Bolder action to tackle the cost, availability and quality of childcare could unlock a sizeable economic prize by getting more parents and carers into work. That’s according to new research from BusinessLDN, KPMG and Central District Alliance out today [29th February].
The report, No Kidding: How Transforming Childcare Can Boost The Economy, shows that increasing the employment rate among parents with children under the age of five by 250,000 could increase GDP by up to £11.3bn per annum, giving a potential annual boost to the UK’s public finances of up to £3.2bn.
It shines a light on the impact of the UK’s childcare system – the third most costly in the world, behind Ireland and New Zealand – which is negatively impacting the labour market. The report includes actions for the Government and businesses to help boost labour market inclusion, building on the recent expansion of up to 30 hours of funded childcare during term time for under-fives, gradually being rolled out from April 2024. However, it is anticipated that this will place additional demand pressures on already stretched childcare services.
BusinessLDN is calling on the Government to urgently clarify funding arrangements for providers ahead of the April deadline before looking at a range of other measures to tackle the cost and availability of childcare, while maintaining its quality. These include: introducing an annual review to ensure funding remains sustainable in line with inflation and other economic factors; investing in the early years workforce; and – as the public finances improve – widening the eligibility of funded hours beyond term time to include school holidays and parents in training or education. It also calls on businesses to do more to support working parents. For example, backing more flexible working practices, setting up nursery workplace partnerships paid for via a salary sacrifice scheme and offering shared parental leave.
Muniya Barua, Deputy Chief Executive at BusinessLDN, said:
“There is a compelling business and economic case to fix the UK’s broken childcare system, which is essential as firms look to recruit and retain staff, particularly women.
“While the Government has announced a welcome expansion of childcare support, without urgent action to clarify funding for providers, many parents are likely to face disappointment in April.
“There’s no quick or easy fix to the UK’s childcare challenge but it’s clear that bolder action could deliver a sizeable economic prize. Our proposals provide a menu of options to transform childcare from which the Government can draw on as the public finances improve. Some are relatively simple and low-cost, such as clarifying tax rules for employers looking to set up workplace nurseries, while others will require long-term investment.”
The report highlights that while childcare is a UK-wide challenge, issues around cost and availability are particularly acute in London with its higher housing and travel costs. A survey of parents and carers who use childcare services in the capital, carried out as part of the research, found that on average Londoners are spending more than a third (36%) of their monthly personal income on childcare, with 53% rating it as unaffordable, and nearly half (49%) saying the cost had pushed them into debt. It also looks at international models of childcare to understand what lessons can be learned in the UK, drawing on OECD data and focus groups from KPMG’s international offices. While like-for-like comparisons are challenging, given different policy priorities and funding models, the report shows the UK is a clear outlier when it comes to affordability. It also reveals that in those countries which have more qualified staff they can support higher ratios of children without any impact on parents’ perceptions of quality.
