Childcare and levelling up

Will universal free childcare level the country up or favour middle class parents more?

Child playing with blocks at nursery


According to the Resolution Foundation think tank, the Government should spend less time focusing on getting retired workers back to work and focus more on tackling health issues and addressing the maternal employment gap. The latter is the result of differences in labour participation rates between low and higher income mothers. Among low-income women aged 25-54 it was just 50 per cent in 2017-2019, compared to 94 per cent among high-income women of the same age. That means looking at how the benefits system can be used to incentivise work better as well as reviewing childcare policy.

The Foundation says universal childcare is not the silver bullet for tackling the problem and could end up favouring middle class professionals more than those who need the financial help more. At an event yesterday they talked about simplifying the childcare support system, addressing high upfront costs for nursery places and tweaking Universal Credit to help second earners. Currently second earners – most likely to be mums – have lower work allowances within Universal Credit than first earners. Another issue that came up in the discussion was work intensity and workplace stress, alongside job insecurity – something that is a particular feature of lower paid jobs. This could be addressed through a focus on more high quality part-time roles and changes, such as giving more notice for shifts which would help those with caring responsibilities, said Louise Murphy of the Resolution Foundation.

The discussion was interesting, given that some sort of targeted approach is the most likely outcome of Budget discussions. The problem will arise if that involves an extension of the ‘free’ hours scheme because that doesn’t cover a significant proportion of the actual cost of a place. At private nurseries this shortfall can be covered through top-up fees for those who can afford them [a diminishing number], but other nurseries, including community nurseries, are unable to charge top-up fees. Such nurseries serve the most disadvantaged children and many have closed since Covid. There seems to be little point in increasing subsidies for disadvantaged parents at the expense of the nurseries that serve them.

We know from studies and anecdotal evidence that it is often nurseries in the most disadvantaged areas that have been more likely to close in recent years. One nursery chain told that the only way that their nurseries in poorer areas stay afloat is that they are subsidised by those in wealthier areas. It’s much harder for independent providers.  According to the Coram Family and Childcare annual report, availability of the two-year-old free entitlement for disadvantaged children and the three-four-year-old 15-hour entitlement dropped by 9% and 3% respectively between 2021 and 2022, hitting the most disadvantaged children and families the hardest.

Last year the Early Years Alliance warned that proposed changes to the early years funding formula would mean areas with a shortage of spaces, largely in northern regions, would be more adversely affected than areas in the south of England and London, where the availability of places has increased in recent years. It seems a bit of a chicken and egg situation. Places fall due to lack of support, meaning less support is provided. Meanwhile, there have been start-up companies and others promoting more flexible childcare services, but they are also under pressure to make their books balance and it can make more financial sense for them to be based in wealthier areas where there is strong demand and some ability to pay for childcare.

The danger is that many of these developments are increasing the childcare divide rather than ‘levelling up’. We know too that access to childcare is important for children’s education chances in primary school and beyond. Levelling up needs to start early – which was the reason for the Sure Start Centres, 1,300 of which were closed between 2010 and 2020. In 2021 an £82m investment was announced to create 75 family hubs in England to provide joined up services for families. Critics say it is a drop in the ocean compared to the Sure Start centres that have been lost.

Getting information about any advice and support available out to parents is not an easy job either. It takes effort and outreach.  It’s not simply about economics. A much more interdisciplinary approach is necessary. Yet too often the policy debate centres solely on the economic argument: Announce x millions for ‘free’ childcare expansion and then we can solve the labour market problems; sanction parents who won’t work longer hours; give retired workers tax breaks to get them back to work. Economics, like any other discipline, doesn’t have all the answers to the entrenched, multi-layered social issues facing the country.

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