CBI backs major childcare reform

The Government should launch an Independent Review of childcare, increase funding so providers receive funding that reflects the true cost of service provision and roll-out subsidised children to all one and two year olds, according to the CBI’s submission to the Treasury ahead of the March Budget.

Childcare is right at the top of the employment proposals in the CBI’s submission, alongside the need to support lifelong learning and upskilling and addressing ill health in the workplace.

The CBI says acute labour and skills shortages are “an albatross hampering UK growth”, with difficulties hiring, upskilling and re-training staff making it harder for businesses to enhance productivity, create sustainable wage growth, and launch investment plans. It says that, if left unaddressed, labour shortages could cost the economy £30-39bn every year.

The CBI states: “The truth is, there are simply too few people in the workforce.” It cites figures showing 75% of businesses say they’ve been hit by labour shortages in the last 12 months and other statistics on economic inactivity which show 1.7m economically inactive people want to work. Many of them have health issues. The CBI says that, annually, the UK loses 131m working days to ill-health, which explains why health and wellbeing is the number one priority for nearly two thirds of businesses. Meanwhile, almost one in five (19%) inactive people who want to work are held back by caring responsibilities, it states, with high childcare costs being a major part of the problem. It’s not just that they are being prevented from working – many have to limit their hours due to childcare costs, says the CBI. It cites one study which estimated that inadequate access to childcare prevented approximately 1.7m women from taking on more hours, equating to £28.2bn economic output lost every year.  “We need a system where people who want to increase their hours – or just get back to work – are supported to do so,” says the CBI.

Specifically on childcare, it is calling for an £8.9bn annual package to fund:

• the launch of an Independent Review to investigate the UK’s childcare system with the objective of reducing the service cost for parents while maintaining high-quality provision
• an increase in funding to the existing system to ensure providers are receiving funding that reflects the true cost of service provision, with a clear timeline for when funding will be provided.
• the roll out of existing provision for three and four year olds to all one and two year olds.

It also calls for changes to the Universal Credit system so that childcare support is paid upfront, rather than in arrears.

On health, the CBI wants to see an expansion of the scope of health support businesses can provide to employees as a non-taxable benefit in kind so that it reflects the three highest workforce health risks: musculoskeletal conditions, mental health and ergonomics. Other recommendations include a targeted SME subsidy for procuring occupational health services, an industry co-chaired Heath and Work Taskforce to design and report on the role of employers in increasing economic participation and reducing societal ill health, a two-year pilot to turn the Apprenticeship Levy into a broader “Skills Challenge Fund” and a tax-free Cost of Living support allowance in 2023/24.

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