Does Britain have the most expensive childcare in the world?

8 September 2011

The pressures on families needing to pay for child care was highlighted by research yesterday from Save the Children and the DayCare Trust, which suggested that the cost burden could push poorer families into debt.  

The report's findings, 'Making Work Pay: The Childcare Gap', received widespread coverage across the media.  One claim taken from it that was prominent in a number of the articles covering the report was that childcare costs account for a third of the average household income of British families, one of the highest figures in world.  

For example, The Guardian reported that: "Parents spend almost a third of their incomes on childcare - more than anywhere else in the world, according to research by charities Save the Children and Daycare Trust."

So are UK families paying more for childcare?

While mentioned in the 'Making Work Pay' report, this figure originally comes from work by the Organisation for Economic Co-operation and Development (OECD), published in July 2010. The report compares the childcare costs of thirty one different countries.

In both reports 'childcare' refers to professional childminders, nurseries and after school clubs, not casual or informal carers. In terms of gross childcare costs the UK is ranked 4th highest, with full time care for one two-year-old child costing around 25 per cent of the average wage. As the OECD report points out, this does not take into account financial assistance that may be available.

In order to calculate the 'net' cost of childcare, the OECD report therefore creates two 'model' families. The first model consists of a two parent household with two children, aged 2 and 3, with one parent earning 100 per cent of the national average wage, and the other earning 67 per cent.

The second family is a lone parent household, employed full time, also with two children aged 2 and 3, and in which the parent earns 67 per cent of the national average wage. From this, the OECD calculates how much of each family's income is being spent on childcare after any financial support or subsidies that are available are taken into account. 

For the two parent model, childcare was estimated to cost around 33 per cent of household income in the UK, which i indeed one of the highest in the world. However for the lone parent household, this figure drops to 14 per cent, a figure which is below the EU average of 17 per cent.

This is significantly lower than the 52 per cent of household income the lone parent would have to pay in Ireland. So, while the 33 per cent figure appears to be accurate for certain families where both parents work, this is not so true when it comes to poorer single parent households.

We should also point out that the data on which the report is based on dates back to 2004. While it is, at the time of writing, the most recent internationally-comparable set of figures available, there have nevertheless been some significant changes to childcare costs in Britain over the last seven years.

As the 'Making Work Pay' report points out, since 2011 the Working Tax Credit has been reduced from 80 to 70 per cent of childcare costs. As a result, it is probable that the proportion of net household income given over to childcare has actually risen since the OECD report was published for both family model types. This is supported by the findings of the Annual Childcare Costs survey, published by the DayCare Trust in February 2011, which found increases to the overall cost of childcare over the last four years were well above inflation.

Despite the age of the data, overall it seems that there is certainly evidence to back up the claim that the UK has some of the most expensive childcare in the world as a proportion of net income, although there does seem to be some variation depending upon the individual circumstances of different families.

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