Baby boom: why funding childcare properly will boost the UK economy

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‘There is no help for mums,” says Felicity Hutchinson, who has just taken the drastic step of giving up her job in a cafe, because reduced hours meant there was no way she could cover the cost of childcare.

With two children under five, she says, “I am no longer able to work, as before- and after-school club and nursery fees would cost me £70 a day, when I earn £9.50 an hour”. For a typical eight-hour day, that adds up to £76 before tax, but Felicity’s hours were cut. She is now scrambling to find another job that would be more feasible.

Jeremy Hunt’s autumn statement this month, which promised to set the UK on a path to sustainable growth, made no mention of childcare – but a vocal coalition of campaigners and experts say the existing system is broken, and fixing it should be a key plank of economic policy.

The UK’s patchwork of provision is among the costliest of any developed nation, according to the Organisation for Economic Co-operation and Development. A couple earning two-thirds of the average income, with two children aged two and three, can spend 29% of their salary on childcare. That compares with 9% in France and 1% in Germany.

“The cost of childcare is really unfair,” says Felicity. “I am in desperate need of a job to help pay towards our cost of living. My husband is a gas engineer and works every hour he can get, even on the weekends. But we just about manage to pay our bills and food.” She is now “applying for jobs left, right and centre”, and admits “it’s quite a stressful time”.

With labour shortages holding back growth and the number of economically inactive people in the UK up 630,000 since the pandemic, the economy can ill afford parents being driven out of the workforce.

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A survey by the Centre for Progressive Policy (CPP) thinktank last year suggested that 1.7 million women would like to work more hours but were unable to do so because of problems with childcare. Another 1.3 million had turned down a job for the same reason. The CPP estimated that that could amount to up to £11bn in forgone earnings.

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“The idea of not investing in childcare when you’re simultaneously talking about growth and productivity just doesn’t marry,” says Sarah Ronan of the Women’s Budget Group (WBG), which analyses the gender impact of economic policy.

“Because some of the loudest voices around childcare are generally female voices, it gets pigeonholed as a women’s issue – a domestic issue. But we really believe the tide is changing and the level of frustration is such that this will be an election issue: this will be a doorstep issue.”

The TUC estimates that the average price of a full-time childcare place in England has risen by £3,000 a year since 2013, to £14,226. Thousands of parents joined the recent “March of the Mummies,” organised by the campaign group Pregnant Then Screwed, to demand reform.

Graph showing cost of childcare in several countries separated out between single parents and countries, often with quite large differences

Alongside eye-watering costs, the childcare system has structural flaws, many of them long familiar to harassed parents.

In England, the state provides 15 hours of free care a week for two-year-olds in low-income households, and 30 hours for three-year-olds; but that leaves a costly gap between the end of parental leave and the start of taxpayer-funded support. Meanwhile, providers say the 30-hours offer is systematically underfunded, which means that many nurseries have to cross-subsidise these free hours by increasing their overall fees.

Finally, the fact that the 30-hours offer is available only during term-time leaves many parents scrambling to find help during the school holidays. Research by the charity Coram Family and Childcare, which carries out annual cost surveys, found the average cost of a week-long holiday camp this summer was £148, up 5% on last year.

“The whole system needs a rethink, to make sure that there’s the right support at the right time for parents – particularly at that time between when you end parental leave and the free childcare at three kicks in,” says the head of Coram Family and Childcare, Megan Jarvie. “That’s the bit at the moment that’s the real squeeze for families and needs attention.”

The WBG estimates that providing 30 hours a week of free childcare for children from six months, year-round, in England – bridging the gap to age three and covering the school holidays – would cost the government an additional £10.4bn a year. It suggests at least three-quarters of that could be recouped over time, however, in increased tax revenues and lower benefit costs.

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But advocates of reform complain that the government continues to see childcare as a social, not an economic, issue. “The fact that Jeremy Hunt didn’t even say the word ‘childcare’ tells you everything about where we are,” says Labour’s Alison McGovern, the shadow employment minister.

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“Literally every family in the country is impacted by our poor childcare, and the macroeconomy is made far less robust and far less productive than it would be if we saw childcare properly as we should, which is as economic infrastructure.”

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Labour recently announced a promise of taxpayer-funded breakfast clubs for all primary schools, but the shadow education secretary, Bridget Phillipson, has hinted the party will have more to say before a general election, promising to “completely transform” the sector.

In a possible signal of Labour’s intentions, the Guardian recently travelled with Phillipson to Estonia, where a guaranteed nursery place is offered for children from 18 months, at a low cost of €58 (£50) a month. Similarly, a recent report for the Fawcett Society pointed to a significant increase in women’s employment in Quebec, Canada, after universal childcare was provided for a C$10-a-day flat rate – about £6.

By contrast, Hunt has confirmed that the government is still consulting on a proposal made by Liz Truss’s shortlived government to increase the number of children each worker is allowed to look after – from four to five for under-two-year-olds – in the hope of cutting costs.

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Conservative MP Steve Brine, who chairs the all-party parliamentary group on childcare, warns that this plan could worsen the quality of care, and exacerbate a recruitment crisis in the sector.

“The dogwalker that looks after our labrador gets paid more than many early-years workers do,” he says. “Young children are hard work. If you do it for the love, that’s great – but if you’re coming home and needing to sit in a darkened room, you’re going to leave the profession.”

Graph showing state spending on early childhood education and care as a percentage of GDP

He agrees with McGovern and the WBG that the failings of the sector are a problem not just for struggling families. “If childcare falls over any more, people are just not going to be in the workforce – and this becomes an economic issue.”

At the autumn statement, Hunt announced a review into “issues holding back workforce participation”. It is understood this is likely to include caring responsibilities, but childcare was not specifically mentioned.

A government spokesperson said: “We understand the pressures many households and childcare providers are under due to the challenges of recession and high inflation. We have spent more than £20bn over the past five years to support families with the cost of childcare.”

For many, it is not enough. Lili, whose children are four and 10, should be taking the next step in her career, but has just turned down a job offer from the NHS for a full-time role in children’s mental health. “My childcare – if I’d have been able to find any – would have cost more than the £26k salary I was offered,” the 47-year-old says. “My partner’s income is larger and can fund us, but it is very frustrating. I want to work full-time, but I can’t.”

She adds: “I feel like I’m being blocked from better work because I can’t get the childcare I need.”

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