Finance4U

Hunt Is Right — £100k Isn’t Enough For Working Parents


Chancellor Jeremy Hunt is in hot water after saying that earning £100,000 a year “doesn’t go as far as you might think”. Against the backdrop of a cost of living crisis, his comments have proved divisive. But specifically for working parents, he might just have a point.

This week, research from The Co-operative Bank revealed that parents in London (the most expensive area for childcare) now spend an average of £1,781 per month on nursery or childminder fees. On a £100k salary, that represents 31% of earnings after tax.

Average pay has risen by record amounts in the past 12 months. But as The Co-operative data shows, mums and dads at every stage in the UK pay scale are still struggling to afford ever more extortionate childcare fees.

What would you do with £100k?

Hunt reiterated his comments in an appearance on Sky News last Sunday. “What sounds like a large salary – when you have house prices averaging £670,000 in my area and you’ve got a mortgage and childcare costs – it doesn’t go as far as you might think,” he said.

It’s easy to roll eyes at anyone complaining about earning £100k a year. Classed as being in the top 1% of earners in the UK, this group of workers would make around 186% more than the average yearly income in 2024 of £34,963.

However, the UK’s Income Tax brackets means that earnings between £100,000 and £125,140 pay a tax rate of 60% on some of their income, known as the ‘60% tax trap’.

That means higher earners (who are most likely to be based in London) end up putting a bigger chunk of their monthly post-tax income towards nursery fees than workers in, say, the city with the cheapest childcare: Liverpool.

Scousers pay, on average, £800 per month for childcare. That’s £981 less than the capital and represents a massive 123% difference in cost.

Still, according to The Co-operative, average total net income for a couple in Liverpool is £50,351. With a crippling 19.1% of a couple’s monthly net income still required to cover childcare, few parents in this area would describe their childcare as “affordable”.

Indeed, regional analysis by The Co-operative finds employees in every area are affected by the crisis. Derby in the Midlands is the second most expensive city in the UK for childcare, while parents in Southend-on-Sea put the largest proportion (31%) of monthly pay on childcare.

Childcare crisis

Accessing childcare is becoming increasingly arduous for Brits, with the UK now ranked as the third most expensive country for childcare by the Organisation for Economic Co-operation and Development( OECD).

The fallout is devastating for the labour market. High costs mean it can make more financial sense for parents to leave the workforce, essentially pricing out employees who choose to start a family.

Women’s careers are being most affected. In a study by Ipsos and Business in the Community (BITC), 19% of women admitted to leaving a job because they had found it too hard to balance work and care.

Employers are aware of the impact this is having on the workforce, but they can hardly raise staff wages to cover daycare fees — the hit to payroll would be too great.

Entrepreneurs are also being penalised on both ends. Given that business owners take their income from their company profits, the amount they spend on childcare impacts their own pockets and their business bank accounts.

What is the government doing about it?

In January, new laws came into effect which mean that households earning less than £100k per year now qualify for 15 hours of free childcare for their two-year-olds. From September, that will be extended to those with nine-month-olds.

Given this barely takes care of two working days a week, the announcement sent more ripples than shockwaves. Women might switch to part-time work over unemployment, but that would still leave a sizable gap between household income and spend.

And, while Hunt has acknowledged that the issue is untenable for both working parents and the wider labour market, any talk of tangible policy was kept vague and only addressed those affected by the tax trap.

“We weren’t able to afford to fund childcare for people on the higher salaries but I was simply saying that’s something I’d love to look at in the next parliament,” he told Sky News.

In 2025, plans are to extend the policy to cover 30 hours of free childcare support per week for toddlers under three. But that’s only if the Tories remain in power (a big “if” that few business owners are wishing for).

It may seem ridiculous to the average earner, but that the top percentage of workers can’t afford childcare is not just whinging; it’s a truism that shows how dire the situation is.

Fixing the solution for all workers, at any income bracket, will require a revolutionary response that means modern working parents aren’t penalised for wanting both a career and a family.

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