During the Conservative leadership election campaign, Liz Truss proposed an extension of the present transferable tax allowance, in order to help family members who needed to care for a relative.
It wasn’t clear how the transfer might practicably be extended to cohabiting rather than married couples, but the then leadership candidate was clearly thinking hard about how a Truss-led Government could better help families.
And over the weekend, it was reported that she and Kilt Malthouse are considering plans to give childcare payments presently made to nurseries on parents’ behalf to those parents themselves.
Again, it isn’t clear how the proposal would work, and it is “at an early stage”. But the Prime Minister seems to be trying to join up the dots – to understand how family support works now, especially for children, and then turn it into a coherent whole.
The last Conservative manifesto promised “a new £1 billion fund to help create more high quality, affordable childcare, including before and after school and during the school holidays”.
This suggested action on the supply rather than the demand side and, to develop workable policies, Truss will need to get to grips with what has been happening on both.
On the supply side, successive governments have regulated in such a way as to disadvantage less formal suppliers, such as relatives and childminders, and advantage more formal ones, such as day nurseries and nursery schools.
And on the demand side, child benefit, the successor to child tax allowances, has been restricted to two children and is capped at £60,000. However, tax-free childcare is available if a parent earns under £100,000.
The Prime Minister knows all about the supply side restrictions, having previously tried to loosen some of them. When an Education Minister, she clashed with Nick Clegg, then Deputy Prime Minister, over staff-to-child ratios in nurseries.
Some argue that families policy in Britain should also be a natalism policy – that British governments, like some other European countries, should be using tax and regulation to try to boost the domestic birth rate.
For to cut a long story very short, countries with low birthrates must eventually choose between their people working longer, importing more labour…or getting poorer.
But it isn’t necessary to be pro-natalism to be pro-family, and Truss could radically simplify the system by acting on both the supply and demand side.
Supply-wise, she would act cross-government to simplify childminder registration, ease staffing ratios and relax planning restraints.
Demand-wise, she would streamline the funding – either restoring child tax allowances, with commensurate provision for those who don’t pay tax; or re-badging child benefit as a child allowance, and rolling into it childcare payments made to nurseries.
The latter course would be simpler and better, and open up the prospect of more childcare choice for parents between formal and informal options.
If they wanted to use the money to care for their children at home, they would better be able to do so. If they wanted to pay a friend, neighbour or their own relatives instead, the option would be open.
Childminders would return or enter as restrictions were loosened; new competition would enter the nurseries market. If this sounds a bit too good to be true, then perhaps it is – at least for the moment, for four main reasons.
First, many parents, if given more money for childcare directly, are likely to spend at least some of it instead on food, energy bills (despite the Governments’ help package) rents and mortgage payments – at least for the moment.
Second, it’s far from clear where any extra taxpayers’ money would come from. A ferocious public spending review is heading our way soon.
Third, giving people greater choice in childcare implies fewer mothers in the labour market, at least when their children are young. So while the policy might be friendly to families it would be an “enemy of growth”.
Finally, cutting red tape may look easy on paper but it can be harder in practice. What regulations are you proposing to remove, the opponents of change will ask?
Child safety checks? Health and safety in new childcare premises? As for child-staff ratios, just wait until the media gets going when, heaven help us, a child meets an accident post-reform (whether connected to the changes or not).
Potential losers from reform in the formal day care sector will resist any such proposals especially fiercely, as will those who want more mothers in the labour market and a bigger childcare role for the state.
As for more child benefit used to pay for informal childcare, I can already see the same papers that call for “tax breaks for families now” complaining about the “scandal of taxpayers’ money used to subsidise relatives”.
This points to the biggest political problem of all that the Prime Minister may face in reforming families’ policy: the cry of “why should I pay for your children?
This way of viewing the next generation as though they were consumer durables is peculiarly British, and viewed with bewilderment by some of our European neighbours.
Those on the right who think that we can learn from them on healthcare, citing continential social insurance models, might also ask if we could do likewise on families’ policy.
For there is more to it than the supply and demand factors I cite above. Strong families are a social as well as an economic good, and Britain has been ranked as one of the least family-friendly countries in Europe in recent years.
The fact is that change would never happen were unanimity a condition of it. There will always be opposition to some aspect of it among some people – including Conservative MPs.
The trick for the party managers is to work out how many of them would mobilise over which particular issues. Their task will be more difficult after the mini-Budget fiasco and amidst current market uncertainties – and bleak polls.
My sense is that supply side childcare reform would meet some opposition but that demand side change would get an easier ride, assuming the Treasury is in a position to help fund it and willing to swing in behind it.
Almost certainly, Truss will have to settle for smaller-scale change than some of the briefing suggests – such as, for example, raising the proportion of childcare costs that can be claimed back by those on Universal Credit.
(The Government points out that those claiming, or their partners if they live with them, “will usually need to either be working – it does not matter how many hours you or your partner work – or have a job offer.
Truss’s instincts on families policy are in the right place. Now she needs a package for families and carers. I’ve left the biggest challenge of all until last – housing.
More than half of women in Britain are now childless at the age of 30. The lack of homes for younger people is an important element of the reason why.
The housing theory of everything turns out to be central to the Prime Minister’s aspirations for happier families as well as for higher growth.