Jeremy Hunt is being urged by business leaders to fix the UK’s broken childcare system to secure a boost to the economy worth £11bn by enabling more parents and carers to work.
In the run-up to next week’s budget, industry leaders said the chancellor needed to clarify funding arrangements for childcare providers before the government’s April deadline for providing additional financial help.
The intervention came as childcare providers in England warned they will struggle to meet extra demand for funded places, amid chaos surrounding the introduction of the new free hours scheme.
In a call for more support for already stretched childcare services, the BusinessLDN lobby group, which represents some of London’s largest companies, said bolder action could unlock a sizeable economic prize by increasing the number of people available to work.
It said ministers needed to act before the April deadline to expand the financial support available for parents, and weigh up a range of measures to transform the UK’s childcare system, which is among the most expensive in the developed world.
Muniya Barua, the deputy chief executive of BusinessLDN, said: “While the government has announced a welcome expansion of childcare support, without urgent action to clarify funding for providers, many parents are likely to face disappointment in April.
“There’s no quick or easy fix to the UK’s childcare challenge but it’s clear that bolder action could deliver a sizeable economic prize.”
Under the plans unveiled by Hunt at last year’s budget, working parents of two-year-olds will be able to access 15 hours a week of free childcare from April. This will be extended to working parents of all children older than nine months from September, and to 30 hours for these children within a year.
However, the flagship scheme had been beset with problems, including the allocation of funding for nurseries and staff shortages.
Research in the report compiled by BusinessLDN, the accountancy firm KPMG, and the Central District Alliance, which represents 25,000 firms in the capital, shows that funding for childcare places could increase the employment rate among parents of under-fives by 250,000.
It said this could increase UK GDP by £11.3bn a year, giving a potential annual boost to the government finances of up to £3.2bn.
A survey of parents and carers that use childcare services in the capital, carried out as part of the research, found that on average Londoners spend more than a third (36%) of their monthly income on childcare, with more than half rating it as unaffordable, and nearly half (49%) saying the cost had pushed them into debt.
“Our proposals provide a menu of options to transform childcare from which the government can draw on as the public finances improve,” said Barua.
“There is a compelling business and economic case to fix the UK’s broken childcare system, which is essential as firms look to recruit and retain staff, particularly women.”
