The Cost of a Child in London

What you need to know:

  • Universal Credit provides only enough childcare support to enable London parents to work about half the time. 
  • Even part-time jobs won’t pay for some if limits on childcare support stay frozen.
  • London families can pay over twice as much for childcare for young children as families outside London.

This report from Child Poverty Action Group (CPAG) written by Donald Hirsch, Centre for Research in Social Policy at Loughborough University and funded by Trust For London explores the costs which families face raising children in London.

Key findings

  • London parents can face much higher costs than parents elsewhere in paying for a family home and for childcare. However, children cost less to bring up in London when it comes to transport and there is not a significant difference for many other costs.
  • Housing costs in London can hugely increase living costs associated with having children. However, these vary greatly, and depend particularly on whether families can access social housing. A single person renting privately can face additional costs of over £100 a week to accommodate a child, compared to £20 outside London.
  • State support for housing costs has become less adequate with the erosion of local housing allowance (LHA) levels relative to rents. This has to some extent been rectified during the pandemic, but these improved entitlements are limited by the benefit cap, which now hits almost all London families in private accommodation at the permitted LHA level.
  • Childcare costs are on average over 10% higher in Outer London and over 30% higher in Inner London than in Britain as a whole. In Inner London, childcare costs over 50% more than in parts of the country where childcare costs are lowest. However, this understates the difference in the cost to families, since families receiving universal credit (UC) get 85 per cent of childcare costs covered, up to a cash limit. As the cost of full-time childcare in London generally exceeds this limit, the proportion that families have to pay is much higher than elsewhere. This makes the cost to the family over twice as high as outside London for children too young to benefit from the early childhood (30 hours) entitlement.
  • Families in London do not need cars, and children currently travel free on London buses and on tubes if they are under 12. This means that, unlike in other parts of the country, having a young child does not generally bring additional transport costs. However, overall transport costs can nevertheless be higher than elsewhere for couple families in London, since the minimum cost of public transport used by adults is much higher than in the rest of the UK. For a lone parent, on the other hand, the cost of just one adult travelcard is not enough to offset the cost of a car outside London, so travel costs in London are generally lower. It is important to retain London travel concessions for children and young people, which have recently been under threat.

Key recommendations

  • As an interim measure, Universal Credit should be reformed so that it covers 100% rather than 85% of childcare costs and payment must be provided upfront rather than in arrears.
  • The cap on childcare costs must be reviewed and updated regularly to reflect any increases in childcare costs, including with reference to high-cost areas like London.