Childcare crisis hurting economy, say small firms ahead of spring budget

The FSB is calling on the Chancellor to tackle the childcare crisis and take proactive measures to help more people work in his spring budget.

“Childcare providers are facing insufficient government funding [and] are currently caught in a tough spot — either having to shut for good or pass the costs onto already-struggling parents and carers,” the FSB said in a statement.

“The economic impact is far-reaching as it becomes unviable for some parents to work, forcing them to choose between childcare and their careers, holding back economic capacity in the short and long term.”

The FSB said its five-point plan to tackle the issue head-on would help small businesses in the early years sector run sustainably while enabling parents to stay in the workforce.

The plan includes:

• Stopping the funding gap: the government funds 30 hours of free childcare for 38 weeks of the year, but providers struggle with a shortfall and are forced to pass the extra charges onto parents.
• Extending the current 38-week free childcare entitlement to 45 weeks, as parents don’t just work in term time.
• Giving nurseries in England 100 per cent exemption from business rates, in line with Scotland and Wales, so the savings are passed onto parents and carers.
• Raising the UK’s tax-free childcare allowance from £2,000 to £3,000 to incentivise parents to undertake more paid work.
• And the government matching employers who want to make discretionary contributions for childcare.

FSB policy chair Tina McKenzie said childcare businesses are in dire straits: trying their best to provide affordable services but end up taking a loss under government-funded hours, shutting up shop completely or passing the costs onto already-stretched parents.

“This means parents are faced with an ultimatum: to leave the workforce altogether or take on the extra, crippling costs with less and less choice when providers are forced to close,” she said.

“To make sure more people can work, and we can secure growth in the long term, the Chancellor has a real opportunity to tackle the domino effect that rising childcare costs have on the workforce. It keeps parents and carers away from their jobs, puts providers out of business and holds the economy back as a whole.

“We’re pushing for changes to ensure more parents can access affordable childcare, allowing them to work and stimulate the economy without having to worry about high costs, and to help a childcare sector that’s been put under huge pressure from under-provision of per hour funding from the government.

“These changes would ensure that parents — who will play a big role in helping economic recovery — can access affordable childcare, and providers won’t feel caught between a rock and a hard place.”