Here’s how to fix the UK’s broken childcare system

In just over a month, the Government will introduce the first phase of a package of reforms it hopes will fix the UK’s broken childcare system. 

The expansion of funded hours for working parents in April could be a big stride towards tackling a problem that is holding back businesses and our economy, as well as damaging the career prospects of parents and carers. But unless it is urgently matched by adequate funding this change will place additional pressure on already stretched childcare services, potentially disappointing parents up and down the country, and making it harder for them to get into work. 

This would be a damaging own goal. The number one challenge for many firms in London and across the UK is skills shortages. Our childcare system is a major barrier to addressing these skills shortages, boosting labour market inclusion, and recruiting and retaining staff, particularly women.   

So as well as fixing the immediate funding challenge ahead of April, the Government should also implement a range of other measures when the public finances permit to tackle the cost and availability of childcare, while maintaining its quality. 

A new report published this week by BusinessLDN, KPMG and Central District Alliance (CDA) business improvement district shows that the size of the prize for getting childcare right is huge. It demonstrates that increasing the employment rate among parents with children under the age of five could increase GDP by up to £11.3bn a year, giving a potential annual boost to the UK’s public finances of up to £3.2bn. 

Childcare is a challenge across the length and breadth of the UK. But in London, the problem is particularly acute, where housing and travel costs take up a greater share of income. A recent survey of more than 1000 parents that use childcare services in the capital by BusinessLDN and the CDA found that a quarter of parents said the cost and availability of childcare had negatively impacted their career. More worryingly, over half (53%) said they were struggling to afford childcare, while nearly half (49%) said the cost had pushed them into debt. 

My own experience of being a working mother of three has seen me change careers and reduce my hours at different points in the lives of my children, with my partner and I relying on a mix of formal settings, such as nurseries, playgroups, and after-school clubs, to informal arrangements with grandparents and friends to help manage the childcare challenge. But, as every parent knows, this carefully constructed house of cards can all too easily come crashing down with something as simple as a missed or late running train - or the dreaded phone call from the school office to collect a sick child.    

Our report sets out practical recommendations to boost the availability, affordability and quality of childcare in the UK. These include a menu of options for the Government, such as: introducing an annual review to ensure funding remains sustainable in line with inflation and other economic factors; investing in the early years workforce; and – as the public finances improve – widening the eligibility of funded hours beyond term time to include school holidays and parents in training or education.  

Some of these will require additional funding as the public finances allow, but the return on investment could be significant. And there are others where greater clarity and changes to regulation could improve provision.  

The report also calls on businesses to do more to support working parents. For example, backing more flexible working practices, setting up nursery workplace partnerships paid for via a salary sacrifice scheme and offering shared parental leave.