15 September 2021

‘Free’ childcare is making everyone poorer

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Petitions are one of the bluntest instruments in politics. Two of the biggest petitions ever to appear on the UK Parliament website called for Britain to stay in the EU and Donald Trump to be banned from a State visit to the UK – both were demonstrable failures. Likewise unweighted surveys are a good way of finding out what the kind of people who respond to surveys think, but an inaccurate sample of public opinion.

But sometimes even these slightly feeble expressions of democracy can serve a useful purpose, and this week a parliamentary petition and a Mumsnet survey have drawn attention to the exorbitant costs of childcare.

On Monday The Guardian and the BBC reported that 97% of working parents say that childcare in the UK is too expensive and costs more than rent or mortgage for a third of families. YouGov’s Anthony Wells criticised the outlets for presenting the unweighted sample as a ‘major survey’, but the point the articles highlight is a fair one nonetheless. In fact, the UK has the third most expensive childcare system in the world, according to the OECD.

A full-time nursery place for a child under three costs around £13,700 a year – that’s more than a private primary school. It’s completely out of reach for many, and the result is often that one parent simply can’t afford to work – and that parent is almost invariably the mother. This is a penalty women are paying for motherhood and it’s perhaps the single biggest cause of gender inequality in this country. As I have written before, those who argue that it’s a mother’s choice to work less after starting a family should consider whether that choice is equally available to fathers.

Also on Monday, Parliament debated a petition demanding the Government commission an ‘independent review of childcare funding and affordability’, which had attracted over 100,000 signatures. Parents are right to feel strongly about this, but a toothless ‘independent review’ isn’t the answer. What we really need is more choice and less Government intervention in how we look after our children.

The current policy of funding up to 30 hours of care a week for children over three isn’t working. For a start, It’s not 30 hours per week and it’s not ‘free’. It’s actually 15 hours a week for all parents and a further 15 hour ‘extended entitlement’ with some caveats about earnings and hours worked. If you choose to use the entitlement for 30 hours a week it only covers 38 weeks. Few jobs allow you to take a quarter of the year off, and the average working week is over 35 hours long.

Despite being inadequate for anyone with a full-time job, this provision costs £6 billion a year. As with any (semi) universal entitlement, it’s a bad use of taxpayer money – effectively a hand-out to wealthier families. Subsidising childcare in this way has increased demand, but the Government pays below the market rate, leaving many providers struggling to cope. The National Day Nurseries Association says that 39% of nurseries are running at a loss, and that there is a shortfall of over £2,000 for every child on a funded 30 hours place. Regulations on everything from class size, to child-adult ratios and staff qualifications are also pushing up costs. To stay in business, many nurseries have increased fees for children who do not qualify for funded places and hiked up charges for extras like meals and nappies.

There’s little evidence that any of this is helping women stay in work or improving the life chances of very young children. In fact, the overall effect is thousands of nurseries in deprived areas closing, spiralling costs for fee-paying parents, more women lost from the workforce, and low wages for childcare staff. Far from being ‘free’ the Government’s childcare provision is making the country poorer.

So it’s disappointing that the best some MPs who spoke in Monday’s debate could come up with was to call for yet more public money to be ‘invested’ in the sector. We need to be much more ambitious than that. As Annabel Denham suggests in an essay for the Free Market Forum, published today, the system needs a complete overhaul. “We should unwind this misguided experiment by scrapping all state involvement, rather than doubling down with yet more subsidies that will further strip pluralism from the market and allow costs to spiral out of control,” she says.

I might not go as far as Annabel in suggesting the Government should have no role whatsoever in the sector, but we have to get away from the idea that ever more state intervention is the best way to solve all our policy problems. Ultimately it should be for parents, not politicians, to decide what type of childcare is best for their own children. Perhaps if we trusted families, they wouldn’t have to resort to signing pointless petitions and filling out unscientific surveys.

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Alys Denby is Deputy Editor of CapX