Despite the Chancellor’s rhetoric on supporting struggling families and prioritising early years development, he offered nothing on childcare in last week’s Budget. The Chancellor’s inaction risks hampering post-pandemic recovery, failing low- and middle-income families and amplifying pandemic-induced gender imbalances.
The Chancellor promised £500 million over three years for 75 new “family hubs”, echoing New Labour’s Sure Start programme. The funding is small change compared to the 1.8 billion annual investment Sure Start accounted for at its peak in 2010 and 75 hubs will do little to undo the closure of 1000s Sure Start centres the Chancellor’s own party presided over.
More pressingly, this funding is a meagre commitment at a time when the pandemic has put intense pressure on the already strained availability of childcare in the UK. Prior to the pandemic, only 56% of local authorities in England reported having enough childcare for the children of parents who work full-time, 18% for parents working atypical hours. During the pandemic, 41% of nurseries went into deficit, 26% took on debt and 58% used reserves to compensate for losses. By July 2021, more than 11,000 childcare places had been lost due to closures many in the most deprived parts of the country.
As labour market pressures build, a failure to invest in childcare is bad economics. Universally available childcare has a bigger impact on mothers’ participation when maternal employment is low, there is strong labour demand, and the availability of childcare is limited. Vacancy rates are high across the economy, wages are rising and unemployment is low and falling, but in March women in work before the crisis were more likely than men to be out of work, furloughed or on reduced hours. Parents were working about 7% fewer hours than pre-pandemic with mothers having experienced a large and persistent hit throughout the last 12 months for having to cover for the precarious patchwork of informal care and the declining availability of formal care. All of this suggests that affordable childcare is yet another supply bottleneck holding back the UK economy.
While availability has worsened during the pandemic, affordability is a chronic problem. UK childcare costs about a third of median incomes, amongst the most expensive in the OECD and growing fast: for parents with a one-year old, the cost of nursery grew four times faster than their wages between 2008 and 2017. British under threes from low and middle-income households have some of the lowest participation rates in early childhood education among OECD countries.
The Chancellor’s inaction is misaligned with voters’ values too. 72% of adults disagree with the view that ‘a man’s job is to be the breadwinner and a woman’s to look after the family’. A poll this September found that 96% of working parents felt the government is not supporting them enough with childcare costs. Some of these frustrated parents are holding the party’s future electoral prospects in their hands.
The affordability and availability of childcare and leave is critical for women’s participation in the workforce and therefore for the economic recovery from covid. Even before the pandemic, 52% of women not in employment said they would prefer paid work if they could arrange the right childcare. Their chances of doing so have only deteriorated over the past 18 months. Estimates – including from the Treasury itself – suggest better provision could lead to 1.4 -1.7 million more women in the workforce (equivalent to roughly £10 billion annually in NICs and income tax if working full time for median earnings).
Fixing childcare will not be easy and could require significant upfront investment from both providers and the government. Nor is it as simple as dialling-up public spending. Reform of the way the sector is regulated and structured is required to bring down costs and complexity. Other countries already are, Biden termed childcare “essential infrastructure”. What is it going to take for the government to care?