Small businesses call on Hunt to tackle ‘childcare crisis’ as economic impact grows

One of the UK’s leading business groups has called on Chancellor Jeremy Hunt to immediately tackle the “childcare crisis” in the upcoming budget as the high cost of childcare is increasingly forcing parents out of the workforce.

Childcare providers face insufficient funding, the Federation of Small Businesses (FSB) told City PM, and are either having to shut down or pass on costs to parents.

The group said the economic impact of the childcare crisis is “far-reaching” as it becomes impossible for some parents to work, forcing them to choose between childcare and their careers.

Although the government currently tries to fund 30 hours of free childcare for 38 weeks of the year, the FSB said there is a funding shortfall which providers have to pass onto parents.

“Childcare businesses are in dire straits,” FSB policy chair Tina McKenzie said. “This means parents are faced with an ultimatum: to leave the workforce altogether or take on the extra, crippling costs with less and less choice when providers are forced to close.”

The FSB also asked the government to expand the free childcare entitlement to 45 weeks.

Labour’s shadow education secretary Bridget Phillipson told City PM it was time for the government to start taking childcare seriously.

“The Chancellor has a real opportunity to take working families and their children seriously at the Budget by scrapping non-dom status to fund breakfast clubs in every primary school for every child, as Labour will do.

“Proper childcare reform needs to support children, parents, and families to succeed.”

Childcare has been growing in prominence as the Budget approaches, with calls piling onto Jeremy Hunt to better fund the sector.

At Prime Minister Questions on Wednesday, Labour leader Keir Starmer said that if Prime Minister Rishi Sunak scrapped the policy of allowing individuals to have a non-domiciled tax status, “he could start to fund better childcare, put money back in people’s pockets and get parents back to work”.

But Sunak hit back, claiming Starmer had already told voters “five different things” he would spend the money raised from the change on, adding: “It is the same old Labour Party, always running out of other people’s money.”

The FSB’s submission follows the Confederation of British Industry (CBI) in calling on the government to get squeezed parents back into work. Director general Tony Danker said the UK needs a “childcare revolution”.

A Department for Education (DfE) spokesperson said: “We recognise that families and early years providers across the country are facing financial pressures.

“That’s why we have spent more than £20bn over the past five years to support families with the cost of childcare.

“The number of places available in England has also remained broadly stable since 2015, with hundreds of thousands of parents benefiting from this.”