6 February 2017

Less is more when it comes to childcare policy

By Nerissa Chesterfield

For parents, their child’s education, safety and upbringing are among their biggest concerns. But what families need and when they need it, varies dramatically.

Some families with one working parent and one stay-at-home parent may only need childcare for a couple of hours a week, where carers simply provide parent-like supervision for limited periods of time. Other families with a single parent in work, or where both parents are in full time work, will need a more educational, structured form of care.

But whatever their individual preferences, all British families share the burden of expensive childcare costs – some of the highest in the OECD. Despite the government spending over £7 billion of public funds on childcare annually, a family earning roughly the national average will spend more than a third of their income on childcare.

It’s time for the vicious cycle of increased public spending and increased costs for families to come to an end.

The Institute of Economic Affairs’ latest report “Getting the state out of pre-school & childcare”, illustrates how government intervention in the childcare sector over the years has led to the patchy and costly system we have today.

The Government’s aims for childcare policy include improving quality, boosting future education prospects for kids, encouraging greater employment (among mothers), and making childcare affordable. While all of these are desirable as stand-alone objectives, trying to treat them all with the same policy prescriptions has, unsurprisingly, failed to work.

In fact, these objectives often contradict each other – but rather than rolling back poor policy, the response is always to pile on more red tape, creating the ineffective system we have now.

The Government’s attempt, for example, to improve quality by mandating high staff-child ratios and requiring a certain level of qualification for carers has proved to be completely at odds with lowering childcare costs. These regulations have, in fact, greatly exacerbated costs across the board, with very little evidence to suggest an improved quality of provision.

And it is not just a heavily regulated market that is pushing up costs. The Government’s “free” pre-school education for up to 15 hours a week certainly works as a subsidy for some. But what happens when families need care for more than 15 hours a week? The subsidies do nothing to reduce the market price of childcare – if anything, the funds contribute to inflated prices – making the cost of childcare for that 16th hour and onwards dramatically more expensive.

Furthermore, this “free” childcare is poorly focused, often used by wealthier families to pay for formal childcare that they could have afforded on their own. It is in fact minority groups, who are much less likely to use formal childcare, who end up subsidising wealthier families.

Throwing money at childcare might be a “feel good” policy, but it has failed to achieve any of the government’s objectives: childcare is not affordable, and there is no evidence to suggest that having a lower staff-child ratio improves quality or the child’s future prospects. Encouraging greater employment among mothers might be a worthy cause to help reduce the “motherhood pay gap” – yet 29 per cent of women (twice the number of men) feel like returning to work isn’t financially worthwhile.

Families across the UK are facing a cost of living crisis – expensive childcare being a main contributing factor. It’s time the Government took its first big step to alleviate this, by scrapping universal offers for “free care” – which disproportionately subsidise the well-off – and deregulating the childcare sector to bring costs down.

Unshackled from overarching regulations, carers could provide a variety of types of childcare depending on the parents’ preferences, instead of all being forced into the same formal and expensive provision. And public funds, when administered, could be directed to the most disadvantaged, helping them financially through the tax-credit system.

This will enable parents to get the care for their kids that they need, when they need it, at a price they can afford. The solution for childcare policy is simple – less is more.

Nerissa Chesterfield is a communications officer at the Institute of Economic Affairs