Affordable Childcare - Select Committee on Affordable Childcare Contents


APPENDIX 7: BRIEFING NOTE ON CHILDCARE COSTS AND SPENDING ESTIMATES PREPARED BY DR GILLIAN PAULL, 1 DECEMBER 2014


This note reviews the available evidence on childcare costs; total parental spending on childcare; and the level of public expenditure on childcare in the UK. It also assesses the evidence behind the perception that parents in the UK face high childcare costs while government spending is also high in comparison to other countries.

Childcare Costs

There are several sources of information on childcare costs in the UK, but almost all have limitations in their scope or methodology of data collection (details of the sources and weaknesses are summarised in table 1 in the Annex to this note). Comparability between sources is problematic due in part to differences in the categorisation of settings and child age and in the timing of surveys, but mainly because they measure different aspects of cost. In particular, the sources consider delivery costs (Ceeda report), prices or fees (Family and Childcare Trust, Laing & Buisson and DfE's Childcare and Early Years Providers Survey) and amounts spent by parents (DfE's Childcare and Early Years Survey of Parents). While these different measures are related, they are each subject to their own market and policy influences and need not exhibit similar levels or trends.[380]

A summary of the key characteristics of costs in the UK is presented in the following subsections, but further details can be found in the referenced tables which are presented in the annex at the end of this note.

Hourly delivery costs / prices / amounts paid

Figure 1 presents the average hourly delivery costs, prices and amounts paid by parents from four different sources. The diversity in categorisation of type of care which makes it difficult to draw direct comparisons across these measures is highlighted in the labels below the horizontal axis.

Most average hourly cost measures are around £4 and generally lower for older children. The average delivery cost for two year olds is notably higher at almost £6 but this measure is only for good and outstanding rated settings and is the most recent set of estimates, which may account for the higher cost. It may also indicate that prices incorporate some cross-subsidisation from older to younger children in covering delivery costs. The average (mean) hourly amounts paid by parents are also higher (at around £5), but the median amounts (that paid by the family exactly in the middle of the distribution) are around £4 (shown in table 7), indicating a 'long tail' of a few families paying higher amounts. The average hourly amounts paid for nursery classes and playgroups/pre-schools are lower than the other measures (just over £2), but this may reflect a large proportion of free or subsidised hours delivered by these types of settings which bring down the average cost paid by parents.

Figure 1: Average Hourly Cost for Different Measures

Sources: See tables 2, 3, 5 and 7 in the Annex.

Amounts spent by families

According to DfE's Parents' Survey, families with only pre-school childcare who paid for childcare spent a mean total amount of £94 each week in 2012/13, although the median amount was £74 (again indicating a 'long tail' of a few families paying larger amounts) (table 8). Unsurprisingly, the average was lower (mean of £62 and median of £28) for families with both pre-school and school age children.

Grossing up these weekly amounts shows that the mean annual amount spent by families with only pre-school children was £4,888 in 2012/13, while half of these families paid less than £3,848. The average annual amount was £3,224 for families with both pre-school and school children, with half paying less than £1,456. It should be noted that these amounts are considerably less than the example cases presented in the reports from the Family and Childcare Trust which include £7,549 a year for a family with a child in part-time nursery care and one in an after school club and £11,700 for a family with two children in full-time childcare. While these examples highlight how much some families might potentially pay for such childcare arrangements, they are not typical of what most families do pay.

Recent trends

The Family and Childcare Trust report that the average price of childcare (for children under two in nurseries) has risen 27 % over the last five years has been widely cited. However, much of this change occurred in 2009 to 2010 and the growth in prices has slowed substantially in recent years to just 2 % in the past year (figure 2(a)). The Family and Childcare Trust reports also highlight a similar, more pronounced pattern for children over age two in nurseries. While Laing & Buisson's measure of fee inflation for full day nurseries is lower, it has also shown a slight downward trend in recent years.

Figure 2: Comparison between annual growth in nominal and real prices

Sources: See tables 3 and 4 in the Annex. The inflation adjustment uses the RPI index.

Figure 2(b) presents the same trends in nursery price inflation, but adjusted for RPI to show how childcare prices have changed relative to the prices of other goods and services. While rising substantially faster than the general price level during 2009 and 2010, price increases have moderated in more recent years to the point where real (inflation adjusted) prices have fallen. This pattern in childcare prices also holds for childminders (table 3) and is also evident in fewer providers reporting that they have increased fees in recent years (table 6).

The average hourly amounts spent by parents on childcare in day nurseries, childminders and playgroups/pre-schools have also fallen in recent years (2011 to 2013) after exhibiting much higher growth during 2009 to 2011 (table 7). The contrary rise in recent years for spending for nursery schools and nursery classes may be due to measurement issues due to the small sample for nursery schools and to the low price level for nursery classes.

Total Parental Spending on Childcare

There do not appear to be reliable estimates of the total private spending on childcare. Laing & Buisson estimate the total value of the day care nursery market to be £4.6 billion (Blackburn (2013)), but this only captures part of the childcare market and does not distinguish between the amount paid by parents and that funded by public support. A very approximate measure can be derived from DfE's Parents' Survey which suggests that parents in England spend between £5.1 billion to £7.0 billion on childcare each year[381]. However, this may overstate private spending as parents may fail to deduct reimbursements received from tax credits when reporting their net childcare payments in the survey. Given that current estimates of the value of these reimbursements is £1.5 billion, this could mean that total private spending is notably lower. In addition, a similar approximation based on the previous year's survey suggested a range of total spending between £4.3 billion and £5.9 billion, highlighting considerable randomness in the estimate across years.

Public Expenditure on Childcare and Early Education

Estimates of total public spending on childcare (covering children of all ages) are presented in figure 3 (detailed in table 9), derived from the Government response to follow-up requests provided to this Committee in July 2014 (Written evidence from the Department for Education ACC0068).

Figure 3: Public expenditure on childcare and early education

Sources: see table 9 in the Annex.

These estimates are slightly revised from those provided in More Great Childcare published by DfE in January 2013 (Department for Education (2013)). Estimates presented in The Green Budget published by IFS in February 2014 were slightly lower (total spending of £4.2 billion) because the IFS estimate did not include spending on the free entitlement for the second highest income band of two year-olds; it used take-up data rather than allocated expenditure for the cost for the lowest income band of two year-olds; and it used older data for the three and four old year old entitlement spending and WTC expenditure on childcare (table 9). All information on expenditure is derived from government publications and there is no independent source to verify it.

Current public expenditure totals £5.2 billion, with just over half (56 %) spent on the early education entitlement. According to current plans, total expenditure will rise by £1.2 billion during the next Parliament, with an additional £0.6 billion of spending for the introduction of Universal Credit (£0.2 billion for support for parents working less than 16 hours a week and £0.4 billion for the increase to 85 % reimbursement for childcare costs) and a net addition of £0.6 billion for tax-free childcare (a gross cost of £1 billion minus a reduction of £0.4 billion in payments for Employer Supported Childcare). With these changes, the majority of expenditure for childcare support (55 %) will become contingent on parents' working.

OECD Comparison of Childcare Costs and Public Spending on Childcare

There is a widespread perception that parents in the UK face high childcare costs while government spending is also high in comparison to other countries. The primary source of this perception is two reports based on data from the OECD Family Database. These reports have been critiqued in Penn & Lloyd (2013) who note that the OECD data suffers from several general limitations including problems arising from the variation in the categorisation of care and early education across countries; from the regional diversity in policy in some countries; and from the fact that some of the source data is quite outdated. They also note a lack of clarity on how the data was compiled from the national levels and what mechanisms were used within countries to provide the data. Moss & Lloyd (2013) suggest further concerns over the public spending estimates used for the UK. This section summarises and reviews the evidence underlying the criticisms of the OECD comparisons, drawing on some additional data sources and calculations which are explained and sourced in table 10 in the Annex.

The OECD publication PF3.4: Childcare support (OECD (2014)) contains the most recently updated analysis of comparative childcare costs based on data for 2012. This analysis suggests that the UK has unusually high childcare costs using two types of measures:

(a)  A comparison of average fees for a two year-old child in full-time (40 hours a week) accredited centre-based childcare as a proportion of average gross annual earnings. In 2012, this proportion was 26.5 % for the UK compared to the OECD average of 14 %, ranking the UK the 6th highest out of 34 countries.

(b)  A comparison of net childcare costs as a proportion of net income for two example types of families, both with a two year old and three year old child in full-time accredited centre-based childcare. For a dual earner family with gross earnings of 150 % of the average, the estimated proportion of income spent on childcare is 34 % in the UK, compared to an OECD average of 13 %, ranking the UK the highest cost country. However, for a lone parent family with earnings of 50 % of the average, the estimated proportion of income spent on childcare is 8 % in the UK, compared to an OECD average of 14 %, ranking the UK the 22nd country out of 34 countries.

With respect to the first comparison, the following points should be noted:

·  In many countries (but not the UK), direct provider subsidies and fee caps mean that childcare fees are often reduced at the point of use for families in particular circumstances and these reductions "can be both widespread and substantial" (OECD (2014), page 2). This will overstate relative costs paid by parents in the UK as fees do not include the public subsidies.

·  The comparison is only for a two year old child in accredited centre based care and may not reflect international variation across age groups or other types of care (including childminders and the use of informal childcare in the UK).

·  The average fees for the UK correspond to £4.04 an hour which is similar to the hourly prices for the UK presented above. However, these prices do not allow for the free early education entitlement for three and four year olds in the UK which suggests the UK would rank as having lower costs for these older age groups.

With respect to the second comparison, the following points should be noted:

·  This is a fairer comparison than considering gross fees because it includes the support from tax credits in the UK. However, it still does not allow for the early education entitlement for the three year old which is estimated to reduce the proportion paid by the dual earner family to 29 % (ranking the UK as the 6th highest country) (see table 10).

·  The relatively high cost ranking for the UK for the dual earner family and relatively low ranking for the lone parent family reflects the fact that UK support is more targeted towards lower income families in the UK than in the comparison countries.

·  The extent to which the two selected examples accurately represent relative childcare costs across countries depends upon the degree to which they represent typical families. However, the dual earner family in the UK has a gross income of £47,585, placing it in the top income quintile for all households in the UK and making it unlikely that the family would be eligible for the childcare element of WTC. In addition, estimated childcare costs assume families use 40 hours of average-price childcare for both children, which may overstate actual spending. For example, the lone parent in the UK is assumed to be paying more for childcare than their gross earnings prior to any reimbursement. These assumptions about usage may not only affect the international comparisons, but also mean that the absolute proportions for the UK do not reflect average spending.

The perception that the UK government spends comparatively more on childcare and early education than other countries is based on the OECD publication PF3.1: Public spending on childcare and early education (OECD (2013)). This was cited in More Great Childcare: "As a share of GDP, the Government spends around 40 per cent more than the OECD average on childcare" (Department for Education (2013)). It was reiterated in the Government response to follow-up requests to the Committee: "According to the most recent figures, in 2009, average public expenditure on childcare amongst OECD member countries was 0.3% of GDP—the UK spent 0.5% of GDP. This was over 40 % more than the OECD average" (Written evidence from the Department for Education [ACC0068]).

The original source of this evidence is chart PF3.1.A in OECD (2013). This chart shows that "public expenditure on childcare and early education services in 2009" for the UK was 1.1 % of GDP, placing the UK as the 6th highest spender in 37 countries. The 1.1 % is divided into 0.5 % on "childcare" and 0.7 % on "pre-primary spending". Although the data source for the UK is cited as the OECD Social Expenditure database, the database contains only the 1.1 % figure, with no original source reported or any record or explanation of the division into childcare and pre-primary spending.

This analysis should be treated with caution for several reasons (several of which were recognized in the Government's response to this committee):

·  The data is several years old and relative spending and relative GDP may have changed. Indeed, spending on childcare and education for children under five in the UK as a percentage of GDP reached a peak in 2009/2010 (figure 8.1, Brewer et al (2014)), although may have similarly peaked in other counties.

·  According to the OECD publication, the measure includes spending on childcare and primary school for all children under the age of six. This is not, therefore, a comparison of childcare spending alone but a comparison of a mixture of childcare and school expenditure. Moreover, the balance of the mixture varies across countries and those with younger school entry ages (such as the UK) will be more heavily weighted towards the higher costs of school.

·  There are problems capturing the spending by local governments in some countries which means that spending may be under-stated in these countries (but not in the UK).

·  Potentially the most serious problem is that the number cited for the UK appears inconsistent with UK data sources (as pointed out in Moss & Lloyd (2013)). The OECD comparison implies that UK spending in 2009 was £15.6 billion on children under the age of six, with £7.1 billion spent on childcare (OECD GDP for the UK was £1420 billion in 2009). However, even the most generous UK-sourced estimates on spending for 2009 suggest that the total spending on childcare and school for children under age six was at most £10.9 billion in 2009 (0.8 % of GDP) and the spending on childcare £4.2 billion (0.3 % of GDP) (see Annex table 10). These UK-sourced figures suggest that the UK was around the OECD average for both measures. However, the issues concerning the UK data also raise questions about the reliability of the OECD data for other countries.

In summary, this review suggests that the evidence base for the perceptions that parents face unusually high childcare costs and that public spending on childcare is unusually high in the UK compared to other countries is limited and questionable.

References

Blackburn, P. (2013), Children's Nurseries: UK Market Report 2013 Twelfth Edition, Laing and Buisson

Brewer, M., Catton, S. and Crawford, C., (2014), "State support for early childhood education and care in England", chapter 8 in The IFS Green Budget: February 2014, Institute for Fiscal Studies

Bryson, C., Kazimirski, A. and Southwood, H., (2006), Childcare and Early Years Provision: A Study of Parents' Use, Views and Experience, Department for Education and Skills Research Report no. 723

Ceeda, (2014), Counting the cost: An analysis of delivery costs for funded early years education and childcare, October

Daycare Trust, (2008), Daycare Trust Childcare costs survey 2008

Daycare Trust, (2009), Daycare Trust Childcare costs survey 2009

Daycare Trust, (2010), Daycare Trust Childcare costs survey 2010

Daycare Trust, (2011), Daycare Trust Childcare costs survey 2011

Daycare Trust, (2012), Daycare Trust Childcare costs survey 2012

Department for Education, (2013), More great childcare: Raising quality and giving parents more choice, January

Family and Childcare Trust, (2013), Childcare Costs Survey 2013

HM Treasury, (2013), Public Expenditure Statistical Analyses 2013, July

HM Treasury & HMRC, (2009), Tax ready reckoner and tax reliefs, December

HMRC, (2011), Child and Working Tax Credits Statistics: Finalised annual awards 2009-10

HMRC, (2014), Childcare Payments Bill 2014: Impact Assessment, November

Written evidence from the Department for Education (ACC0068), "Q13: Costs to Government of subsidising childcare" in "Government response to follow-up requests".

Huskinson, T., Pye, J., Medien, K., Dobie, S., Ferguson, C. and Gardner, C. with Gilby, N., Littlewood, M. and D'Souza, J., (2013), Childcare and Early Years Survey of Parents 2011, Department for Education SFR08/2013, January

Huskinson, T., Kostadintcheva, K., Greevy, H., Salmon, C., Dobie, S., Median, K., with Gilby, N., Littlewood, M. and D'Souza, J., (2014), Childcare and Early Years Survey of Parents 2012-2013, Department for Education SFR06/2014, January

Kazimirski, A., Smith, R., Butt, S., Ireland, E. and Lloyd. E., (2008), Childcare and Early Years Survey 2007: Parents' Use, Views and Experiences, Department for Children Schools and Families Research Report DCSF-RR025

La Valle, I., Finch, S., Nove A. and Lewin, C., (2000), Parents' Demand for Childcare, Department for Education and Employment, Research Report RR176, March

Moss, P., and Lloyd, E., (2013), "Is England really near the top of the league?", Nursery World, 8-12 April

National Audit Office, (2012), Delivering the free entitlement to education for three-and four-year-olds, February

OECD, (2013), PF3.1: Public spending on childcare and early education, OECD Family Database Indicators, July, most recent version available at http://www.oecd.org/social/family/database.htm

OECD, (2014), PF3.4: Childcare support, OECD Family Database Indicators, May, most recent version available at http://www.oecd.org/social/family/database.htm

Penn, H. and Lloyd, E., (2013), "The Costs of Childcare", CWRC Working Paper no. 18, July

Rutter, J. and Stocker, K., (2014), Childcare Costs Survey 2014, Family and Childcare Trust

Smith, R., Poole, E., Perry, J., Wollny, I. and Reeves, A. with Cashall, C. and d'Souza, J., (2010), Childcare and early years survey of parents 2009, Department for Education Research Report DFE-RR054, October

TNS BMRB, (2014), Childcare and Early Years Providers Survey 2013, Department for Education, September

Woodland, S., Miller, M., and Tipping, S., (2002), Repeat Study of Parents' Demand for Childcare, Department for Education and Skills Research Report RR348

ANNEX: TABLES


Table 1: Sources of information on childcare costs
Description Weaknesses
Delivery costs
Ceeda (funded by Pre-school Learning Alliance) Average hourly delivery cost for funded two, three and four year olds in PVI nurseries and playgroups with a good or outstanding Ofsted rating in July 2014.

Data collected from 100 settings in England completing attendance and resource usage diaries over two weeks.

No information for maintained settings, for childminders, for settings with lower Ofsted ratings or for children under the age of two.

Information only for July 2014 and no information on changes over time.

Relatively low survey response rate although not untypical for this type of work requiring heavy data collection demands over a short, inflexible period.

Prices or fees
Daycare Trust / Family and Childcare Trust Annual information since 2002 on average prices for 25 weekly hours (and 50 weekly hours) for children under age two and two years or over for nurseries and childminders.

Data collected from a survey of Local Authority Family Information Services (or equivalents) in Britain, asking them to estimate an average price paid by parents for the different forms of childcare.

Unclear how Local Authorities estimate average price and may contain an element of subjectivity.

NOTE: This survey does not collect information on the amounts spent by parents but the reports present example calculations from the average prices. These calculations make no allowance for the free entitlement; assume families pay average prices and use high amounts of formal childcare; and use an arbitrary benchmark of the average mortgage payment for all UK mortgage holders.

Lang and BuissonAnnual information since 2002 on fees for children's nurseries offering full-day care in the UK. Data collected as part of an annual market report from a sample of up to 15 % of these nurseries. No information on settings other than full-day nurseries.

Report only available by private purchase.

Childcare and Early Years Providers' Survey (DfE) Information on average fees for PVI and maintained group-based providers and childminders in 2013 and on the proportions of providers reporting that they have raised fees biannually since 2007.

Data collected from large scale annual surveys in England conducted since 1998.

No information on fees over time at present.
Amounts spent by parents
Childcare and Early Years Survey of Parents (DfE) Periodic information on total amount spent by parents on childcare and hourly amounts spent by type of provider.

Data collected from several large scale surveys in England since 1999.

Spending information is not presented consistently across reports and highly variable patterns of change suggest a degree of inconsistency in data collection between surveys.

Reported spending is "out of their own pocket" excluding money paid directly to providers (i.e. early entitlement funding) but it is highly likely that the reported amounts do not allow for reimbursements through tax credits.

Hourly payments are calculated as the total payment divided by total hours used and are subject to variation due to the use of free entitlement hours or subsidised hours.

Notes: Information on the amounts paid for childcare is also collected in the Family Resources Survey (DWP), but this data source has typically been used for modelling labour market behaviour rather than providing childcare statistics

Table 2: Hourly costs of delivery in July 2014 (Ceeda)
Nurseries and playgroups Average hourly cost excluding unpaid staff contribution Average hourly cost including unpaid staff contribution
Children aged 2 years old £5.97£6.10
Childcare aged 3 and 4 years old £4.53£4.69

Source: Ceeda (2014), tables 2 and 3.

Table 3: Hourly childcare prices 2007-2013 (Family and Childcare Trust Survey)

Year of survey
Nursery

(under 2 years)

Nursery

(2 years and over)

Childminder

(under 2 years)

Childminder

(2 years and over)

Hourly price Annual change Hourly price Annual change Hourly price Annual change Hourly price Annual change
2007£3.18 £2.98 £2.88 £2.84
2008£3.34 5.0%£3.12 4.7%£3.12 8.3%£3.04 7.0%
2009£3.52 5.4%£3.28 5.1%£3.32 6.4%£3.32 9.2%
2010£3.88 10.2%£3.76 14.6%£3.60 8.4%£3.52 6.0%
2011£4.13 6.4%£3.95 5.1%£3.70 2.9%£3.67 4.4%
2012£4.34 5.2%£4.26 7.9%£3.96 6.9%£3.89 5.9%
2013£4.44 2.2%£4.25 -0.3%£4.03 1.8%£4.06 4.4%
2009-2013 26% 30%21% 22%

Sources: Daycare Trust (2008, 2009, 2010, 2011, 2012), Family and Childcare Trust (2013), Rutter & Stocker (2014). Notes: Reports contain prices from previous calendar year and most recent prices are for 2013. Numbers in bold correspond to the 27 % reported for Britain in the 2014 report (numbers for Britain were not published prior to the 2012 report).

Table 4: Annual nursery fee inflation for children aged under five 2002-2013 (Laing & Buisson)
Fee inflation RPI Real growth using RPI CPI Real growth using CPI
20025.9 1.74.2 1.34.6
20036.7 2.93.8 1.45.3
20044.5 3.01.5 1.33.2
20051.1 2.8-1.7 2.1-1.0
20062.0 3.2-1.2 2.3-0.3
20073.5 4.3-0.8 2.31.2
20084.9 4.00.9 3.61.3
20094.0 -0.54.5 2.21.8
20105.1 4.60.5 3.31.8
20113.2 5.2-2.0 4.5-1.3
20123.1 3.2-0.1 2.80.3

Sources: Fee inflation from Blackburn (2013), table 3.5; and real growth is author's own calculations using RPI and CPI from Office of National Statistics ( http://ons.gov.uk/ons/taxonomy/index.html?nscl=Retail+Prices+Index#tab-data-tables,accessed 28/11/14)

Table 5: Mean childcare fees in 2013 (Childcare and Early Years Providers Survey)
Children aged under 2 Children aged 2 Children aged 3-4 Children aged 4 and under
Full day care£4.40 £4.10£3.90 £4.00
Sessional£4.00 £3.70£3.50 £3.60

Source: TNS BMRB, (2014), table 10.3. Notes: The mean childcare fee for all ages of children for childminders is reported in the text as £4.10.

Table 6: Proportion of providers who have increased fees (Childcare and Early Years Providers Survey)
Full day care Sessional Childminders
In last six months In last year In last two years In last six months In last year In last two years In last six months In last year In last two years
200733% 72%86% 28%64% 84%18% 37%57%
200934% 76%91% 17%57% 80%16% 37%63%
201140% 69%88% 49%68% 84%17% 36%60%
201331% 53%77% 28%47% 73%12% 23%44%

Source: TNS BMRB, (2014), table 10.4.

Table 7: Hourly childcare expenditure (Childcare and Early Years Survey of Parents)
Date of survey Day nursery Childminder Nursery school Nursery class Playgroup or pre-school
Median Annual change Median Annual change Median Annual change Median Annual change Median Annual change
Sep 04-Jan 05£3.39 £3.13 £2.43 £0.30 £1.67
Jan-Apr 07£3.75 8%£3.40 7%£2.67 8%£0.36 16%£1.80 6%
June-Dec 09£3.75 0%£4.00 11%£2.83 4%£0.39 5%£1.77 -1%
Oct 11-May 12£4.38 7%£4.44 5%£3.40 9%£0.40 1%£2.33 14%
Nov 12-June 13£4.44 1%£4.00 -9%£3.73 9%£0.62 51%£2.13 -8%
Mean Annual changeMean Annual changeMean Annual changeMean Annual changeMean Annual change
Jan-Apr 07£4.22 £4.03 £3.23 £1.74 £1.99
June-Dec 09£3.99 -3%£4.87 13%£3.19 -1%£1.69 -2%£2.27 9%
Oct 11-May 12£5.25 14%£5.83 8%£4.38 16%£1.64 -1%£2.72 8%
Nov 12-June 13£4.95 -5%£5.21 -10%£5.42 22%£2.37 41%£2.42 -10%

Sources: Bryson et al (2006), Kazimirski et al (2008), Smith et al (2010), Huskinson et al (2013), Huskinson et al (2014).

Table 8: Weekly childcare expenditure for all children (Childcare and Early Years Survey of Parents)
Date of survey Families only with pre-school children Families with pre-school & school age children
Mean Annual change in mean Median Annual change in median Mean Annual change in mean Median Annual change in median
Jan-Apr 1999£68 £27 £52 £20
Feb-July 2001£49 -13%£35 14%£43 -8%£20 0%
June-Dec 2009£77 8%£50 6%£62 6%£27 5%
Oct 2011-May 2012£79 1%£50 0%£60 -1%£25 -3%
Nov 2012-June 2013£94 18%£74 44%£62 3%£28 11%

Sources: La Valle et al (2000), Woodland et al (2002), Smith et al (2010), Huskinson et al (2013), Huskinson et al (2014).

Table 9: Public spending on early education and childcare for all children
Public spending in £ billion Early Education Entitlement Tax Credits and Benefit Disregards Employer Supported Childcare (vouchers) Tax free Childcare (from Autumn 2015) Current total

(future rise)

3 & 4 year olds Bottom 20%

2 year olds

20%-40%

2 year olds

WTC Increase with UC (Nov 2014) Increase with 85% UC (from 2016)
DfE More Great Childcare

(Jan 2013)

£2£1* £1.5 £0.2* -----£0.8 -----£5.3

(+ £0.2)

IFS Green Budget

(Feb 2014)

£1.9

(2012)

£0.3*

(take-up)

-----£1.2

(2011/12)

---------- £0.8

falling to £0*

£0.8* rising to £1.5* £4.2

(+ £0.7)

Government Response

(July 2014)

£2.1£0.8 £1.5£0.2* £0.4*£0.8

falling to £0.4*

£0.8* rising to £1* £5.2

(+ £1.2)

Sources: Department for Education (2013), Brewer et al (2014), Department for Education (2014). Notes: * denotes forecast at the time and italics denote "future" spending. Spending on the Early Education Entitlement covers only England, while the remaining spending items cover the UK. The fall in spending on Employer Supported Childcare to £0.4 billion is derived from the estimates that Tax Free Childcare spending will rise to £1 billion and the "steady state additional spending" will be £0.6 billion (HMRC (2014), Written evidence from the Department for Education (ACC0068)

Table 10: Calculations and sources for OECD comparisons
Estimate Calculation and additional sources
Spending on childcare for a two year-old child is 26.5 % of average gross annual earnings in the UK. Chart PF3.4.A shows this proportion as 53 %, but according to the accompanying text and for consistency with charts PF3.4.B and PF3.4.C, this proportion appears to be for a two-year-old and three-year-old. It has therefor been halved to obtain the proportion for a single child (consistent with the chart title and figures presented in previous versions of the note).
Average fees for the UK correspond to £4.04 an hour. The OECD figure for annual average gross earnings for the UK in 2012 is £31,723 (OECD database) 26.5 % of which divided by 52 weeks of 40 hours generates an hourly price of £4.04
Allowance for the early education entitlement reduces the proportion paid by the dual earner family to 29 %. The free entitlement covers 570 hours (15 weekly hours x 38 weeks) of the 4,160 hours used by the family (80 weekly hours x 52 weeks), reducing the proportion of net income spent on childcare to approximately 29 % (= 34 % multiplied by 3590/4160).
UK estimate that total spending on children under age six was at most 10.9 billion in 2009. Spending on the childcare element of WTC was £1.6 billion (HMRC (2011); on Employer Supported Childcare was £0.6 billion (HM Treasury & HMRC (2009)) and on pre-primary and primary education for children under age five was £4.8 billion (table 5.2, (HM Treasury (2013)), totalling £7 billion or 0.5 % of GDP. Allowing for a proportion of the remaining primary education (£3.9 billion of £25.2 billion (table 5.2, (HM Treasury (2013))) to be spent on five year olds in schools, generates a total spend of £10.9 billion or 0.77 c of GDP.
UK estimate that spending on childcare was £4.2 billion in 2009. Spending on the childcare element of WTC was £1.6 billion (HMRC (2011)); on Employer Supported Childcare was £0.6 billion (HM Treasury & HMRC (2009)) and an estimated approximate £2 billion on the early education entitlement (prorated for the UK from a cost of £1.6 billion in England in 2010/11 (National Audit Office (2012)).



380   In particular, delivery costs are influenced by input prices (e.g. staff wages; rents; business rates; and other business costs); the quality/characteristics of care (e.g. staff qualification levels; flexibility; catering for special needs); and efficiency of delivery. Prices (or fees) are influenced by the delivery cost and levels of profit/surplus dependent upon demand and degree of market competition. Amounts paid by parents are influenced by hourly prices; the availability of free care or government subsidises; and by parental choices over how much to use (affecting weekly or annual amounts paid) and about type/quality/characteristics of care to use (affecting hourly amounts paid). Back

381   This is estimated using figures from Huskinson et al (2014) as 4.2 million families using childcare (table 2.2) multiplied by 0.59 (the proportion who pay for childcare in table 5.1) multiplied by £54 (the mean weekly payment for those who pay for childcare in table 5.3) which equals spending of £134 million each week. Assuming that parents' expenditure on childcare may range between 38 weeks (covering term-time only) and 52 weeks each year generates a range of estimated total annual expenditure of between £5.1 billion and £7.0 billion. Back


 
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