Making childcare affordable

The problem is that many young mothers want to return to work to boost the household income and living standards and to fulfil themselves. This requires childcare, but who will pay for it? UK childcare is the most expensive in Europe after Switzerland. Even factoring in up to £2,000 in tax-free childcare benefits that parents can claim each year, full-time childcare with a childminder or in daycare could still cost one-third of the average household income.

Making childcare more affordable in the UK would require a combination of government intervention, policy reforms, and market incentives

Government could lower business rates and allow VAT Exemptions, reducing financial burdens on nurseries to allow them to lower fees. It could relax staff-to-child ratios which in England are generally stricter than in other European countries. For example, the ratio for two-year-olds in England is 1:4, whereas it is 1:6 in Ireland and Germany, and 1:8 in France. Norway requires one staff member for every eight children aged 3-5. Increasing the ratio would enable savings and lower the cost of childcare.

The biggest change could come about by encouraging employer-provided on-site crèche facilities. This should be a totally deductible business expense for the employer, and a tax-free benefit in kind for the parent. For businesses too small to provide on-site facilities, the scheme might be extended to cover employer-supported tax-exempt childcare vouchers.

 We could streamline the registration processes and offer grants to increase childminder availability. We could attract more childcare workers by fast-tracking visas for young European women prepared to work in childcare for a number of years.

From a parent’s point of view, grandparents constitute the best childminders where they are available and if they are sufficiently local. We could encourage this by allowing a notional cost for their provision to be offset against taxes due, including the daily transport costs.

The aim is to allow more young mothers the choice to re-enter the workforce without the often prohibitive costs that are due to inappropriate regulations and rules. Although there are what the Treasury calls ‘tax costs’ in encouraging more provision, the re-entry of young mothers into the workforce would see them earning and paying taxes. The changes suggested would be hugely helpful to many young mothers currently struggling to make ends meet.

Madsen Pirie