Cutting red tape could save UK families £9,000 a year, study says

Cutting red tape cut save families up to £9,000 a year, research shows. Photo: Getty
Cutting red tape could save families up to £9,000 a year, research shows. Photo: Getty

Britain's next prime minister should should cut the red tape for energy, childcare and housing as they are costing stretched families £9,000 ($10,900) extra a year, a think tank has warned.

A new report from the Institute of Economic Affairs (IEA) argues that cash handouts to help Britons deal with spiralling costs "act as mere sticking plasters" and drive up inflation.

"The cost of living crisis is an ideal opportunity to reconsider the underlying policies that are driving up costs for families," Matthew Lesh, IEA head of public policy said.

"Britain needs a serious supply-side reform agenda that would significantly boost quality of life for millions, make life easier for entrepreneurs and unlock our stalled productivity."

It said UK childcare costs, which have risen to one of the highest levels in the developed world, could be cut by around 40%, or over £300 per child per month, by relaxing staff-to-children ratios and other rules.

According to the IEA, increased regulation in the childcare sector has left parents an estimated £4,000 poorer, urging the government to focus on deregulating the industry to maximise savings.

Lesh added: "Parents should be freer to decide what sort of childcare is appropriate for their children, whether in a domestic or formal setting, the number of carers for each child and the appropriate educational qualifications."

However the Institute for Public Policy Research (IPPR) criticised the IEA’s suggestions.

"At a time when people’s incomes are being squeezed, stripping protection from their homes, children and our energy system would be alarming and dangerous," said Joshua Emden, a senior research fellow at IPPR.

Read more: Rishi Sunak vows to cut tax on household energy bills

Rachel Statham, an associate director at IPPR, added: "The notion that our childcare crisis can be resolved by slashing staff-to-child ratios – a key marker of quality in the sector – is a fundamental misdiagnosis of the problem."

Earlier this month Boris Johnson announced a package of measures to reduce the cost of child care, including increasing the number of toddlers each adult can look after in nurseries.

Ministers estimated the reforms would save parents £40 a week, but campaigners have warned relaxing the rules could endanger young and vulnerable children.

It proposed deregulation of the energy and fuel sector and tax cuts, including removing VAT on fuel, could reduce transport costs for the average consumer by £200-£250 a year, and energy bills by around £240.

But that would require backtracking on net zero and fracking pledges and using more fossil fuels.

Ofgem's energy price cap is expected rise to more than £3,200 in October, when every household will receive an automatic £400 discount on their energy bill in a bid to combat soaring costs.

Read more: First time buyer prices and rents jump as mortgage costs up 22%

The think tank also warned excessive planning rules had helped make Britain an "exceptionally expensive" place to rent.

Analysis from property website Rightmove found monthly rental payments have risen at the fastest rate ever recorded, up by 17% since 2020, compared to 5% in the two years before that.

Easing land use planning restrictions could bring down private sector rents in England by 35%, saving the average household £250 per month, it claims.

Watch: How does inflation affect interest rates?