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Government research reveals rising cost of providing childcare

By Rachel Lawler
child drawing cost of childcare
The hourly cost of providing childcare has risen in the past three years, according to a government-commissioned report from Frontier Economics.
The report found that the cost of providing childcare may have risen faster than inflation and more than can be explained by the rising minimum wages.
Early years providers costs survey 2018 spoke to 120 providers about their costs – just 24 of these were private settings, 18 were run by volunteers and 19 were childminders. The providers were surveyed in the summer term, which is when most settings have their highest occupancy and lowest hourly costs.
Increased staffing costs
According to the report, staffing accounts for 77% of costs, with venue-related expenses accounting for just 13% of costs.
The report also found that funded childcare accounts for 54% of providers’ incomes, with 41% coming from parent-paid fees and 6% from other sources.
Despite the report’s findings, government funding rates for the 15 and 30-hours offer have been frozen since 2017. The rates are not due to be reviewed again until at least 2020.
Frozen funding rates
Neil Leitch, chief executive of the Alliance, commented: “Yet again the government’s own-commissioned research puts the scale of the crisis in black and white: hourly costs have risen more over the last three years than can be explained by inflation and the minimum wage and pension contribution policy changes.
“Despite this, funding rates have been frozen by the government throughout that time. Things are looking increasingly unsustainable and, with staffing costs making up over three-quarters of provider outgoings and due to rise significantly next month, the need for government action on childcare funding has never been more compelling.
“This underinvestment is causing untold financial problems to childcare settings, and this will ultimately impact on families who will see prices increase, or childcare settings close for good. The government knows this but continues to find ways to defy mathematics rather than increase funding.”
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