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Childcare experts join Plum to call on Prime Minister to prioritise and improve provision for under 5s in the UK

Childcare costs have skyrocketed for parents around the UK, particularly in the last year alongside other cost of living challenges.

Plum has been increasingly concerned that its customers, many of whom are parents, are having to put their financial resilience at risk by spending ever-growing proportions of their salary on childcare, or alternatively being forced to drop out of the workforce altogether.

Together with leaders from across the childcare sector, Plum’s Head of Money, Rajan Lakhani has written directly to the Prime Minister, urging him to prioritise and improve childcare provision for under 5s.

This letter has been published in The Observer on 19th February 2023 and will be delivered directly to Number 10 by the team at Plum on behalf of their customers.

Click here to sign our Open Letter.

Open letter on childcare

Dear Prime Minister,

We are writing to you with urgency today over the recent reports that childcare reform is being deprioritised, which will have a devastating impact on families and the economy.

The UK is the third most expensive country for childcare, according to the most recent OECD figures. The proportion of wages spent by British parents compared to French parents is more than double. It’s not uncommon for parents, especially in London and the South East, to actually spend most of their income on childcare.

And in 2023, parents face a steep increase in nursery costs as Government funding is falling in real terms while staffing and energy bill costs are rising. If nurseries raise prices in line with inflation, parents could see an increase of 10%+ in their costs. Combined with other rising costs, including increased cost of living and stealth taxes on income, the situation is unsustainable for families up and down the country.

New figures from Plum, the smart money app, have found that a third of parents are having to scale back on essential items, such as groceries, to pay for childcare, with 1 in 5 paying between £800-£1,200 per month on childcare. Many parents aren’t able to access the support they’re entitled to, with 70% saying that information available about childcare allowances is inaccessible or confusing.

Shockingly, there was almost nothing in the Autumn Statement to help parents with childcare. We understand that the Government needs to manage its finances carefully to boost its credibility in the markets and so you will naturally be reluctant to increase spending. But more investment on childcare can help to balance the books, support growth and loosen the labour market, which has been a major driver of inflation.

Higher childcare provision would mean increased parental working, whether extra hours or parents returning to the workforce. The think tank IPPR has estimated this could enable the Treasury to recoup an extra £8 billion a year from increased tax and national insurance revenues and from lower social security payments. Higher quality early years care may also support children’s educational attainment and wellbeing, positively impacting their future earnings and in turn the Government’s tax receipts.

Similarly, the IFS concluded that the single key factor in helping women remain in the labour market is full-time free childcare rather than part-time. With more women also able to work full-time, they may be able to advance their careers further and faster, helping to both address the gender pay gap and fill gaps in the job market.

The patchy nature of the childcare system means parents also struggle to understand all the support available to them, while free childcare up to 15 hours per week is only available universally for children aged three and four in England. This leaves an unjustifiable gap in support from the end of parental leave.

We’re calling on the government to:

  • Launch a campaign to better communicate the support available currently
  • Reform the currently complex provision of tax credits and childcare vouchers, making it easier for parents to access support
  • Increase funding to childcare providers providing early years support to help deliver higher quality care, and expand the free hours provision to children aged under two years old
  • Double universally available free childcare for two-, three- and four-year olds from 15 hours to 30 hours per week
  • Increase the eligible number of weeks for free childcare from 38 weeks a year to include school holidays
  • Press ahead with the legislation to make the right to flexible working from day one statutory
  • Explore ways to encourage businesses to make childcare part of their structure, whether through onsite or local provision through tax incentives

Action is needed urgently, and we hope the Government will adopt the recommendations outlined above. The benefits for productivity, the economy and tackling inflation are immense, with lower-income families in particular benefitting, which supports the levelling-up agenda. The alternative is unimaginable for its devastating impact on parents’ finances, the gender pay gap and the potential of our children.

Signed by:

Rajan Lakhani, Head of Money, Plum
Purnima Tanuku OBE, Chief Exec, National Day Nurseries Association
Adrienne Burgess, Joint CEO, The Fatherhood Institute
June O'Sullivan, CEO, London Early Years Foundation
Kate Dyson, Founder, The Motherload

Click here to sign our Open Letter.

*The research was carried out online on behalf of Plum by Research Without Barriers – RWB

  • All surveys were conducted between 13th January 2023 and 17th January 2023
  • The sample comprised 1,000 UK parents of children aged 0-4-years-old
  • All research conducted adheres to the UK Market Research Society (MRS) code of conduct (2019)
  • RWB is registered with the Information Commissioner’s Office and complies with the DPA (2018)