Third Door

Will proposed ratio’s lower childcare costs?

Tuesday, Jan 29th 2013

Staff are not the only costs in running a Nursery, there are plenty of other reasons to why childcare in the UK is expensive.

It feels almost everyday we hear how expensive childcare costs are in the UK and to her credit, Children’s Minister Liz Truss is attempting to help lower costs. The media is buzzing today with the announcement that nurseries and childminders in England are to be allowed to look after more children per adult in an attempt to cut childcare costs and boost standards.

Liz Truss
However, I feel that the fundamental question ‘Why is Childcare in the UK expensive?’ has not been asked.

I’m a mum of three children aged 5 and under and have been a Nursery owner for almost three years. Only by tightly managing the cash flow and budgets, have I managed to make a small profit so far.  I also have my two youngest children in the Nursery and from that perspective, I would not change the ratio’s of the staff if I want the quality of my provision to stay high.

However, whilst staff costs are a major factor of the running costs of the Nursery, there are many other reasons why childcare costs are expensive in the UK:

  1. Location obviously impacts the cost of childcare.  Areas such as London are a lot more expensive than in other parts of the country, primarily due to high rent.
  2. VAT. What hasn’t been discussed is the fact that any VAT cost associated with a Nursery cannot be claimed back.  I am lucky that at Third Door (Workhub & Nursery), we have a Workhub where parents can work and therefore is not classed as ‘Education’. This means the business can claim back a portion of VAT on rent, electricity, phone, cleaning etc. However, anything that is solely for the Nursery such as equipment, consumables and training cannot be claimed back although the business pays the VAT.
  3. Business Rates. Business Rates are expensive and to date, as a small Nursery provider, I have had no outside help at all to help with any costs especially to ease the cost of business rates
  4. Strictness of childcare ratio’s. This is what the current news story is all about and I feel that whilst the ratio’s should not change especially to prevent accidents and incidents, there should be some relaxation of the law. For example, if a setting/Nursery room is currently over ratio by just one child, an extra member of staff needs to be brought in which adds to costs. If this aspect was relaxed, it would save money to the business.
  5. Training.  All staff need to attend key training to help manage a Nursery and provide excellent quality in provision. This training covers Childcare safeguarding, food hygiene, first aid and fire safety. Perhaps this is where the Government can help and offer a grant to train staff in all mandatory training courses. At the moment, this training is a business cost.
  6. Supplies. Every month we spend a considerable amount of money on regular supplies such as art and craft, messy play, cleaning products, paper towels, tissues, gloves and aprons. This cost builds up, as for example, a different set of gloves and apron are used every time one nappy is changed.
  7. Tax benefits. At present, employed parents only receive childcare vouchers whilst self-employed parents do not. Childcare should be a business expense that can be claimed back to help working parents. Third Door (Workhub & Nursery) has a solution in that it can split invoices to those customers who use both our Nursery and Workhub. The customer can claim the Workhub element back as a business expense making their childcare costs cheaper than those customers who are paying for only our Nursery.

Therefore costs such as staff salaries, rent, business rates, consumables, training all amount up, meaning nurseries have to cover their costs before they make any money. I do not think that allowing more children to be looked after by one adult is necessarily going to bring costs down by itself without taking the above factors also into account.

Additionally, there is only one solution at the moment in term of Childcare vouchers which actually helps parents. If the Government helped Nursery providers, especially the smaller ones with some kind of funding, and allow parents to claim childcare as a business, childcare costs will be lower.

Third Door (Workhub & Nursery) has come up with a solution in that it offers our customers a flexible Nursery. We operate the same as any other Ofsted nursery in terms of EYFS, quality, care and consistency, however, parents are able to chose the days and sessions around their needs, and downgrade their package if on holiday. This flexibility means that parents are not spending money on childcare when on holiday or even when their child is sick for a long period of time.  This helps save costs for the customer as they know they are paying for childcare only when they need it, and if they are on our ‘combined’ package of both Workhub & Nursery, their childcare costs are even cheaper.

If the proposed ratio’s are implemented in September this year, as a nursery owner, I am inclined not to move to the 1 to 6 ratio for two to three years old’s in Third Door (Workhub & Nursery) but stick to providing a 1 to 4 ratio for all under 3′s and monitor the impact on the nursery, children and staff.

2 Responses to Will proposed ratio’s lower childcare costs?

  1. By Victoria, January 30, 2013 at 2:32 pm

    A well put argument that does indeed raise the question as to why other factors of nursery costs are not being looked at.

  2. By Karen, February 5, 2013 at 1:22 pm

    I agree in principal that changing the ratios will not reduce chidcare costs. Overheads will remain constant annd allowing one more child per member of staff will not have any great impact. As mentioned above, there is no flexibility with holidays either, we have to pay for 51 weeks of the year whether my child is in nursery or not, so holiday breaks would also be welcome.

    Furthermore, as a parent with a small child in nursery I would be extremely concerned about the level of care and attention my little one was receiving should the ratios be changed. What needs to change is the help and tax breaks given to parents?

    Parents have to find a balance between going to work and spending quality time with your child. The difficulty is balancing the books. You take a pay cut and reduce hours so you can spend time with your child, but then you have the childcare costs on top. My own personal situation means that I have lost 20% of my wage due to reduced hours and then I lose another 20% in the childcare costs.

    When you are a family with financial commitments and costs and a certain standard of living, it is extremely difficult to manage. We use the voucher system but it just doesn’t go far enough. I have two young boys but we had to wait until the eldest was at school before we had our second child as there’s no way we could have afforded two lots of nursery fees.

    A lot of sacrifices have to be made in the household budget to try and cover the lost income, luxuries such as holidays etc. are just a no no. Some help would be appreciated and soon.

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