older.

A childcare bill of around £800 (S$1,282) – covering four days a week of nursery for 18-month-old Sunnie and wraparound school clubs for four-year-old Lola – leaves her with around £100 of her wage at the end of the month.

“I’d love to work more hours,” Sharples told Reuters at the home in northern England she shares with her children and web-developer husband. “There is no incentive to, because it all just goes to childcare. I am thinking what am I doing, why am I working?“

She’s not alone. A survey of 24,000 parents published this month by campaign group Pregnant Then Screwed found 76 per cent of mothers who pay for childcare say it no longer makes financial sense for them to work.

The Centre for Progressive Policy (CPP) think tank has estimated that around 1.5 million British mums would work more hours if childcare permitted.

Unlocking expansion

With more than 1.1 million jobs unfilled, finance minister Jeremy Hunt has been trying to persuade older workers to return from early retirement to ease a tight labour market. Business groups and researchers say that acting on childcare in his Mar 15 budget would help to unlock greater economic growth.

According to children’s charity Coram, the average annual price for full-time nursery childcare in England for a child under two was more than £14,000 in 2022. That makes Britain’s childcare among the most expensive in the world, according to the Organization for Economic Co-operation and Development (OECD), taking up nearly 30 per cent of the income of a couple with two young children.

Only Switzerland and New Zealand rank higher, spending 33 per cent and 35 per cent respectively, while in Sweden the figure is just 5 per cent. The OECD average stands at 12 per cent.

Most childcare for under-five’s in England is provided by private companies. The government offers some support, including funding 15 free hours a week for three- and four-year-olds, while those on the lowest incomes are reimbursed up to 85 per cent of their costs, although they have to pay upfront.

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The government says it has spent more than £20 billion in the last five years helping with the cost of childcare. But providers say the funding does not fully cover the cost of the free hours, leaving many on the brink of financial collapse.

With energy and food bills surging, many have either had to raise fees further or close. Data from education watchdog Ofsted showed the number of childcare providers in England fell by 5,400 in the year to August 2022, an 8 per cent drop.

Lauren Fabianski, head of campaigns and communications at Pregnant Then Screwed, said childcare and early years education should be seen as infrastructure. “Parents cannot work without good quality, affordable childcare,” she said. “We have to see the government invest in this in order to get more women back into the workplace.”

Proposals include lowering the age at which children receive free hours, expanding the number of weeks a year they apply, and boosting funding per hour.

While such reforms would cost billions of pounds a year just as the government is trying to bring down its budget deficit, proponents argue that investment in childcare pays for itself.

The CPP estimates that if the 1.5 million mothers who want to work more were able to, it would result in at least £9.4 billion in additional earnings a year, boosting economic output by more than £27 billion, or around 1 per cent of GDP.

A report in December by the Institute for Public Policy Research (IPPR) think tank and charity Save the Children estimated that universally accessible and affordable childcare from six months to the end of primary school at age 11 would provide returns of around £8 billion a year in additional tax contributions and reduced social security spending. “We also know there are longer-term economic benefits ... to not seeing that loss of talent across our labour market,” said Rachel Statham, an associate director at the IPPR and one of the report’s authors.

World Bank data shows the labour force participation rate among women in Sweden was around 7 percentage points higher than the UK in 2019.

Other countries have started to act. In 2021, Canada announced a C$30 billion (S$29.5 billion) investment over five years to help bring down average daily childcare fees to C$10. It has forecast a boost to real GDP of as much as 1.2 per cent over 20 years.

Vote winner?

With a British election expected next year, the opposition Labour Party views childcare as a key battleground.

The government is reported to be considering reforms, but has not announced any plans.

Labour, which leads in opinion polls, has pledged to “transform childcare”, including fully funded breakfast clubs for every primary school in England. “Childcare unlocks not just the potential of children, but also the potential of parents,” Labour leader Keir Starmer said last month. “Childcare is central to our plans.”

Pregnant Then Screwed found 96 per cent of families with a child under three were likely to vote for the political party with the best childcare pledge, and Sharples is among them. “It is my biggest issue,” she said. “If a particular party was to promise that childcare would be at the forefront of their changes, my ears would prick up.” REUTERS