Think tank warns it doesn’t pay to work

A report by a leading think tank has warned that 'extortionate' childcare costs could mean some parents are actually left worse off going to work than they would be staying at home. The report, produced by the Centre for Social Justice, has warned that the Government must tackle the high cost of childcare or it will fail to make it economically worthwhile for parents in low paid jobs to be in work.  In some cases, it may even work out cheaper for the Government if certain parents remain at home.

The think tank looked at the situation parents are facing, including the planned introduction of a Universal Credit scheme. The scheme is part of a major overhaul of the benefits system and will aim to simplify the way the system works.

The think tank has concluded that even under the new scheme, parents in low income jobs with more than two children could be worse off working.

However, on reading this report, it has come to light that the think tank has not considered factors such as the free early years entitlement, which provides for 15 hours free childcare a week for all three and four year olds (for 38 weeks a year), so that a parent working 20 hours a week would only have to fund the additional five hours childcare (of which 70% would be subsidised under Universal Credit).

Whilst the robustness of the report may be questioned, it does demonstrate that childcare continues to be a highly topical issue for the Government and one that they are being called upon to address, including areas such as the amount of red tape faced by childcare providers. It is thought that this will help reduce costs that have to be passed on to parents.

At CVS, we fully support working parents and the need for quality childcare provision at an affordable cost. As this report suggests, reducing red tape is one way to do this. We have also made other recommendations to the Government’s Childcare Commission, including suggestions to remove the restriction around the National Minimum Wage  and for changes to the way wrap-around care is provided (perhaps with a relaxation of ratios for care outside of the core nursery hours) and we will keep you updated with any news on this.

Childcare vouchers can help many parents, particularly when you consider that basic rate tax payers can claim vouchers up to the value of £243 a month, so working parents can make potential savings of £933 per parent a year on childcare costs.

Around half a million working parents currently rely on childcare vouchers each month to meet their childcare costs, with the vast majority of these being basic rate tax-payers.  We fervently hope that the Government continues to provide this greatly needed subsidy to normal working parents, who aren’t all higher earners, as the report by the Centre for Social Justice wrongly suggests.

We will continue to lobby the Government with our fellow Childcare Voucher Providers Association members, to ensure that the needs of all working parents are considered and that childcare costs are made more affordable, without reducing the quality of the childcare they receive.