Monday, 27 February 2012

The cost of childcare

Yesterday, on the eve of the launch of the cost of childcare campaign, I was interviewed by a couple of Scottish newspapers. I'm volunteering on the parent panel of the Daycare Trust which is why occasionally I get called with extremely short notice to speak to a journalist or two.

Initially I was a bit worried because I'm not up to speed what exactly the Daycare Trust is asking for. But I don't think this matters so much, it's just about having honest views of parents on the issues they campaign about, which bring the campaign to life. Even yesterday, I was very clear that I'm not the average case study because we don't spend the same amount other families spend on childcare. We're the lucky ones who have their kids in council nurseries for most of the hours that childcare is needed, which is about half the cost of private childcare.

It is interesting to see what of the interviews makes it into the papers. There was one sentence which I totally hadn't said, it read along the lines of having had to consider to give up my job because of the cost of childcare. Now, it is true that I considered if it was financially viable to work, but I never actually would have chosen the path of handing in my notice, my considerations were simply in the light of looming redundancy. There is more to a job than the financial gain, plus, why should it be me who gives up the job if it's not financially viable? Surely the childcare costs are split between two incomes in our case and it's not simply about whether mum works or not.

Other than that, the quotes were bang on but obviously left out quite a lot of detail and width that I had spoken about.

Both papers asked me for my solutions to the cost of childcare.
I explained how in other countries, childcare is subsidised so that the maximum cost to the parents is capped. This makes childcare affordable for all. Of course, it costs money but the theory is that because more parents will be in employment, the cost is offset by the tax the government gets from these working parents.

Another point I made was that the reduction of the childcare element of working parent tax credit to a maximum of 70% of childcare costs will be hitting the poorest parents most. Effectively it means that if you are on a low income, you will have to pay at least 30% of your childcare costs. If you are on minimum wage, have rent/mortgage to pay, council tax, heating, clothing, food, phone and electricity bills to cover, that is a lot. To put it bluntly, while I'm pretty happy with the help of the meagre tax credits we get (not for much longer, I think we'll lose them once I increase my working hours), I'd rather we didn't get them and the government had kept the 80% level.

One idea that didn't occur to me at the time was that it would really help if the childcare voucher amount was increased. Childcare vouchers are a system of salary sacrifice at source - if you are employed and your employer is signed up to it, you can sacrifice up to £243 a month of your salary which can then be paid for childcare. The saving is that  you don't pay tax or national insurance on this amount. It is available to both parents, so if both work, it can cover almost £500. The maximum amount has been static for a rather long time, so it would be a solution to increase this. This would also help those parents where only one parent is in employment (as was the case for us - while we've always paid at least £500 in childcare since Cubling was 5 months old, we've so far only been able to make use of one parent's allowance). It seems unfair that if 2 parents are in employment you can save twice the amount while in situations where either one parent is not in employment or where there is only one parent, you can only save the tax on £243. It is usually the case that families where there is only one employed parent could do with extra help, so why not have a maximum amount of, say, £500, which can be split between parents as they wish. Plus increase the maximum amount anyway as childcare regularly costs £600-£800 per child on a full time basis.

I personally also wouldn't have an issue if the full cost of childcare could be offset against tax. This would help, but of course it would still mean that childcare remains a massive burden for parents.

Of course there will be those who say that if you have kids, that's what you've bargained for. However, it has been shown that capping childcare costs and having universal childcare available to everyone leads to better maternal employment, better outcomes for children, and greater equality in society. This in turn means less expenditure for the failings of an unequal society (the cost of crime, vandalism, poor health and substance abuse). Sometimes spending more won't cost more, but less.

Do you have any ideas how parents could be better supported with the cost of childcare?


Caroline Rose said...

Extremely interesting post. I have always been a bit baffled by the childcare cost system in the UK; having only just become a Mum in Luxembourg I´m yet to grapple with any of these issues. It´s interesting that you say universal, lower cost childcare for everyone increases equality etc - here in Luxembourg they actively encourage one parent to stay at home with the children (usually the mother in my experience) with generous benefits for the non-working parent. I´m perhaps not comparing like with like as Luxembourg is a wealthy country, but the equality issue is not a problem here. I´ll be interested to see what your other readers say.

make do mum said...

I'm in a strange situation where I get help with childcare through the childcare element of working tax credit but only so long as my business makes a loss! It would be a huge help if I could claim the cost of childcare as a business expense, it would work out similar to childcare vouchers where the cost is deducted from my profits before income tax is applied. I can see why many parents can't afford to go back to work.

Muddling Along said...

I find it very hard that I have spend money that has already been taxed on childcare so for every pound I spend on childcare I have to earn £1+x% and with childcare vouchers being phased out even that benefit is going to disappear

It seems to get worse when they go to school - how do we cover holidays, evenings and mornings and inset days - my work (and most other working parent's work) just doesn't match the available options

Love And Enterprise said...

I shudder when I think of all the money I spent on childcare before my kids started school. You sound like a good interviewee - very informed!



Blog Widget by LinkWithin