Childcare is likely to be a key battleground for the UK’s 2015 general election. The Labour party has committed to a universal quality childcare service. It sees it as a strategic political, social and economic imperative. The Liberal Democrats are also trying to convince the electorate that they are serious about transforming childcare, with a promise to provide 15 hours of free childcare a week. The Conservatives plan to up the tax-free childcare scheme from £1,200 to £2,000 a year per child.
Promises to entice female votes? Perhaps, but these policy commitments affect us all, including fathers, grandparents, and taxpayers in general. To put the UK’s childcare cost crisis in perspective, it’s worth looking to how other countries, many of them Nordic, have forged ahead with making universal, quality childcare a priority.
Childcare costs soaring
Over the first 21 years of their children’s lives, parents in the UK spend an average of 28% of their household income on children, with a total of £66,113 on childcare. Childcare costs alone have gone up by 67% since 2003, hitting hardest single parents and parents of disabled children, whose childcare costs are on average even higher.
Since 2009, prices have further increased by 27%, making childcare ever more unaffordable. According to the Family and Childcare Trust 2014 Annual Childcare Costs Survey, even part-time childcare costs outstrip the average mortgage – for a family with two children, the cost for one child in part-time nursery care and one in an after school club is £7,549 a year, compared to the average UK mortgage of £7,207. Regional variation in the UK are also wide, with London and the South East offering the most expensive under-fives childcare.
Boost to women’s employment
Childcare costs operate in the same way as the reduction in female wages: the higher they are, the lower the probability of women’s employment. Insurance company LV= reports that mums believed they needed to earn an average of more than £26,000 a year to make it worth returning to work.
Research on these relationships confirms that childcare availability and affordability significantly affect female labour supply, especially of lower skilled mothers – a 10% increase in childcare boosts their employment by 14 percentage points, relative to a 7-percentage point increase in the employment of women with high education.
Demand-led childcare subsidy
Successive UK governments have made several serious commitments and investments in childcare, and the Coalition promised an additional £1 billion to support childcare. Currently, the government provides cash benefits, vouchers and tax reductions for childcare amounting to £6bn every year.
Even in the OECD, the UK appears a generous spender – in 2009, government expenditure on childcare represented 0.5% of GDP, or 1.1% of GDP including pre-school, which was above the OECD average of 0.3%. But it was well behind Iceland and Sweden, as the graph below shows.
But the level of total government expenditure is not a guarantee that money is spent efficiently.
Unsustainable and complex
The UK’s current childcare system is inefficient and unsustainable. Only 49% of local authorities supplied enough childcare for working parents and 75% failed the disabled children. Much of childcare is delivered by the private and not-for-profit sectors.
Market failure makes parental share of childcare costs in the UK one of the highest in the OECD. After accounting for government support, it represents 34% of average family incomes, compared to an OECD average of 13%, in a family with two-earner family earning 150% of the average wage.
A complex funding mechanism adds to high costs. Parents can receive financial help directly, through Working Tax Credit, childcare vouchers and schemes operated by Job Centre+. Other subsidies go directly to the childcare providers through the free offers – these, however, hardly pay the costs. These funding streams come with high administrative costs; simplifying could help affordability.
The UK’s approach is similar to those in Australia, Canada, Ireland, Korea, and the USA, and significantly differs from the supply-side childcare subsidies common in the Nordic countries and Slovenia.
Nordic countries’ approach to universal childcare remains a source of policy inspiration. Combination of full availability and high quality childcare service underpins these societies, which have more people in paid work, higher tax revenues, low gender inequality and child poverty.
In these countries, universal childcare has been a strategic imperative since the 1970s, when the feminist movements and social democrats pioneered investments in public childcare.
Sweden especially (and its then socialist counterpart Slovenia) saw a big investment in childcare infrastructure and workforce, ensuring that parents had entitlements to full-time daycare in high-quality, safe and secure public childcare centres at the heart of the community. Ever since, practically every neighbourhood in Sweden and Slovenia has had a day care centre at which a child (including yours truly) would be dropped off each morning.
Led by the state, provided by the public sector and (co-)financed by municipality, childcare has resulted in these countries recording the highest maternal employment rates in the OECD. Costs are capped, fees means-tested (using sliding-fee scales in some countries), and selected target groups either charged reduced rate or their fees waived all together. Such an ambitious childcare system has drawn mothers into the labour force on an equal basis with every other group, and secured high levels of gender equality.
A political decision
Childcare policy ostensibly reflects social sharing of care responsibilities and obligations between the family, markets, the state, and the community. Who can access quality childcare is, thereby, an outcome of government decisions.
In the UK, universal childcare is seen as a public scarcity. Of course, having a reliable quality service with a qualified workforce means we need to fund it, and deliver it in a sustainable way, just as any other public service we commit to. This costs many billions, and it takes many years for the benefits to pay off. But basically, the restructuring of childcare could pay for itself by means of reduced administration costs, jobs created, and improved tax revenues.
The run up to a general election is an opportunity to set out the vision for the future, and decide whether care for children – the bedrock of our society – is a shared social responsibility. I, for one, would like to see political parties committing to a sustainable childcare strategy, one that will deliver for mothers and fathers, and, crucially, for children.