Is It Worth Working?

The UK's childcare costs are the highest in Europe, so can some parents simply not afford to work?

I read an interesting article the other day, discussing the fact that there are currently more free nursery places available than ever to young children. And the reason why? The writer believed this was because more mothers are choosing to stay at home to look after their children, rather than return to work.

Although interesting, and most certainly true for many, when you look into the costs of childcare you may construe a slightly different story. According to the Daycare Trust, the average cost of sending a child under two to nursery full-time is £152 per week -- that's £7,900 per year, having risen a whopping 6 per cent on last year -- far exceeding the rate of inflation.

Live in the South East and you'll be paying £180 per week on average (£9,360 per year), and pick a London nursery and you'll be forking out £205 per week (£10,660 per year). In fact, the highest cost found in the survey was one nursery charging a whopping £375 per week, or £19,000 per year!

If you think a childminder will be much cheaper you may be surprised. The survey found a childminder will cost you £141 per week on average (£7,300 per year) in England and Scotland, and £135 per week in Wales (£7,020 per year). Compare these sums to the fact that the average earnings were £447 last year.

Let's face it; this is a heck of a lot of money. These numbers are steep, and what's more, you have to remember this is taxed income. Can some mothers afford to go back to work?

Looking at a simple example, someone earning £25,000 per year will be taking home roughly £1,500 per month, after tax etc. Paying £7,900 per year on childcare equates to around £660 per month -- leaving £840. Subtract commuting expenses and you could be looking at less than £700 per month for working full time.

And consider what would happen if child number two were to come along? Even taking into account the 10 per cent discount that many nurseries offer siblings you'd need to fork out over £1,500 per month -- and it doesn't take a mathematician to figure out that working could effectively cost you money.

What's more, and I'm sure a lot of people reading this will agree, many good nurseries and childminders charge significantly more than the averages quoted. It certainly seems likely that some mothers who stay at home with their children, full-time may feel they have to do so out of financial necessity, rather than choice.

And when you hear that UK parents pay for 75% of their children's childcare costs, compared to our European counterparts who pay, on average just 30% of these costs, according to the Daycare Trust, is this yet another sign of rip-off Britain?

So what can we do to reduce this bill?

Well, of course, family is traditionally where most of us turn regarding childcare -- indeed it's reckoned around 50% of us choose this route, which clearly saves a fortune over using a nursery or childminder. But in this day and age many of us simply don't live close enough to our families for them to help.

Some larger companies offer subsidised on-site crèches or nurseries, which cost a fraction of the price of private care, but these seem to unfortunately be few and far between. So we're left with an awful lot of families who have to go down the nursery or childminder route (I won't even get started on the costs of employing a nanny).

So what does the government do to help? Well, it has two schemes in particular that parents should try and take full advantage of:

1. Firstly, there is the Childcare Voucher scheme. This allows parents to buy vouchers out of their gross salary (and so avoid paying tax and National Insurance) to pay for childcare. Unfortunately, while this is a great idea, parents can currently only buy up to £55 worth of vouchers per week (around £2,900 worth per year) meaning that a higher rate taxpayer could save a maximum of £1,196 per year, and a basic rate taxpayer £916. And unfortunately, a large percentage of companies don't offer the scheme at all.

2. Additionally, the government has promised free nursery places to all children aged three and four. Children are currently entitled to 12.5 hours of free nursery education hours, per week, for 38 weeks of the year (which will be increasing to 15 hours following the Budget).

And families claiming Working Tax Credits can claim the Childcare Element, entitling them to help towards the cost of childcare (up to 80p for every £1 spent).

However, this perhaps compares unfavourably to the French system. In France, children from the age of two are entitled to places in full day childcare centres, or sometimes family day care, for which families pay on a sliding scale. Lower income families pay nothing, and better off families pay no more than ten to fifteen per cent of the cost.

It's clear that parents need to take advantage of whatever help we can get with childcare. But it does seem sad that parents in the UK may be finding their choices restricted by cost.