Ms Kelly Tolhurst MP
Minister for Schools and Childhood
Department for Education
20 Great Smith St
London
SW1P 3BT
14 October 2022
Dear Kelly Tolhurst MP,
Childcare and reducing labour shortages
Congratulations on your recent appointment as Minister for Schools and Childhood. On behalf of the Recruitment & Employment Confederation (REC), I wish you every success in your new role. The REC is the voice of the recruitment industry; we are here to drive standards and empower recruitment businesses to build better futures for jobseekers. Across the UK, our industry places someone into a new permanent role every 21 seconds, and just under one million people into temporary assignments every day, helping those who need or choose to work in a more flexible way.
As you will be aware, the UK is currently facing large labour shortages across the country. The REC recently published a report, Overcoming Shortages: Creating a Sustainable Labour Market, setting out recommendations for government and business to address these shortages. We have also published our Manifesto for Growth to set out clear policy aims for the government to implement to boost economic growth.
Cost to families
One of the key principles in our manifesto is the need for improvements in childcare provision to allow those with caring responsibilities to work without fear over the quality or cost of childcare. Under the current system an hour of childcare at a nursery costs more to many parents or carers than they will earn by working for the same amount of time - making this a barrier to work. This is particularly true for those in low-paying work. Additionally, we are seeing an increase in economic inactivity for the over 50s. This generation is likely to have caring responsibilities for both grandchildren and elderly parents, encouraging them to leave the labour market. By reforming the childcare offering in the UK, we can reduce the burden of responsibilities on older workers allowing them to return to or stay in work to help overcome some of the labour shortages in the UK.
Cost to providers
The lack of provision is the other half of the problem. Even for families who can afford childcare costs, there isn’t enough access to nurseries or other childcare, due to the low number of providers available in some areas. Running a nursery is expensive, costing up to £7.69 per child per day. However, government funding for nursery operators is only £4 per child per day, leaving a £3.69 shortfall to be made up. Even taking into account the fees that are charged to parents, many childcare providers are unable to afford to operate under the current funding system.
Addressing the issues
There are things that can be done to address these issues. The REC is calling on the government to launch a full review into the current childcare system to review the current shortcomings of the system. A review of this nature will help to ensure that we can have a sustainable and accessible childcare system in the future.
In the short-term, the government needs to take action on increasing the funding for the current system. In terms of funding for families, we recommend the government reviews the existing tax-free childcare system. As you will know, under the current rules, the government will provide £2 of funding for every £8 a parent or carer spends. This contribution should be doubled to £4 to provide greater support, particularly given the current cost of living crisis.
These kinds of changes are aimed at freeing up more people be in work at a time when the labour market is incredibly tight. This will add to UK growth and productivity. Our report shows that if changes aren’t made to address labour shortages, we could see a 1.2% fall in expected GDP and productivity by 2027 – costing the economy anywhere between £30 billion and £39 billion every year. The government needs to take swift and decisive action on these to make a difference now.
The REC would be happy to have a meeting with you to discuss this issue further, Jamie Keen (jamie.keen@rec.uk.com) in my office will be able to arrange at your convenience.
Yours sincerely,
Kate Shoesmith
Deputy CEO
Recruitment & Employment Confederation