It’s far too early for families to celebrate, but at least the issue of childcare has gained political salience in Britain. It’s about time.
Childcare affordability has long been a burden for families in Britain, as in the US, but in the past it was largely seen as an equalities matter and got short shrift from governments. It is, of course, a gender issue: A new report from the consultancy PwC cites unaffordable childcare as partly responsible for Britain dropping five places to 14th among 38 advanced countries for women in work.
But the system imposes wider social and economic costs that have long been ignored. A lack of suitable care deprives kids of the positive benefits of early childhood education. It increases the financial stress on families and disproportionately takes women out of the workforce. The burden further disadvantages poorer children, widening inequality.
The pandemic, followed by a cost-of-living squeeze, has helped push the issue up the political agenda. Both brought added pressure on families and especially mothers. Analysis last year from the Prince’s Responsible Business Network found that nursery costs are 65% of one parent’s weekly median take-home pay in England. And the affordability gap has been widening steadily, with the cost of childcare in the UK increasing at twice the rate of wages in the decade to 2022.
This rather large voter group has become more organized and noisier, with the help of campaign organizations such as Pregnant Then Screwed, who have cleverly highlighted the connection of economic growth. Indeed, there is no tackling Britain’s low-growth problem without addressing a major barrier to women in the workforce. Estimates of the number of mothers prevented from entering paid work because of childcare range from 540,000 to 1.7 million — not numbers any government can afford to ignore when there are some 9 million economically inactive adults in Britain.
A new report by the Centre for Progressive Policy estimates that mothers are missing out on £9.4 billion ($11.3 billion) in earnings due to lack of suitable childcare, while lost economic output is estimated at £27 billion, or 1% of GDP. Of the mothers surveyed, over half said they struggled to find suitable childcare and nearly half a million had quit their jobs due to childcare provisions.
To her credit, former Prime Minister Liz Truss argued for both relaxing staff-to-child ratios to cut costs for nurseries and increasing childcare support for three- and four-year-olds during her brief time in office. Rishi Sunak has said little on the subject. While some Tories (Andrea Leadsom, for example) have supported that approach, deregulation appeals far more to fiscal conservatives than adding support.
That’s not likely to endear them to voters. Regulatory change is also unlikely to solve the problem on its own. Thousands of workers have left the childcare sector due to low pay and Brexit, among other reasons. It’s unclear whether those left will take on more work for the same pay and whether nurseries’ cost savings will even benefit parents. (While some European countries have higher ratios, there are also more stringent demands on staffing qualifications, so parents are naturally wary of lowering standards with relaxed ratios.)
Sunak has reportedly considered extending the program of 30 hours of free childcare — currently available for three- and four-year-olds, subject to some work requirements — to all two- to four-year-olds. That is ironically what Labour pledged to do in its 2017 election campaign. Labour leader Keir Starmer is likely to raise that bet for the next election, and make childcare a major plank of its election campaign (a strategy that worked recently for Australia’s Labour Party). Labour MP Stella Creasy has already had success campaigning for it to be viewed as “necessary infrastructure” like GP services or schools.
If the government is to factor in childcare in the March 15 budget, many would want support extended to one- and two-year-olds. That would certainly benefit low-income families, though Christine Farquharson, one of the authors of an Institute for Fiscal Studies report on childcare in Britain, cautions that preferences also play a role. The Department of Education found that two-thirds of parents not using childcare said that they would rather look after children themselves, versus 14% who cited the cost of care as a factor.
Extending funding to full-day care would likely have a greater impact on getting mothers back to work. A study published in the journal Labour Economics last year found that offering an entitlement for a full day of childcare significantly increased labor-force participation (by 3 percentage points) and employment, while half-day provision had little impact. The caveat is that it takes time for mothers to reenter the workforce and find a job. The observed employment impact was more than three times as high by the end of the first year of a full-time entitlement as it was after the first term of offering.
Britain also needs to simplify its patchwork of provisions and make them more accessible. Low-income families must pay for childcare up front and then claim their subsidy back, which is unreasonable for families living paycheck to paycheck or for mothers starting a new job. The rollout of tax-free childcare in place of employer-based programs has been hampered by complicated eligibility criteria and low levels of public awareness. Partial fixes and carve-outs for certain groups can also create market distortions. Subsidizing costs without addressing supply constraints is also likely to place an added burden on paying parents.
The government may decide it can’t offer meaningful childcare support in this budget. But ignoring the needs of young families adds to future economic costs, and builds resentment that may come back to haunt the Tories at the next election.
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• Childcare Costs Are Orphaned in the US Tax Code: Alexis Leondis
--With assistance from Elaine He.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Therese Raphael is a columnist for Bloomberg Opinion covering health care and British politics. Previously, she was editorial page editor of the Wall Street Journal Europe.
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