Written evidence submitted by Killik & Co LLP

The following evidence has been submitted by Killik & Co LLP (“Killik & Co”), an independently-owned investment house that advises clients on how to save, plan and invest.

Killik & Co takes a keen interest in childcare policy and its socio-economic impact. In December 2017, the firm published The Real Cost of Childcare Report, a comprehensive study into the British public’s experience with childcare based on original research. This attracted national attention, with its authors being interviewed on the BBC, ITV and elsewhere.

Executive Summary

Killik & Co’s research found that many working, middle-class parents are unaware of the Government’s childcare schemes and significantly underestimate the extent of help available. The financial pressure caused by childcare responsibilities has led parents into making unwanted, life-changing decisions. These could be mitigated by improving knowledge of and access to the Government’s childcare schemes.

Killik & Co surveyed 2,000 working parents across the UK with children aged five and under, whose household income was between £40,000 and £200,000 per annum. Each respondent qualified for the 30 Hours Free Childcare and Tax-Free Childcare schemes.

This submission is comprised of two sections: Killik & Co’s findings and its recommendations.

1. Findings

1. Working, middle-class parents eligible for the Government’s childcare schemes are not using them and significantly underestimate the extent of help available
2. They are relying on family members, typically grandparents, to help
3. They are cutting down on working hours significantly to care for their children, a sacrifice made by women more than twice as often as men
4. Half are deterred from having additional children as a result

2. Recommendations:

1. Ensuring broader awareness of the Government’s schemes
2. Ensuring these schemes are easily accessible

1. Findings

1. Working, middle-class parents eligible for the Government’s childcare schemes are not using them and significantly underestimate the extent of help available.

Killik & Co’s research found that 38% of those polled said that the cost of childcare has increased significantly over the last two years.

By making full use of the Government’s schemes, parents in England could potentially save £8,384, £4,128 in Wales, £5,405 in Scotland and £4,660 in Northern Ireland.

However, parents significantly underestimate this. Estimates were around 20% of this figure (Fig.1).

Meanwhile, almost half (47%) of respondents had not yet heard about the Tax-Free Childcare Scheme.

Only 31% are using the existing childcare allowance of 15 hours and only 21% plan to use the full 30 hours now available.

A significant proportion of respondents found the process of applying for 15 Hours of Free Childcare scheme daunting. Over 19% found it ‘too complicated’ and 13% ‘did not know where to start’.

The majority (53%) of respondents used nurseries as a childcare service, followed by 32% who use childminders. However, only 14% of parents combine both services in order to juggle their childcare needs – family support and reduced working hours therefore make up the shortfall.

2. Parents are relying on family members to help.

The majority (71%) of parents rely on family for childcare to enable them to work.

Over 92% of this help comes from grandparents (65% of total respondents). This number has sharply risen in the last decade: research in 2015 by RIAS suggested that the number of grandparent childminders rose by 51% between 2009-2015.

Over 9.2 million grandparents spend an average of nine hours a week looking after grandchildren, saving parents over £1,900 in childcare fees.

Aunts and uncles also play an important role according to 34% of respondents.

3. Parents are cutting down on working hours significantly to care for their children, a sacrifice made by women more than twice as often as men.

Almost half (49%) of mothers had cut back their working hours since having a child over the past five years.

This is more than double the number of fathers (22%).

They are making significant sacrifices: of these, 44% of mothers had cut down their typical working week by 2 full days (Fig.2).

4. Almost half of respondents (47%) were deterred from having children due to high childcare costs.

Therefore, childcare costs are not merely a financial burden; they are shaping the demographics of the UK and making the population older.

                These views were consistent across both gender and income brackets.

Respondents underestimated the cost of raising a child to the age of 18. The average estimate was £131,400, however the real figure is closer to £199,000 according to NatWest’s ‘Cost of Raising a Child Calculator’.[1] Families could even be less inclined to have additional children, therefore, if the true costs were better-known.

2. Recommendations:

1. Ensuring broader awareness of the Government’s schemes.

Killik & Co’s research found that 85% of parents’ local nurseries can provide the full 30 hours of free childcare now available, despite many nurseries expressing concern in the media about their ability to provide this.

Attendees at a childcare event organised by Killik & Co on 24/01/2018 were surprised by this figure.

2. Ensuring such schemes can be accessed easily.

Over 19% of parents found the application process for the 30 Hours Free Childcare scheme ‘too complicated’ and 13% ‘did not know where to start’.

Appendices

Fig. 1

Fig.2