Cost of childcare soars
The cost of childcare has risen twice as fast as wages, figures from the Daycare Trust have revealed.
The cost of a nursery place for a child of two or over has increased by 4.8% since last year while the average wage increased by just 2.1%.
In England it now costs £5,028 on average each year to keep a child under two at nursery for 25 hours a week, while for parents in Scotland that rises to £5,178. The figure in Wales is slightly lower at £4,723.
Those parents opting to use a childminder make a small saving with the average yearly cost for 25 hours care a week standing at £4,670 in England, £4,664 in Scotland and £4,687 in Wales.
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Unsurprisingly childcare costs in London and the South East are higher than in the North with the average cost for 25 hours nursery care £118.54 compared to £82.70 in the North West. But the most expensive nursery in the survey, costing £11 per hour, is found in the West Midlands.
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Anand Shukla, acting chief executive of Daycare Trust says the rising price of childcare means it is no wonder that some parents may think twice about the economic sense of staying in work.
"These high, rapidly rising costs are particularly significant given the number of people not receiving cost of living pay increases this year, the increase in VAT, and rising costs of other household goods, particularly food and fuel," he says.
"These findings add to our concern about the reduction in the childcare element of working tax credit, which from April will only cover up 70% of childcare costs for low income working families, rather than the current 80%."
He adds: "Once this change comes into place, some families will effectively have an extra £546 a year added to their childcare bill. Yet parents in the UK already spend an average of one third of their net income on childcare cost."
The news comes ahead of changes to the childcare voucher scheme in April that will see benefits reduced for new members paying higher rate tax.
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
A special government scheme operated through employers that allows you to pay for childcare from your PRE-tax salary. The vouchers cover childcare up to 1 September after your child’s 15th birthday (16th if they are disabled) and can be used at any registered and regulated nursery, playgroup and for nannies, childminders or au pairs.