Soaring childcare costs leave many families 'better off by NOT working', according to new research

The annual cost of part-time nursery care for under-twos has risen at five times the rate of inflation in the past year

Less than half of councils in England have enough childcare to meet the needs of working parents, according to the report (Corbis)

Soaring costs of childcare, leaving low earning parents in some parts of Britain more than £50 a week worse off, mean that many families are better off not working, according to the Family and Childcare Trust.

Part-time nursery places for children under two are a third more expensive than they were five years ago, with parents paying £1,533 more than they did in 2010, according to new research released today.

Based on responses from local authorities throughout Britain, the Family and Childcare Trust’s annual childcare costs survey reveals that the annual cost of part-time nursery care for children less than two years old has broken through the £6,000 barrier for the first time.

The national average now stands at £115.45 a week – a rise of five per cent in the past year – five times the rate of inflation.

Government funding is failing to keep pace with the rising cost of childcare, partially driven by the increase in working mothers, according to the report.

Less than half of councils in England have enough childcare to meet the needs of working parents, it adds.

Some parents on the lowest incomes may find that the maximum amount of help they can claim for childcare under working tax credits will not cover part-time childcare costs, and could leave them out of pocket by at least £52.50 a week.

“The reality is that for too many families it simply does not pay to work,” warns the report.

There are “growing gaps in provision” and “we are concerned that the problem of insufficient childcare provision is getting worse not better,” it states.

Seeking to capitalise on what will be a key issue at the general election, Liberal Democrat leader Nick Clegg will today pledge to give working parents of children between nine months and two years 15 hours of free early education a week, saving them £2,670 a year.

But the crisis is such that an independent review of childcare is needed, according to the report. Parents should have the same legal right to early education and childcare as they do for a school place, it adds.

Stephen Dunmore, chief executive, Family and Childcare Trust, said: “In spite of several positive initiatives, including more funding for free early education, the childcare system in Britain needs radical reform.” He added: “Britain needs a simple system that promotes quality, supports parents and delivers for children.”

In a statement, a Department for Education spokesperson said: "We understand that the cost of childcare can be an issue for many parents, but this report only relates to the prices parents pay after they receive the Government's offer of 15 hours of free childcare.” Funding for childcare has risen from £2bn a year to around £3bn, they added.

Childcare provision: The British model

Parents in Britain pay a higher proportion of their income on childcare than those in most other developed countries, according to the Family and Childcare Trust.

While all children in the UK are entitled to some free early education, access to affordable additional hours of care is left up to market forces.

In contrast, parents in France have a legal entitlement to childcare and the prices are dictated by the Government.

And Germany recently implemented a legal entitlement to daycare for all children up to the age of six.

The approach taken in Britain, with its complex mix of tax credits and state funding, contrasts with that taken by many other developed countries where all or the majority of public subsidies go to childcare providers.

Within Britain itself, differences in provision remain, with fewer private and voluntary sector nurseries per head of population in Wales and Scotland also having more state nursery provision than in England.

Jonathan Owen