Let’s talk about childcare costs...

[SweetSouls]

I’ve recently been looking at local childcare costs, to see how feasible having a baby would be. I live in outer London, which I acknowledge is expensive.

All of the local nurseries are £90-100 per day (>£100 per day if you do less than full time).

This means my childcare cost for one child will be around £2,000 per month.

I’m feeling a little frustrated by the enormity of the cost, and the minimal support which the government will provide to working parents.

If prices continue to rise above inflation, we can’t be too many years off the very, very vast majority of parents (and let’s face it, women) left in the position that they have no option but to quit their careers if they want a child.

Why is this not a more pressing topic in the press and government? I know we are a country like the idea of ‘don’t have children if you can’t afford them’ - but if this trend continues presumably no one will be able to afford to have children and contemplate a career, unless they can make it to senior management before they hit 35.

What’s a sustainable way to lower the cost? Providers already seem to struggle to make the numbers work and break even, let alone be profitable. Could the full sum become tax deductible in some way (other business expenses are!).

@notthemum

I do sympathise, however I saw that someone said a childminder costs about £8. Per hour. National minimum wage is £8-21 per hour so to get a childminder for less than this is pretty amazing. Childminders may be prepared to offer a small discount for siblings it is not a requirement but could be worth asking. If you have more than one child then maybe consider a nanny as this could work out cheaper and you have the added advantage that they will probably feed the children, take them out, and may even push a Hoover round for you.

But a childminder rarely looks after only one child - which is why the NMW doesn't come into play (as it would and should if you were employing someone directly in a nanny type role). Our childminder has a minimum of three children a day and quite often anything up to six, so she's not getting £5.50/hr, she's getting multiples thereof.

I'm not saying it's necessarily well paid, but it's not quite as bad as it sounds!

It’s seems a fundamentally anti-women (anti-family, but mainly anti-women) position to allow childcare costs to spiral so wildly out of control.

I hate to say it but it used to be worse (and that's no justification for not making it better, I agree). When I had my first, you only got 15hrs at 3yo - so it had nothing like the impact on childcare costs as 30hrs does. It changes all the time.

I got 2.5 hours a day, term time only for my third DC and none for my first two and the hourly amount given wasn’t enough to cover the nursery hourly fee so that had to be topped up by DH snd I.

Having children is a choice and the costs of childcare should be between the two parents not just women.

People can work opposite hours, use alternative providers, save before hand etc to deal with the costs.

Maybe there should be interest free loans that have to be paid back over x years or make childcare tax deductible.

It is a massive issue but i suspect it won’t be fully addressed until there’s a big turn around in terms of this impacting both men and women such as companies/gov investing more in shared parental leave and longer paternity leave and general views at a society level about childcare largely falling to women. This has been massively highlighted in the pandemic when home school v home working has massively been shouldered by mums (i do appreciate some men will have done the bulk but the data proves that it has landed more on women.) we both compress and have a day off so only need nursery 3 days which saves a bit and then a tax free account. My nursery also does a sibling discount which shaved off 5%. Unfortunately moving forward financially after the pandemic I’m not sure there will be any money to subsidise costs.

@willowsandroses

just don’t have twins I’m not sure it’s a choice, sink!

Quite - I definitely didn’t choose it. And all the people who make the “buy one get one free” comments can bog off too. If only 😂

Very easy just to say ‘well having children is a choice’...

But when the cost of that childcare is commonly as much or more than a take home salary, then we are facing rather a large problem (and it will still be overwhelmingly women who exit the workforce as a result).

We have one of the most expensive childcare systems on the planet - and yet for some reason it is rarely discussed in the public sphere.

And very difficult to work opposite hours in most jobs... that just probably pushes one of you into minimum-wage work.

It's not that expensive everywhere in the UK though. Mine is £45 a day for an outstanding nursery.

@SweetSouls we are lucky we have some grandparent help otherwise it is basically the entirety of one person’s take home pay every month. But I’m just looking at it like it won’t be forever and I want to keep my hand in, industry knowledge sharp and can hopefully continue to progress.

That is expensive even for London.

Compressing hours (both of you) is well worth looking at and dropping some hours can be quite tax efficient. Both DH and I work 95% of fulltime compressed into 4 days so we only pay for 3 days of childcare and because we are both higher rate taxpayers, it doesn't make that much difference to our take home pay.

I think it's also worth thinking about it as a short term cost to get through until the 30 free hours kick in, so topping up with savings or taking a mortgage payment holiday once a year etc.

It is expensive. We had two under two so when I went back to work 3 days a week, the cost of nursery was the equivalent of my salary. But - I enjoy my job and wanted to carry on working so now they are both in school the 2 years of very high fees were worth it.

National minimum wage is £8-21 per hour so to get a childminder for less than this is pretty amazing.

But they will more often than not have more than one child, so they won't be making min wage (if that makes sense).

As others have said, we had twins so nursery costs were huge, and we only got 15 hrs free at 3 at the time (it's actually the term after they turn three so a birthday just after Easter meant they didn't get it until the following September so they were actually 3.5).

Childcare has never been seen as a priority for government spending and I don't see that changing any time soon.

£2k does sound expensive - have you checked whether there's a discount for using 5 days - it's not normally 5 x the daily rate, it's usually maybe 4.5 x daily rate. It won't make much of a difference but on those figures it would be £200 less. Factor in some nominal tax savings and it's not quite as bad as it first appears.

I own a nursery in London. It’s full with a waiting list, but barely breaks even. The problem is that nurseries are so expensive to run, and of course, the costs have to be passed on to parents for the businesses to be viable.

What makes them so expensive?:

1. In London, the cost of commercial property, which is insanely high for D1 buildings.
2. Linked to the above, the cost of business rates. Totally unaffordable for nurseries (and not payable in Scotland, which is so unfair).
3. The staff:child ratios. Obviously, these are necessary, but a comparable business in terms of turnover would be a corner shop, which might have one unqualified employee. The same income would need to cover eight or nine salaries in a nursery.
4. The on costs of employing eight or nine staff. Only the unqualified staff will work for minimum wage, but even then the on costs - the employer’s NI and the pension contributions - are crippling.
5. Linked to the above, greedy agencies, who charge 100% over and above the real cost of employing a nursery worker and encourage staff to have unrealistic expectations when it comes to salaries. Every day, I get emails from agencies representing nursery nurses who expect to be paid £25-£30k to work term time only. These salaries are not realistic comparative to what comes in.
6. The government funding, which only pays a fraction of the true cost of the per hour rate to sustain a nursery.
7. The unrealistic expectations of most parents, who believe they are entitled to ‘free’ childcare. I struggle to get parents to pay for food if their children only attend for 15 or 30 hours. Their attitude is, food is free in primary schools - the government should pay. Well, let me tell you, the government don’t pay, and if the parents won’t, it’s incumbent on the nursery owner to provide food for these children (and that is actually written into the funding regulations).

How things could change for the better and make nurseries more affordable for parents:

1. The government could put a cap on commercial rents for nurseries, or subsidise rent payments.
2. They could abolish business rates for nurseries.
3. They could pay a realistic hourly rate, which reflects the fact that nurseries are paying out multiple salaries on the turnover of your average corner shop.
4. They could provide meals for funded children, as they do for primary age children.

The government offer childcare incentives to parents because it makes them look good and buys them votes. At the same time, the Early Years sector is so woefully underfunded that the incentives make little difference to working parents who need full time childcare because the ‘free’ hours inevitably drive the costs up. The whole sector needs a serious overhaul.

You are on the more expensive end. A lot of my friends have gone for gaps between children to avoid paying for double childcare. It must be very hard for those with multiples. We’re on £70 a day for child no.2 so very much looking forward to not paying in a few years time. What may be a shock to you is wrap around and holiday care once you’re at school age, it is still a fair old chunk. We pay £16.50 a day for wrap-around (obviously much cheaper than nursery but still something to factor in) plus between £35-50 for holiday clubs per day.

There are triplets at our nursery, the costs must be staggering...

It's not just a women's issues unless you've married a misogynist. DH and I both consolidated full time over full time so we only have 3 days a week childcare to cover, £75 a day roughly here. Once DS is 3 he'll get his 30 hours, which will reduce the annual bill, we still expect to contribute and not have our childcare for free, but this is a welcome subsidy. It's a short term problem.

Kids are expensive. It is good that you're going into this with your eyes wide open.

@EYProvider that's really interesting, I hadn't even considered the cost of the building in London but of course that will put the prices up massively in certain areas.

We pay £45 a day for our childminder (we aren't near London) and with tax free childcare it makes it affordable, although it's still a huge lump of money each month. It's one of the many reasons we're stopping at one child. We're nearly at age 3 now and due to start the 30 free hours which we've been hanging on for.

I have friends who earned minimum wage who reluctantly became SAHM because the cost of childcare made working pointless for them. Thankfully my career pays reasonably well and has very good prospects for the future, so I've managed to make it work.

@wkjab - Yes, and to put this into context, the commercial rent for a shop in Ealing, for example, would be in the region of £15,000 per annum, which would be below the threshold to pay business rates. A nursery requires at least 5 x the floor space of a small shop (each child must be allocated a minimum amount of space), and falls under a more expensive rating category in any case, so is usually 5 x more expensive than a shop to rent. For example, a nursery operating on a term time only basis in a church hall in Ealing would probably be paying in the region of £45,000 per annum. A nursery having sole use of a building all year round would be paying upwards of £80,000 per annum, and would then have business rates of about £25,000 on top (don’t forget, business rates are calculated on square footage, and nurseries have to be more spacious than shops or offices).

Despite all that, the nursery in Ealing paying out £105,000 per annum is still only bringing in the same amount of money as the corner shop.

And other thing I forgot to mention is VAT. Nurseries are VAT exempt: they cannot charge VAT on fees. HOWEVER, unlike local authority schools and charities, nurseries have to pay VAT on everything they purchase. They can’t claim it back because they are not allowed to be VAT registered. In real terms, this means that nurseries have to pay 20% more for everything than any other business - including resources, renovations/maintenance and utilities. Over the course of a year, that adds up to one hell of a lot of money.

In short, there are many ways in which the government could introduce changes to support the childcare sector to become more affordable. However, it’s more politically expedient for them to offer ‘incentives’ to parents. And possibly cheaper overall.

my question is broader - what is going to happen in the next 5-10 years if there isn’t further intervention by the government in this sector?

But most people don’t live in London, so most people don’t have costs that are that high.

It is eye watering - I’ve got 3 children who have been through full time nursery and I reckon in the 8 years I’ve been paying for childcare it’s cost me somewhere in the region of £75,000. Which is frightening if you think about it too much! My youngest is the only one in full time nursery now. 7.30 - 5.30 mon - fri. Term time only, which helps. But with the 30 free hours it costs me £320 a month. Then -20% for tax free childcare. I pay about the same for wrap around for the other 2.

So still eye watering, but nowhere near your figures. And presumably there are enough people in your area of London earning enough to cover the fees.

@Dustyhedge is right re:wraparound. The £320 is per child - after the initial drop for the 30 free hours, my childcare bill didn’t drop when they went to school.

I think we’re still looking at £4.5k a year for a 4 day week of wrap around and holiday. We got excited when child no.1 went to school thinking ‘yay’ no nursery fees and then realised we’d still have quite a bit to pay out. Lots of people are able to use grandparents but we don’t live close by.