Despite government schemes offering free childcare hours, many UK families, especially those on low incomes, continue to face unaffordable childcare costs. A new study by the Institute for Policy Research (IPR) at the University of Bath, funded by abrdn Financial Fairness Trust, highlights how current support systems are failing families.
Based on interviews with low-income parents on Universal Credit (UC), the study found that insufficient free hours, added provider fees, and a lack of after-school and limited holiday club options leave many families struggling to balance work and care. Among the report’s recommendations is allowing working parents on Universal Credit to reclaim 100 per cent of their childcare costs, rather than the current 85 per cent.
The researchers behind the study say it’s time for bold action to fix crippling childcare costs and make childcare work for families. Their recommendations:
Fully subsidise childcare for under-fives for working parents on UC to alleviate financial pressures and encourage them to work and earn more. This would have limited additional costs, as many families already qualify for free hours.
Expand free childcare support to include clubs not Ofsted-registered, such as sports or drama clubs, providing more flexible, affordable options for low-income working parents.
Build on family hubs to bring back a programme like Sure Start for disadvantaged families, helping parents balance work, care, and wellbeing.
Key Findings from the research
Insufficient Free Hours. Families need more hours than Government schemes provide. Providers often charge extra, for example, for meals. No free hours are available for after-school clubs.
Parents on UC must pay childcare costs upfront and wait weeks, sometimes months for reimbursement. Even then, the maximum amount of childcare costs parents can reclaim is only up to 85 per cent so does not cover their full childcare costs.
Earnings thresholds for support mean that some families who don’t earn enough, or earn too much, miss out on free childcare hours. Children with special educational needs and disabilities face significant barriers due to limited specialist childcare providers.
Dr Marsha Wood, a Research Associate at the IPR, said:
Low-income families are juggling so much—work, care, and often childcare costs. Childcare should ease their burden, not add to it. These changes could transform life for parents while giving children a better start.
Dr Rita Griffiths, a Research Fellow at the IPR, said:
Current childcare policies are forcing families to make impossible choices between work and care. These reforms are essential to prevent families from being trapped by high childcare costs and bureaucracy while ensuring every child has access to quality early years education. An increase in parental employment is a 'win win' for all parties concerned – parents, children and the public purse.
This IPR research was funded by abrdn Financial Fairness Trust. It follows on from a wider qualitative longitudinal research study exploring the experience of working claimants on UC published in April 2024.
The IPR have also published a policy brief highlighting the key findings of the report, with a series of recommendations for policy makers.