British working parents spend almost a quarter of their income on childcare

UK government should consider making childcare more affordable to tackle declining birth rates, says think tank

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Working parents in the UK spend nearly a quarter of their income on full-time childcare, more than double the average for western economies, a think tank has said.

The Social Market Foundation (SMF) recommended that the British government increase the availability and affordability of childcare in order to address potential economic decline due to a “baby shortage”.

In a briefing paper, the cross-party think tank said birth rates in Britain are in decline, with the total fertility rate (TFR) in 2020 nearly halved compared to the post-World War Two peak.

The number of children a woman has in England and Wales stood at 1.58 in 2020, compared to 2.93 at the peak. The decline is even more pronounced in Scotland, where the TFR is 1.29.

The declining birth rate, coupled with the country’s ageing population, could lead to “long-term economic stagnation” and economic decline, said the report.

The report pointed towards a 2016 study that analysed the parental happiness gap and policies that make it easier to work. The study, published in the American Journal of Sociology, found that in countries with more “family-friendly” policies, parents were “as happy – if not happier – than non-parents”.

“Public subsidies for childcare had the biggest effect on parental happiness, with parents also substantially better off under regimes with more generous leave and holiday entitlements,” wrote the authors.

According to the study, the UK has one of the largest parental happiness gaps, behind only Ireland, Greece and the USA.

It comes after a survey, produced by more than a dozen parenting organisations, found that 96 per cent of working parents believed ministers were not doing enough to support parents with the cost and availability of childcare.

The survey, which involved more than 20,000 working parents, found that 97 per cent said childcare in the UK was too expensive.

Data from the Organisation for Economic Co-operation and Development (OECD) shows that the UK has the third most expensive childcare system in the world, with full-time childcare costing £12,376 a year on average.

It is estimated that a dual-earner household would have to spend 22 per cent of their income on full-time childcare.

“That might mean that there is more scope for the government to influence birth rates through childcare policy in the UK than in other parts of the world starting from a better position on childcare costs,” said the SMF report.

It recommended the creation of a cross-departmental taskforce to ensure ministers take into account the impact of policies on population growth in light of the declining birthrate.

Dr Aveek Bhattarcharya, chief economist at the SMF, said: “The question of whether the government should intervene to try to increase the birthrate is clearly a sensitive topic that must be delicately handled.

“However, given the alarming fall in fertility rates, and the risks that population ageing poses to our social and economic wellbeing, it is a discussion we should not duck.”