A think tank has called for a radical overhaul of the childcare system as research finds that the cost of childcare is forcing new parents to pay to return to work.

A new report by the IPPR think tank has revealed that childcare costs and the universal credit taper alongside income taxes, can create an ‘effective marginal tax rate’ of over 100%.

In a two-parent family with a one-year-old, a low-paid second earner whose partner is on minimum wage could face ‘effective marginal rates’ as high as 130%, according to IPPR’s research. This means the household can become substantially worse off financially from increasing their working hours.

The report also found that the ‘complex and incomplete patchwork’ of childcare entitlements, benefits and allowances for working parents in England leaves many struggling in the face of spiralling childcare bills.

The think tank called for a new ‘childcare guarantee’, which would include 15 hours of free childcare for 48 weeks a year for all pre-school age children.

The guarantee would also include the extension of the core free hours offer to 30 hours per week for all three and four-year olds throughout the year, including school holidays.

Rachel Statham, IPPR associate director and lead author of the report, said: ‘Parents and carers are facing a complex, patchy and costly set of childcare offers. As the cost of living crisis pushes more families into financial stress, rising childcare costs are increasingly unaffordable - and risk pushing parents of young children out of the workforce altogether.

‘We urgently need reform to simplify and expand childcare provision. It’s time for a childcare guarantee to lower barriers for parents getting back into or getting on in work, to reduce costs for families with children, and to ensure every child has access to high quality early years’ education.’