Making the case for universal childcare

Jonathan Clifton
Sunday, January 22, 2012

This week we've seen more gloomy announcements on the economy - with unemployment still rising and forecasts that the economy is tipping back into recession. More than a million women are now unemployed, the highest for 23 years. As the chancellor admitted in his autumn statement, the public finances are in a worse position than he expected.

All this has important implications for public spending - which will now continue to be cut well into the next parliament. As Ed Miliband acknowledged last week, politicians from all political parties will have to think even harder about which services to cut and which to prioritise in the coming years. Harder still, they will have to defend their decisions to the public.

So which services should be the priority for government spending? IPPR has recently made the case for focusing on childcare. Providing universally available childcare is a good way to increase the number of parents in work, relieve the pressure on household bills, and reduce the number of children living in poverty.

The spiralling cost of childcare is putting a huge squeeze on families - an average UK family will spend 27% of its income on childcare, well over double the amount spent in other developed countries. Lifting this burden would be a good way to protect living standards in these straightened times.

But perhaps most importantly, childcare makes economic sense for the government. The high cost of childcare has long prevented mothers from returning to work after childbirth - and once the economy has started growing again we must ensure this barrier to women finding work is removed. When affordable subsidised childcare was introduced in Quebec, they saw the female employment rate go up by 3.8%. Having more people in work certainly makes sense for the Treasury, who would see tax receipts increase. These increased tax revenues will more than outweigh the cost of providing childcare - IPPR have calculated that every mother returning to work after maternity leave would net the treasury an additional £20,000 over four years. Put simply, childcare pays for itself.

Of course the arguments for expanding childcare are not just economic - there are important social benefits too. Children who attend high-quality early years provision have been shown to achieve higher results in language, reading and numeracy.

But while there is a strong case for expanding childcare, the other side of the public spending debate means making cuts to pay for it. If the government were to expand free childcare to all preschool children (beyond the existing entitlement to 15 hours for all 3-4 year olds, and some two year olds), it would need to pay upfront costs of £3-6bn. And this is where the painful side of the public spending debate comes in. Because if childcare is deemed to be a priority for spending, other things will have to lose out. In this case, the sums could be raised from cuts to benefits for pensioners such as the winter fuel allowance, bus pass and pension relief. But it would require politicians to stand up and defend their decisions to both the winners and the losers.

Jonathan Clifton is a Research Fellow at IPPR. You can follow him on twitter @jp_clifton