Childcare crisis deepens as costs rise 7%

As the government prepares to expand its childcare support next month, a damning report highlights a dramatic drop in the availability of childcare places, plus an above-inflation increase in costs. 

The charity Coram Family and Childcare found that only a third of English councils have enough childcare spaces for parents working full-time, a decrease from 48% in 2023. 

Meanwhile, a part-time nursery place for a child under two now costs an average of £158 a week in Great Britain, up 7% on last year.

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The most expensive region is inner London, where parents pay a weekly average of £218 for one part-time nursery place - or £11,336 a year.

From 1 April, the government is rolling out 15 hours of free childcare per week for two-year-olds, and will eventually offer free hours to all youngsters aged nine months and over from September 2025. 

Currently, children aged three and four are entitled to 15 or 30 hours of free childcare each year, depending on how much their parents earn.

Ellen Broomé, managing director of Coram Family and Childcare, comments: “The new childcare support that is being rolled out from April has the potential to be a game-changer for parents up and down the country – many of whom have found themselves facing eye-watering childcare bills and sometimes even locked out of work because of childcare costs.”

However, she notes that there is a risk the policy is not properly funded and supported, with families unable to access or afford the childcare they need. 

Coram’s survey found that while 63% of councils in England are “confident” or “very confident” that there will be enough places to meet demand for the imminent expansion, just 28% say the same about the expansion from September 2024 (15 free hours from nine months), and this falls to just 12% for the September 2025 expansion (30 hours from nine months). 

“The recent additional funding from the chancellor was welcome but won’t address the long-term systemic challenges of high childcare costs for parents, the workforce recruitment and retention crisis or the lack of availability of places for children with SEND,” adds Broomé. 

 How much does childcare cost? 

The average cost of 25 hours of nursery per week for a child under two is £157.68, according to Coram. Scotland is the cheapest region, at £125.42, followed by Wales, at £139.94, then England at £159.61. For a two year old, the costs fall slightly. The British average is £151.72 a week.

In terms of parents working full-time, they would pay £302.10 a week on average for 50 hours of nursery for their baby or toddler aged under two.

This works out as an eye-watering £15,709 a year. A family living in central London would fork out a lot more: £22,269 a year on average for a full-time nursery place.

Overall, nursery costs are higher than childminder costs (for 50 hours a week for those aged two and under). For example, the average cost of a nursery in Great Britain for under-twos is £302.10 a week, 19% more than the equivalent costs for a childminder (£253.02).

Separate data from the investment platform AJ Bell reveals that childcare costs are more than half the average wage in some parts of the country, with the East and South-East the worst for working parents.

In those regions, parents with a child in nursery or at a childminder could be paying 54p in every £1 earned, based on the median salary and typical childcare costs in their area.

If the costs were doubled to cover two pre-school children, many parents would be paying to go to work.

Laura Suter, director of personal finance at AJ Bell, comments: “When you factor in taxes, and the cost of getting to work on top of this, it’s clear that for many people going back to work just isn’t financially viable.”t

 What childcare support is available to me? 

 The government is expanding its childcare support in three phases: 

• April 2024: Eligible parents will be entitled to 15 hours of free childcare per week for two year olds.
• September 2024: This support will be extended further to cover children aged nine months to three years.
• September 2025: The final phase of the rollout will see the allowance doubled to 30 hours for all children aged nine months to school age.

Working parents who individually earn more than £8,670 but less than £100,000 adjusted net income per year are eligible for the free hours. 

For couples, the rules apply to both parents, so both must earn at least £8,670 and neither can earn more than £100,000.

The hours can be used at a registered childminder, playgroup, pre-school or nursery.

To register for the free hours from 1 April, you need to submit an application by 31 March, so you’ll need to act fast. You can apply for the free hours on gov.uk. 

 Don’t forget tax-free childcare 

Tax-free childcare can help ease the burden of soaring childcare costs, and it can be used in addition to the free hours. 

Under this scheme, the government contributes an additional 20% on top of any childcare fees you pay, up to a maximum of £2,000 a year (or £4,000 a year for disabled children). 

Take-up has been low since tax-free childcare launched, so it’s worth checking if you qualify. About 1.8 million families are eligible, but only 440,000 families made use of the allowance in December 2023, according to the latest quarterly data from HMRC. 

You can apply on the government website.