The Family and Childcare Trust Director of Policy Ellen Broome has blogged for the Huffington Post on the tax-free childcare scheme. Ellen writes:

The tax-free childcare has been widely welcomed but there are important questions about the effect the scheme will have on childcare prices. If the scheme contributes substantially to price inflation in childcare, not only will its value will be eroded over time, but it could reduce access for those families least able to afford childcare.

Staff wages are by far the greatest cost for childcare providers, which can in turn only charge prices that are affordable to parents bearing in mind typical wages. In the long run, childcare prices should therefore rise broadly in line with wage trends. Despite this, in the last five years the average price of childcare for under-2s went up 27% - significantly outpacing both the rate of inflation and wage increases. A number of factors have contributed to this trend:

• Wages in the childcare sector have historically been very low and are being pushed up faster than average wages by rising quality standards and professionalisation in the early years workforce. As wages for childcare staff remain low compared to other skilled workers, this trend is unlikely to have run its course.

• The childcare 'market' has low profit margins and high barriers to entry, whilst the information available to parents on local provision is often weak. If as a result local markets do not respond effectively to changes in parental demand, price inflation may be the result.

• Many providers have been squeezed by other costs, such as the increased price of energy and business rates that are high for small businesses.

Read the full blog post here.

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