Childcare costs rising twice as fast as salaries

With nursery charges rising twice as quickly as wages, and the proposed government cuts in childcare benefits set to be introduced from April, should parents be thinking twice about the economic sense of staying in work?

The cost of placing a two-year-old in nursery care has risen twice as fast as the average wage, according to a survey by the national childcare charity, Daycare Trust.

The survey revealed that nursery fees for a child of two or more have increased by 4.8% since last year, exceeding the annual growth rate of 2.1% for the average wage.

‘When parents sit down to calculate their family finances and see childcare costs increasing far faster than their wages, it is no wonder they may think twice about the economic sense of staying in work,’ says Anand Shukla, acting chief executive of Daycare Trust.

‘These high, rapidly rising costs are particularly significant given the number of people not receiving cost-of-living pay increases this year, the increase in VAT and rising costs of other household goods, particularly food and fuel,’ says Shukla.

London and the south-east maintain the highest childcare fees in Britain, with the average cost of 25 hours’ nursery care for a child over the age of two costing £118.54, equating to £6,164 a year.

The government plans to reduce the childcare element of the working tax credit from 80% for poor working families to 70% has also caused concern. ‘Once this change comes into place, some families will effectively have an extra £546 a year added to their childcare bill,’ says Shukla.

Ryan Shorthouse, of the Social Market Foundation think tank believes the rising costs can be attributed to parents increasingly seeking childcare for younger children who require higher child to staff ratios. ‘At the same time, funding from local authorities has often been insubstantial and the result is rising costs,’ he says.

Do you think the government is right to cut back on childcare spending? Have you given up work as a result of rising costs, or have you discovered clever ways of making ends meet that you would like to share with readers? Post your thoughts in the box below...

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