Childcare is not a domestic problem, or a women’s problem: it’s an economic problem. This was the subtext of a recent announcement from the Confederation of British Industry, which has called on the government to extend free childcare to relieve labour shortages. The Treasury is now considering a huge expansion in free childcare hours as part of its attempt to get more people into work. Senior Tories have pressured Jeremy Hunt ahead of the chancellor’s spring statement to cut the costs of childcare, which are among the highest in Europe. Reducing these costs and providing more childcare hours is essential, but focusing only on its benefits to employment would be a missed opportunity.
The current system is based on a byzantine set of policies. Two-year-olds from low-income families are entitled to 15 weekly hours of free childcare. Most children aged three to four with two working parents get 30 free hours. Parents can also access up to £2,000 a year, per child, by paying money into an account topped up by the government. Almost two-thirds of take-home pay can be spent on putting a two-year-old in nursery. Even parents on higher salaries are justifiably angry, but the situation is worse for poorer families. Working parents on universal credit can get up to 85% of childcare costs reimbursed, but this is paid in arrears, forcing some into a cycle of debt. Nurseries also charge extra fees that can be prohibitively expensive. It’s no wonder that many low-income families don’t use formal childcare at all.
So far, the government’s only proposal for fixing the system has come from Liz Truss, who pledged to slash the ratio of nursery staff to children. Rishi Sunak was right to quietly ditch the idea. He should now go further. The government’s funding of free hours falls far behind the real cost of childcare. As a result, nurseries have made up the shortfall elsewhere to stay afloat, subsidising funded hours by slashing wages and charging steep fees to parents with children under two. Pay is so low that nursery staff are taking jobs in supermarkets, while the number of early years staff with qualifications equivalent to A-level fell from 83% in 2015 to 52% in 2020. Raising pay across the sector should be an immediate priority.
The quality of early years education is pivotal to children’s development. It can reduce inequalities that would otherwise persist in adulthood. The achievement gap between disadvantaged and wealthy children is already significant at the age of five. Over the last decade, the Conservatives have increased the number of free childcare hours, but this gap has not shrunk. Expanding the number of free hours without examining the quality of childcare or which children are benefiting most from it is unlikely to fix this gap. Labour’s plans for a childcare settlement -worth at least £365m -would be an improvement, but ensuring that measures also target children from low-income families, who are among the least likely to make use of government-funded nursery hours, will be vital.
Childcare is classed as day-to-day spending rather than capital investment. It has long been regarded as a drain on the public purse. Its impact is long-term and therefore more difficult to model. But its economic benefits are obvious. High-quality, universal and affordable childcare pays dividends. It helps parents get back into work, and improves outcomes for children, particularly those from disadvantaged backgrounds. Both of these things should be integral to the government’s plans.
This article was amended on 14 February 2023. An earlier version, based on a December 2022 newspaper report, referred to “Labour’s plans for a £6bn childcare settlement”. Labour contacted us to clarify that so far it has announced plans for a £365m expansion in free school breakfast clubs at primary schools as a “first step”.
