Our fortnightly series continues.
Families first: childcare
Children are a gift, but they’re not free. Estimates of the total cost of raising each child from birth to adulthood vary, but the Child Poverty Action Group puts the figure at £158,000 (for a couple), while The Times quotes a figure of £223,000.
And those are just the direct financial costs. There are many other sacrifices. If we want to reverse the alarming decline in birth rates then we need to reduce the burden on parents.
The lessons of the Baby Boom
In the mid-twentieth century, three developments came together to do just that. Most important was the medical progress that reduced maternal mortality. Then there was the growing availability of labour saving devices — especially the washing machine — which greatly reduced the drudgery of running a household. The third factor was the growing affordability of home ownership.
The result was the Baby Boom, which was much more than a rebound after the Second World War. Rather, what happened was a sustained increase in the number of births per woman — the most significant example in modern history.
Reducing the demand for government depends on restoring the demographic balance between young and old. Therefore we too must lighten the burdens of parenthood. In the previous chapter, we made the case for lower taxation on families and in the the next we’ll argue for radical action on housing costs. In this chapter we turn to another heavy imposition on parents: the cost of childcare.
Why is childcare so expensive in Britain?
Matthew Lesh of the Institute of Economic Affairs calculates that the “annual cost of full-time childcare (50 hours per week) for an under-two-year-old has risen by 171 per cent since 2000, from £5,148 to £13,939 in 2021.” This means that “the cost of putting two children into full-time childcare is almost the same as the median household income in the UK.”
In his Budget statement earlier this year, Jeremy Hunt admitted that “we have one of the most expensive systems in the world” adding that “almost half of non-working mothers said they would prefer to work if they could arrange suitable childcare.”
How, then, does he intend to help them?
The Government’s flawed approach
The main thrust of Government policy is a further expansion of so-called free childcare. In 2010, the Government introduced 15 hours of it for the three and four-year-old children of working parents. This was increased to 30 hours in 2017. What Jeremy Hunt announced in this year’s Budget was the phased introduction of 30 hours for one and two-year-olds too.
It is a consistent approach, but also one that contains serious flaws – beginning right at the start with the terms it uses.
Free childcare isn’t really free
For just as the NHS provides care free at the point of use, but nonetheless isn’t a free service (at least, if you’re a taxpayer, because your taxes are helping to fund it), so “free” childcare isn’t really a free service either.
This is because while parents are able to access some hours of childcare for some children at the point of use, the taxpayer, once again, must help to finance the providers (through Universal Credit, tax credits, childcare vouchers or tax-free provision)
And just as NHS staff complain that the service is underfunded, so too do some childcare providers – arguing that they cannot increase their capacity due to costs, staffing levels and space.
Hundreds made exactly that case in the wake of the Budget announcement. The consequence is frustration for Ministers, providers, carers, parents and, perhaps ultimately, children alike.
An alliance of convenience between the Treasury and formal providers…
The frustration is followed, inevitably, by calls for more money – and pressure to expand free childcare, as it is called, for working parents still further. This suits two central players in childcare provision.
First, the Treasury.
For though childcare is officially the responsibility of the Department for Education, it was clear from the Budget statement that the Treasury is taking the big decisions.
Hence the obvious order of priorities — which is not family formation or the good of children or equality between the sexes, but maximising supply to the workforce.
That much was made plain when the Chancellor described Britain’s reward for solving its childcare problems: “if we matched Dutch levels of [female] participation [in the workforce], there would be more than one million additional women working.”
Second, it suits formal childcare providers.
If formal care can be defined as regulated care away from the child’s home, it isn’t hard to see why formal providers are keen on the Government’s “free” childcare offer.
For after all, it can’t be used to fund informal providers – such as grandparents, other relatives, friends – who are willing to offer help outside formal settings.
Furthermore, some formal providers have been doing better than others. For example, the number of childminders has fallen in recent years, and some of those leaving have cited pay, workloads, admin, Ofsted inspections, insufficient funding of the “free” childcare offer and rising costs as reasons.
…As Conservative-led governments have followed Gordon Brown’s model
The Treasury and formal providers may disagree about the amount of money put into this system, but they tend to agree about the design into which the money goes – one that those informal providers – and parents who want to care for their children at home themselves – can’t access.
It’s worth remembering that that this alliance between the Treasury, some employers and formal providers was originally put together by Gordon Brown (who pledged a “free” nursery place for every two-year-old over ten years in 2008).
The Coalition followed Brown’s model, while also removing child benefit (which is paid to all parents, whether they work in the labour market or not) from higher earners.
Wouldn’t parents prefer a system based on choice?
But while Britain, under governments of both main parties, has adopted a policy model that prioritises certain types of childcare for certain types of family, comparable European countries (such as France and Germany) have taken a different approach – and one that is fairer between them.
Here, demand-side childcare payments, as we’ve seen, are paid to certain parents under certain conditions. Elsewhere, they tend to be available to parents of all kinds. Furthermore, parents tend to be taxed not as individuals, but on the assumption that they share their incomes (as is usually the case).
Were that example followed here, our system would be fairer between “informal” childcare – namely, the care provided by parents, grandparents and the wider support of extended family, friends and neighbours – and formal childcare, as well as between two earner and one earner couples.
Getting our priorities right
So substantial changes are required to put families first.
First of all, support for family formation and the wellbeing of children in their earliest years must be the top priority for government — not the needs of employers.
That said, these distinct objectives need not be in conflict — at least not over the long-term. If policymakers have the foresight to plan for the next few decades, and not just the next few years, then the greatest threat to the labour market is the looming disaster of a collapsing birth rate.
The “penny wise, pound foolish” mindset of the Treasury is unsuited to such considerations, which is why its control over childcare policy must end.
However, if leadership on this agenda is to be exercised from elsewhere in Whitehall, then we need to restore ministerial continuity. Absurdly, there have been seven children’s ministers in the course of the current parliament — and nine since the long incumbency of Edward Timpson ended in 2017.
Nick Gibb’s success in driving up educational standards as the schools minister is testament to what can be achieved when a dedicated appointee is given the time and authority to drive progress. The same is required for childcare.
A zero-based review of regulation
With a dedicated Children’s Minister in place, the first order of business must be to lead a review of childcare regulation.
This would be zero-based, meaning that every existing regulation would be abolished unless a convincing case can be made for its retention. As an additional test of necessity, the UK system should be set against its counterparts in comparable countries. Wherever an equivalent regulation is found to be less onerous (or indeed, non-existent), we would adopt the lighter standard, unless it can shown to have unacceptable consequences.
Finally, the harms prevented by retained regulation would have to be greater than the harms caused by the related increase in the cost of childcare.
Letting parents decide
A policy that puts families first should allow capable parents to decide what is best for their children. Unless there are safeguarding or other compelling reasons to deny parents control, the current system of formal childcare subsidies should be converted into something much simpler — such as child benefit or an additional personal tax allowance: we considered the options here last week, together with the future of parental leave and pay.
Some formal childcare providers, especially in the day nursery sector, will argue that outcomes for children are improved in formal settings. If so – and the evidence is contested – questions arise about the cost of high-quality provision, affordability (for parents and taxpayers) and, perhaps above all, to what degree, if at all, the state is entitled to restict or remove parental choice.
The role of schools
Any switch from targeted provision for working parents to broader support for all parents has implications the taxpayer.
It’s therefore unsurprising that the 2019 Conservative Manifesto concentrated more narrowly on the role of schools, pledging £1 billion “to fund more high-quality, affordable childcare places, including before and after- school and holiday provision”
This was a sensible place to start, given the concerns of many parents about childcare outside school hours, and it follows that Ministers should mull developing this offer as the next election approaches.
Having family and friends within easy reach
Access to informal childcare becomes a lot easier when family and friends live nearby.
Tomorrow, we will look at how planning reform can be used to prioritise new housing for first-time buyers and/or young families. One way to mobilise local support for new development is to recycle more of the profits of planning permission (i.e. land value uplift) into community facilities. These could include purpose-designed premises for childcare.
As expensive as childcare is, it is not biggest purchase a family makes. That, of course, is the roof over their heads – and so tomorrow we turn to housing.