Childcare Loans - could this be the answer?

[olgaga]

So, I was on the other thread about childcare ratios, and it suddenly occurred to me...

The Govt's proposals are a complete waste of time. The Early Years sector and most parents and commentators seem to agree that tinkering with ratios, and insisting on higher level qualifications for childcare workers, will not reduce the cost of childcare.

However, everyone agrees that we want good quality childcare and EY workers to be paid a decent wage for the valuable work they do.

We have a system of Student Loans to spread the enormous cost of further education over a longer period.

Why not a Childcare Loan to spread the cost of childcare over a longer period?

So the Govt pays the upfront fees, which parents pay back over a much longer period, with loan repayments based on income.

Could this work?

[olgaga]

Well I think I get the message. I still think this is one way of making it easier to manage, for some people - obviously it woudn't be for everyone, just as going to university or taking on a mortgage is not for everyone.

In the absence of any other realistic suggestions as to how childcare might be made more affordable, I still think this could work.

Anyway - thanks to everyone for your views. I think it's an idea we might well hear more about in future.

[BeCool]

Don't know why I started with "sorry" - I'm not.

[BeCool]

Sorry but I think this is a dreadful idea. Getting in debt to cover the cost if daily life is not a suitable solution for anyone, for anything.
And for a govt to fund such a scheme would be immoral.

[Tanith]

Reinstating the subsidies and tax credits they've removed to date would be a start!

[SizzleSazz]

A high proportion of people already have no money set aside for retirement and will have to continue to work beyond retirement age to pay for day to day life. I can't see how adding more debt to be paid off in later life helps tbh.
For most people they won't become massively richer as they get older (presuming no house price bubble and inheritances used up for long term care)

[AThingInYourLife]

"I think many people would be delighted to spread the cost of childcare over 10, 15, 20 years"

I'm sure they would.

People are delighted to pay for all kinds if things on the never never - holidays, house extensions, handbags.

But that doesn't make it a good idea.

And I would not be delighted for this loan scheme to bring more money into the childcare market without increasing supply or regulating costs.

Because I forgo a lot of consumer spending that other people deem essential so that I can pay for my children to be cared for, so that I can work.

I have no interest in those costs being increased with hot money so that I can have more disposable income now.

If the government wants parents ti have more disposable income while children are small, then they should use tax credits to achieve that aim.

When will these people have time to save for retirement, if they have mortgages, student debt, and massive childcare loans to pay off?

Are you following the issue of unsustainable borrowing for third level education in the US? You really need to.

[AThingInYourLife]

"The simple truth is that additional taxpayer subsidy will not happen, under this Government or any other."

Sorry, but that is not an argument.

You have no idea whether or not that is the truth.

You believe it unlikely, but that doesn't mean you get to call it "a truth" and make policy as though it were.

[DoubleLifeIsALifeHalved]

But it wouldn't be a choice would it?

Still don't understand why you won't even consider the idea of not getting further into debt, or address any of my comments suggesting that a credit society is not sustainable. Shame. I've said all I can.

[olgaga]

why not increase subsidy rather than forcing people to take out loans?

The simple truth is that additional taxpayer subsidy will not happen, under this Government or any other.

You say "It won't help parents one iota." It won't pay for it, no. But it does allow parents to pay for childcare over a longer period, which would enable them to have more disposable income during the years they actually need childcare.

Long term debt is fundamentally a bad idea. It is unstable, effects peoples day to day well being, and no-one can plan that far in the future

You cannot get a higher education, or buy a property, without a loan unless you are wealthy. I think many people would be delighted to spread the cost of childcare over 10, 15, 20 years, just as they are happy to spread the cost of their higher education or mortgage over the period of their working life.

If they didn't want to do that, no-one would force them to - it wouldn't be obligatory. It would simply give people a choice.

[DoubleLifeIsALifeHalved]

Long term debt is fundamentally a bad idea. It is unstable, effects peoples day to day well being, and noone can plan that far in the future to 'take out a debt you cannot afford', multiple debts are exactly the way to get debt spiraling out of control... I do not think it can ever be argued that it's a necessary evil, or just a case of planning more.

Again I ask, why the conviction that we must somehow borrow more to get out of the problems that borrowing have created?

[AThingInYourLife]

Cars, cookers, fridges and extra-curricular activities are not frivolous things either.

And yet we don't have government-backed loans to pay for any of them.

People are expected to do their own financial planning for everything other than student loans.

And George Osborne's desperate and crazy recent attempt to reinflate the housing bubble.

Why is childcare something the government should be involved in making sure we can afford?

If it is better for society that people can afford to go back to work, why not increase subsidy rather than forcing people to take out loans?

If it isn't better for society that parents go back ti work, why should we pay for this?

Clearly in making something more "affordable" but not less costly, you are increasing the money available to pay for childcare.

People who currently think they can't afford it, who aren't prepared to make the same sacrifices as others to stay at work will be chasing the same childcare places, except with money they borrowed (and might never have to pay back) in their pockets.

You claim that won't have any effect on the cost. But as someone who has prioritised childcare so that I can continue to work, I am suspicious of your blithe assumptions that there will be no increase in costs.

I don't want to end up having to take out loans to pay for childcare I can currently afford.

I think the student loan scheme is a massive scam, loading debt (and if it accrues interest and is in your name, it is a debt, not a tax) and I find the idea of perpetrating the same fraud on parents horrifying.

A mortgage used to be the only long-term debt, to put a roof over your head.

Now young people have to take out longterm debt to pay for their education. The impact this will have on household formation is not clear yet, but it is not looking great.

Now we're going dump a load more debt on them as soon as they have children.

This scheme will still discourage people from working. They will just be different people from the ones who decide working is unaffordable now.

Most people who say it is unaffordable complain that it costs more than the second wage, not that the cost couldn't be met from household income.

Giving those people a loan so work seems affordable to them does not seem a reasonable policy objective.

You make things more affordable by making them cheaper, subsidising them (through tax credits or tax breaks), or increasing wages.

This proposal does none of those things. It will make easy money for nurseries and whoever manages the loan scheme.

It won't help parents one iota.

[olgaga]

Yes I agree that you shouldn't get into debt that you cannot afford to pay back, or for frivolous things.

But housing, higher education, childcare - these are not frivolous things.

I don't see these essential items as part of the "credit culture". It's about financial planning, over an anticipated thirty, forty (or more) years of earning.

As far as the "credit culture" you talk of , well that's been here since deregulation in the 1980s, and it's a little late to row back on it now.

[DoubleLifeIsALifeHalved]

Will write more, aware 1 line comments not that useful!

I guess my point is that by forcing people to take on more loans, even if better interest rates, shackles us as a country and as individuals to a credit culture mindset, which may be enough to get us through the next one or two elections, but ultimately won't do our economy any good at all.

Also suspect that dragging people into massive long term debt will result in even more bankruptcies & defaulting, and gets people into a modern day slavery existence, forever paying off loans whilst needing more loans as the next expensive lifestage happens.

I know I'm not thinking about a short term solution, but an exconomy solely supported by getting people into debt is no way to live, or run a country. Much of Europe is going into free fall based on bad credit culture, our ratings as a country have gone down, the eu (?) have warned us that our economic policy is making too swingeing cuts too rapidly with little effect on the national debt... Look at the countries that stand above this turmoil, like Germany, with it's debt avoidance strategy as an economy, and as a people.

[olgaga]

Well unless you are wealthy - yes! "Debt or nothing" is not an "interesting perspective". It's the reality. It all has to be paid for somehow. Personal borrowing or taxpayer subsidy - take your choice.

However, no political party would ever be elected to power if they promised to increase taxation to subsidise everyone's personal non-compulsory spending choices.

People are already in debt because they are struggling to make ends meet, using credit cards to juggle outgoings - including childcare costs - at exorbitant rates of interest.

Payday lending has exploded in this country.

If families are struggling to meet the short-term additional cost of childcare I would rather they were able to borrow through a government scheme similar to the student loan scheme.

[DoubleLifeIsALifeHalved]

Really? So it's debt or nothing then? Interesting perspective.

[olgaga]

Double because people need higher education, housing and childcare. These are not luxury items.

They are expensive.

The only way to deal with these high cost items is to spread the cost over your working life.

We're not talking about non-essential items here which people seem to be quite happy to get into debt for - holidays, furnishings, the latest electronics etc.

[DoubleLifeIsALifeHalved]

Hideous idea... Our credit and debt culture is a huge cause of our problems today. So why are so many of the 'solutions' that people must be plunged deeper into debt? Utterly wrong.

[olgaga]

Couldn't come back before now but I have found this EC report from which Liz Truss quoted the following with regard to availability:

UK:
Despite the expansion in formal childcare services there are still problems with availability. There is a mismatch of supply and demand across the country, with sizeable vacancies in day care, out-of-school and childminder places in some areas and heavy shortages in others. Moreover, the universal right to free pre-school for 3?4-year-olds is for a part-time place only.

So this explains why in some areas there are no places to be had for love nor money, while in other places childcare settings are folding.

Will have a think and get back later tomorrow.

[nannynick]

Would de-regulating some forms of childcare help, or should that stay the same, or cover more types of provider?
Not about loan I know but it's related, as if there was a childcare loan it may be tied to only being usable with certain providers (similar to childcare vouchers and tax credits).

[AThingInYourLife]

Oh and baby suddenly much better, thanks for asking :)

[AThingInYourLife]

"If parents are currently unable to afford childcare they certainly won't be prepared to pay for more expensive childcare whether there is a loan available or not."

You have a lot more faith in people than I do. :o

I think a scheme like this would make people a lot less price sensitive.

I think there is an argument that it isn't that important if costs rise, as long as people can access childcare when they need it.

That's not a line of thinking I would be inclined to go along with, but I'd be open to persuasion.

I think the question that really needs to be answered is why supply isn't currently meeting demand, particularly if prices are high as a result.

[olgaga]

How bloody annoying! My last post seems to have got lost, I must have forgotten to press send.

I'm not saying it's impossible, but I don't think a loan scheme available to service users would have the same effect as a direct subsidy to service providers.

Not all parents will choose to take it up, and not all parents will be able to walk straight into a job. If parents are currently unable to afford childcare they certainly won't be prepared to pay for more expensive childcare whether there is a loan available or not.

I also think it is likely that increased demand would be countered by increased private sector investment such as the larger nursery chains extending their reach. It may encourage the diminishing number of childminders to be retained, and new CMs recruited.

I have contacted Ryan Shorthouse at SMF and sent him a link to this thread. I suggested he might want to contact MN to see if they wanted to do a webchat about the proposals or something like that.

Anyway - I think that was more or less the gist of it.

Hope your baby is improving

[AThingInYourLife]

"I do not agree that this proposal would raise costs. I have already explained why I think that."

Are you claiming that it is impossible that a government backed loan might increase costs?

Even claiming that it is unlikely is a pretty bold claim.

And no, I don't understand your reasons for believing that this is not a concern.

"I think a government backed loan scheme would give investors confidence that demand for places and settings would increase"

So your plan will initially increase demand.

Which normally means prices rise.

And it would give suppliers confidence that people would be able to afford their services without being too price sensitive.

If there is already high demand, inadequate supply, and high prices, how is a loan going to make costs come down?

"I didn't come here with a fully-worked proposal, this was intended to be a discussion about an idea I had."

I know, that's why I'm raising possible issues that need to be addressed. I thought I was taking your idea seriously.

I think it has merit. There is no intention to disparage it. Just to think it through.

"Perhaps it's just your peremptory style of posting."

Likely. What seems to me to be slightly rushed, spare writing seems often to be taken as some kind of fury.

I'm just distracted and trying to make my point succinctly.

Maybe I should use more smileys.

"There's no need to act like a House of Commons Select Committee Chair having fun in front of the cameras."

:o

You flatter me :o

[olgaga]

Perhaps it's just your peremptory style of posting.

I didn't come here with a fully-worked proposal, this was intended to be a discussion about an idea I had. There's no need to act like a House of Commons Select Committee Chair having fun in front of the cameras.

While the idea prompted this thread, I have subsequently discovered that proposals along these lines have already been made by the SMF. You might want to post your comments on their blog too.

Decide whether regulation was required, or decide whether it was a good policy to pursue at all?

Both.

Do you agree that it is a problem if this raises costs

I do not agree that this proposal would raise costs. I have already explained why I think that.

If (as you claim) the problem with costs of childcare is caused by insufficient supply, (how) do you intend to tackle that

I would prefer to answer this question myself rather than use your multi-choice options: I think a government backed loan scheme would give investors confidence that demand for places and settings would increase, as it would make a return to work more viable for larger numbers of parents.

Of course, whether there is enough employment for everyone who might want to return to work is another matter entirely - so much hinges on confidence in the economy generally.

There will be little point to any of this if unemployment starts rising substantially.

[AThingInYourLife]

Why do you imagine my cage was rattled?

I'm sitting under a sick baby today, I would struggle to be less rattled.

"look at the results, then decide whether regulation was required."

Decide whether regulation was required, or decide whether it was a good policy to pursue at all?

Do you agree that it is a problem if this raises costs, or do you think short-term affordability justifies making childcare more expensive?

If (as you claim) the problem with costs of childcare is caused by insufficient supply, do you intend to tackle that
A first
B in tandem with loan scheme
C not at all

Pursuing A would ideally make the proposal redundant.