In the summer of 2017, the Government launched two new childcare schemes: ’30-hours free childcare’ and ‘Tax-Free Childcare’. Around the same time, I became Chair of the Treasury Committee in the House of Commons. We launched an inquiry into the Government’s childcare policy and its influence on the economy earlier this year, and yesterday, we published our report.
High quality and flexible childcare is important for getting parents into work and supporting working families. Throughout our inquiry, we examined how childcare can deliver benefits to the economy and support labour productivity and participation. We also looked at the effectiveness of Government initiatives at making childcare accessible and affordable.
A key objective of the Government’s childcare policy is to improve productivity by allowing parents to return to work at a level more consistent with their skills. However, the impact on the UK’s overall productivity performance is uncertain and more research would be welcome.
One possible way to improve productivity is to remove age restrictions on childcare support for parents entering training or education. As it stands, childcare support is provided by the Government to parents under the age of 20 and for full-time university undergraduates. But outside of these groups, support is very limited.
The rapidly changing nature of work makes it ever more important that Government encourages lifelong learning and promotes the acquisition of new skills. As it stands, however, most parents considering entering training or education would be deterred by an absence of proper support for childcare costs. Many parents may need to retrain or upskill to return to work after having children. It’s short sighted for the Government to exclude such parents from receiving proper childcare support.
As part of its efforts to improve the UK’s productivity performance through the launch of the National Retraining Scheme, the Government should remove age restrictions on childcare support for parents entering training or education. This would enable more parents to build their skills in order to enter high quality work.
Recently in the House of Commons, the Government agreed to a six-month extension of the workplace childcare voucher scheme. The scheme was due to be discontinued on 6 April 2018 and would no longer be open to new applicants. This 11th hour stay of execution is no way to manage childcare policy. It is likely that many parents who were better-off under childcare vouchers will have already made arrangements with childcare providers and their employers to start using the Tax-Free Childcare scheme.
The Government’s U-turn underlines the Committee’s concerns about the difficulties that parents face in making the right choice about which schemes to use. It should keep the voucher scheme open until it understands the extent to which parents will be made better or worse off as a result of discontinuing the scheme, and simplify its range of childcare support to address the complex interaction between schemes.
The jury is still out on whether the Government is sufficiently funding providers for 30-hours free childcare. The Committee received evidence from numerous organisations highlighting the measures that are being taken by providers to make up for shortfalls in funding. This includes restricting the times at which parents can claim the 30-hours free childcare, which reduces flexibility, cutting back on higher qualified staff and increasing child-to-staff ratios, which reduces provision quality, and charging for services that were previously free, such as food and activities, resulting in providers in higher income areas being able to better mitigate funding shortfalls than those in more deprived areas.
If the Government wants to avoid these consequences, it should pay a higher hourly rate to childcare providers that more accurately reflects their current costs.
The Committee also notes that many parents choose to care for their young children at home, rather than returning to work, and that the economic value of this activity is not measured in the national accounts. This is a legitimate choice that the Government should take care to respect in setting its objectives for childcare policy. In particular, the over-riding policy objective should be to support parents who decide to return to work, rather than to increase labour force participation among those who choose to stay at home to care for their children.
The Government will respond to the conclusions and recommendations in the Committee’s report within eight weeks. In the meantime, let us know what you think.
Nicky Morgan will be responding to questions and comments on this post later this week.