By Sascha O'Sullivan
Jeremy Hunt and Rishi Sunak are betting big on childcare reforms to boost the economy, but many mothers will still choose to stay at home, writes Len Shackleton.
It is bizarre to see a substantial increase in childcare support, aimed at parents of very small children, being mainly promoted as a means to get mothers back into work.
In this purpose, it will probably disappoint. Despite pressure group claims, there are not huge numbers of women with very young children whose return to the workforce is held back by expensive childcare. Half of mothers of toddlers say they prefer to stay with their children, while I suspect that a significant proportion of those saying they want to come back to work will not do so in practice.
We already have greater numbers of mothers of young children in work than the EU or OECD averages, and any increase in numbers and hours worked could well be rather smaller than claimed. Furthermore, highly educated women with well-paid jobs already return quickly to the workforce, so the new returners are likely to be in relatively poorly-paid, low-productivity jobs. It is this group for which childcare costs are a particular deterrent.
The Office for Budget Responsibility believes that the new funding for children aged between nine months and three years will boost the workforce by a modest 60,000 over two or three years. On this basis, taxpayers will be paying over £8000 for each addition to the active workforce, rather more than they will return in income tax and national insurance. This is projected to boost output by 0.2%, probably an exaggeration if returners, particularly part-timers, are paid less than the average earnings the OBR assumes.
All this is contingent on that the supply of nursery and childminder places expanding to meet the new demand. On past experience, this may be problematic, particularly in poorer areas with insufficient better-off parents willing to pay for those wraparound hours and extras that are needed to supplement government funding if providers are to turn a profit. The government is to increase the funding per childcare hour, but there is no guarantee that this will be sufficient to elicit increased supply, particularly over the longer term when a government-set price per hour is likely to lag inflation.
What of wider issues? When, under New Labour, government first got seriously involved in funding childcare it was primarily to help disadvantaged children prepare for Big School. Jeremy Hunt’s extended provision is untargeted, and the main beneficiaries will be middle-class families where the mother already works.
The extra government spending does nothing to help families where mothers wish to remain at home with very small children, perhaps because of inability to work because of ill-health, the special needs of the child, or cultural reasons. The takeup of formal childcare is much lower in some ethnic communities than others.
If the impact of extra taxpayer generosity on the labour market is minimal, and we want to support parents, shouldn’t we offer more choice? Rather than ‘free’ nursery places, offer vouchers which could be topped up by parents to use as and when needed, rather than in the current restricted hours format. This would leave providers free to set prices rather than be subject to government control. Vouchers could also be used for other purposes, perhaps (as has been tried in other countries) to support grandparents who provide care, or to meet some expenses for stay-at-home mums. We need to think more holistically about what is good for children and families rather than what is allegedly good for the economy.
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