Childcare costs are more than half the average wage in some parts of the country, as figures show the East and South-East are the worst regions for working parents.
Analysis of the Coram Childcare report and ONS figures, by AJ Bell, showed that childcare in England accounted for 54 percent of wages in the East and South East regions. This was based on an average yearly salary of £28,382 with childcare costs of £15,204 a year in the East, and annual pay of £30,181 with yearly childcare costs of £16,219 in the South East.
In these regions working 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.
The West Midlands and South West also had average childcare costs that were more than half the average wage, at 53 percent and 51 percent respectively.
More regions, including London, Wales and the East Midlands, had high childcare costs accounting for between 47 percent and 50 percent of average annual salaries.
These figures also assume childcare costs for one child. If the costs were doubled to cover two pre-school children, many parents would be paying to go to work.
The findings come as the government prepares to roll-out increased childcare funding from April 2024. Parents of two-year-olds will be able to access 15 ‘free’ hours from April, with the scheme eventually extended to 30 hours for parents of children from nine months old by September 2025.
Laura Suter, director of personal finance at AJ Bell, said: “These figures reveal the financial challenge faced by many working parents, illustrating the huge percentage of wages that can be swallowed up by childcare fees. 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. Faced with the prospect of losing more than half their pay to childcare, many parents, predominantly women, don’t return to work.
“The figures also look at pay before any deductions, such as tax and national insurance. For someone in the South East, where the gap between pay and childcare fees is tightest, while a typical wage is around £30,000, once tax, NI and childcare costs are factored in, take home pay is only around £9,000 a year. That’s before allowing for other things like student loans and pension contributions too.”
She highlighted other outgoings such as potential 5 percent pension contributions and student loan repayments, adding that after this actual take-home pay after childcare costs drops to £7,800 – or £650 a month. “Considering people need to afford rent, food, bills and other essentials on this money we can see how it’s not viable for many people to make ends meet.
“Once the free hours scheme is extended to 30 hours for children from nine months old in September 2025, it will become more manageable for some parents to afford childcare once their parental leave ends. Although the reality of the free hours scheme is that it doesn’t do exactly what it says on the tin. The free hours only apply in term time and often don’t pay enough to cover the full hourly fee, meaning nurseries have to charge additional fees. And for parents with two or more children, the cost will often still be prohibitive.”
Suter highlighted the “chronically underclaimed” tax-free childcare, which offers up to £2,000 a year per child off childcare costs for eligible parents, while the free hours scheme currently in place offers 30 hours for parents of three and four-year-olds.
“On top of that parents should ensure they are claiming any child benefit they are eligible for, with the criteria changing from next month to include more working parents.”
