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Spiralling childcare costs threaten to force parents out of work, finds Daycare Trust

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New figures compiled by Daycare Trust show above-inflation increases in the price of nursery care in Britain, with the hourly rate for a child aged under two up 5.8%. The increase for a child aged two and over is 3.9%. In the same period, wages have remained stagnant, only increasing by 0.3%.

At the same time, new HMRC figures reveal the impact of the Government's cut to financial support for childcare costs in April 2011.

By cutting the maximum level of support available through the childcare element of Working Tax Credit from 80% of costs to 70%, the average claim has fallen by over £10 per week, costing the low-income working families that receive it more than £500 per year. Furthermore, 44,000 fewer families are receiving this help with childcare costs.

According to the Daycare Trust, the average childcare costs now exceed £100 a week for a part-time place (25 hours) in many parts of Britain, with the average yearly expenditure for a child under two standing at £5,103. The most expensive nursery recorded by this year's survey costs £300 for 25 hours care – that's £15,000 for a year's childcare.

Childminder costs have risen by a smaller amount, with a rise of 3.2% for a child under two, and 3.9% for a child aged two and over.

There are significant gaps in childcare availability across Britain, with a worrying lack of childcare for disabled children and parents who work outside normal office hours. Over half of local authorities said that parents had reported a lack of childcare in the previous 12 months.

Anand Shukla, chief executive of Daycare Trust, said: "These above-inflation increases in the cost of childcare are more bad news for families, heaping further pressure on their stretched budgets as wages remain stagnant and less help is available through tax credits.

"Daycare Trust warned that the Government's decision to cut tax credits would mean some families found they were no longer better off going to work once they had paid for childcare. The latest HMRC figures reinforce Daycare Trust's fear that the loss of this vital lifeline is forcing families out of work and into poverty.

"Today we are calling on the Government to reverse its self-defeating childcare tax credit cut, and to deal decisively with the childcare affordability crisis for parents by pledging to provide free childcare for all two-year-olds by the end of the current parliament.

"At a time when family and government finances are so stretched, and the Treasury is looking to maximise tax revenues and reduce benefit expenditure, it is sheer folly that any parent has to leave work because they cannot afford to pay for childcare."

Julian Foster, MD of Computershare Voucher Services, said:"Daycare Trust's survey highlights the ever-growing gap between working parents and affordable childcare.

"Employers can do their bit to support employees by making flexible working a reality and introducing childcare voucher schemes. Schemes are cost-neutral for companies to run and allow a basic rate earner to save nearly £1000 per year on their childcare costs.

"Computershare Voucher Services fully supports Daycare Trust's recommendations for improving accessibility to affordable childcare. We have been particularly heavily involved in the plan to extend childcare vouchers to self-employed and encourage entrepreneurship; a proposal that has already seen some Government support."

Chris Parke, CEO of Talking Talent, added: "The fact the UK has such high childcare costs, which have continued to rise, even during the recession, is worrying – not only for parents, but also for businesses working to develop their talent pipeline. It is sad to hear that some parents could be forced out of work as a result of the rising cost of living outstripping wage increases. And the implications for UK business could be drastic in the medium- to long-term.

"Indeed, it is positive to see the Government investing in helping families with childcare costs, but we are a long way from replicating the successful Scandinavian model, where parents receive full state support and heavy subsidies when it comes to childcare, and this undoubtedly creates flexibility and diversity in the workplace.

"The time has come for the state and businesses to recognise and support parents in the workplace, and to develop and nurture talent. Retention is such a vital aspect for business today, and the importance of providing the right support during career crunch points, such as maternity, paternity and childcare, is vital."