Budget: Parents facing 20 per cent childcare fee hike after NIC raid

Experts are suggesting parents will face up to a 20 per cent increase in fees to cover rising costs at British nurseries.

The sector warned on Friday there will be a “disproportionately adverse” impact on women who want to work and children’ s health. 

This comes after the government’s Autumn Budget included an increase in Employers’ National Insurance contributions (NICs) and minimum wage. 

Rachel Reeves raised the rate of NICs levelled against employers, which will go up from 13.8 per cent to 15 per cent. The chancellor also lowered the salary threshold at which it has to be paid, from £9,100 to £5,000.

As a result, many charities, small businesses and childcare facilities have complained they will be hit hard, and some may even have to close or lay off staff as a result. 

Earlier in November, the UK’s indoor play industry warned it faced a “severe financial crisis” from the Budget. The Association of Indoor Play, which represents 1,100 firms including laser parks, leisure centres and “baby sensory” companies, said Reeves’s fiscal plans threatened “the very core of our industry” and placed many indoor play centres “at risk.”

The trade body blamed rising costs associated with increasing minimum wages, higher National Insurance payouts and reduced business rates relief.

‘A disproportionately adverse effect on women’

Warnings were this week issued by the audit, tax and business advisory firm, Blick Rothenberg, which said the changes would dramatically increase childcare costs. 

The firm said that in April next year when the changes come in, parents with young children and their employers will face “significant childcare pressures”.

Ele Theochari, a partner at the firm, said: “The Government’s own figures show that over 70 per cent of parents with children between 0-4 years old are using some form of childcare on a regular basis.

“With over 75 per cent of all nursery costs relating to staff and strict legal mandates in place that dictate the staff-to-child ratio, there is little nurseries will be able to do to mitigate additional staffing related costs.”

As quoted by the Early Year’s Alliance, there are suggestions that parents will “face up to a 20 per cent increase in fees to cover nurseries rising costs. As over 35 per cent of parents already find it difficult to meet existing childcare costs, there is the real risk of a childcare crisis causing wide-reaching consequences for employers and the UK economy.”

Gordon Forster, the owner of Safari Play Venues and Jungle Tots Day Nursery told City AM: “Disaster is looming for small businesses from the budget as the Government taxes businesses for employing people.  You tax things you want to reduce like smoking and drinking alcohol. Hence what do they think will happen when you tax employing people?

“It is also going to have a disproportionately adverse effect on women who want to work and well as kids’ health.” 

“We invite the Chancellor to come and actually visit a small business like ours who looks after families and kids’ health first hand and see how important we are and how much hard work it is.”

Theochari added: “Childcare fees can often exceed mortgage or rental costs for a family, and many working parents find that there is already little or nothing left in their disposable finances after tax, NIC and existing childcare costs have been accounted for.”

“This will increasingly lead to parents leaving the workforce as the cost of working and sending a child to full or part-time childcare becomes financially un-viable.”

“Taking any individual out of the workforce for up to 4 years will lead to a drop in economic productivity and lower tax receipts overall. This will disproportionately affect women as the primary caretakers of children.”