Affording universal childcare

The Purple Papers

There is no debate over whether childcare costs are high in the UK: the cost of a nursery place has increased by six per cent in the last year and a dual-earner couple on average wage with two children will spend 27 per cent of their net family income on childcare (higher than any other OECD country except for Switzerland).  The high cost of childcare exacerbates the pay penalty for mothers. Becoming a mother is still the most important factor that explains the gender pay gap. The Resolution Foundation estimates that there are one million women currently not working in part because of the lack of affordable childcare.

There is cross-party consensus that early years provision is an essential public service that needs to be more affordable as well as high quality. So the debate can now shift to how best to deliver it and how should we pay for it.

The publication of IPPR’s recent report Double Dutch has provoked passionate discussion from politicians and policymakers on how to deliver an early years system that responds to the needs of children, families, childcare providers and employers. IPPR’s starting point is straightforward: universal  childcare can enable families to better balance work and caring responsibilities and, in so doing, help to promote higher employment rates and reduce gender inequalities. Universal early years provision is also a key foundation of policy frameworks for achieving social justice more widely.

But in getting from this starting point to a system that delivers, we need a strong account of the strengths and weaknesses in current provision. Availability can be patchy and quality variable. There are indeed different choices for families depending on their income, work patterns and parental preferences. These should not be ignored. At the same time, there is strong evidence showing that high quality early years services can have beneficial outcomes for children in their development and learning. And quality – including the qualifications of the workforce – matter.

So the question is then how to pay for it. There are three strands to IPPR’s approach: generate income through boosting maternal employment rates; better use of current provision; and make political choices that prioritise universal childcare. IPPR analysis shows that universal childcare can pay a return to the exchequer in terms of tax revenue. For mothers returning full-time, the return could be £20,050 (over four years); and for those returning part-time, the additional income to the exchequer could be £4,860. Better use of current provision could also be more efficient in delivering on the affordability objective. We would like to model the financial impact of a single integrated funding system merging tax credits, tax relief on vouchers, and removing childcare from universal credit. This could be means-tested to offer most support to those on lowest incomes. And finally, there are difficult political choices about spending priorities to be made. There are ways to raise income to spend on childcare. For example, if winter fuel allowance and free TV licences were means-tested and only available to those in receipt of pension credits, an additional £1.7bn a year would be available.

The debate on early years provision in the last few weeks has ensured that it will remain a hot political issue in the lead-up to the next general election. The benefits of universal early years provision could extend far beyond that.


Dalia Ben-Galim is associate director at IPPR and is speaking at next week’s Progress event What would we give up to pay for universal childcare? She tweets @IPPR_Dalia

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