In 1997 Labour’s manifesto contained one, rather vague, sentence about childcare. It would be safe to wager the cost of a year’s childcare (on average, nearly £6,000 for sending a child under two to a nursery for 25 hours a week) that the party’s manifesto next year will have rather more to say on the subject.
Over the past two decades childcare has moved from the wings to centre-stage of the political debate. That is not simply due to the ever-increasing cost which parents are having to bear (in March, a Family and Childcare Trust survey indicated that, for most families, the average cost of a nursery is now greater than the average cost of a mortgage), but also thanks to a realisation that it is a social and economic necessity. As last month’s IPPR Condition of Britain report outlined, Scandinavian countries have a higher number of mothers – including lone parents – in work than Britain (85 per cent in Denmark and Sweden, compared to 71 per cent in the UK) despite employment rates among fathers being broadly similar in all three countries. Indeed, four in 10 British mothers who are not in work say they want a job, and two-thirds cite the cost of childcare as a barrier. With more dual-earners and fewer children growing up in workless households, Scandinavia has been able to sustain lower rates of child poverty than Britain. The key to that achievement is the provision of universal affordable childcare. A successful childcare policy thus rests at the heart of a successful employment, welfare, family and anti-poverty policy.
Unsurprisingly, therefore, this is territory which not only Labour, but also the coalition government, has sought to claim as its own. But after initially cutting the amount of childcare costs which families eligible for tax credits can claim back from the government – and then appearing to suggest that the panacea for rising costs was simply tinkering with the ratios of the number of children that staff are allowed to care for – the Tories are playing catch-up in the final months of this parliament. In September, free provision for two-year-olds will be extended to more deprived families, while ‘tax-free childcare’ will be introduced just in time for polling day.
Labour has a clear ‘retail offer’ on childcare – a costed pledge to extend from 15 to 25 hours the free entitlement for three- and four-year-olds received by working parents – which shadow childcare minister Lucy Powell describes as a ‘marker in the ground’ to signal the party’s intention to move in stages to free universal childcare over a 10 to 15 year period. But getting there, even over that extended period, will require some tough decisions by the party given the financial constraints – and competing claims on any new spending – an incoming Labour government would face.
IPPR does the party a service by laying bare some of those choices. It sets out a plan for guaranteeing an affordable childcare place for all preschool children, with a universal entitlement to free year-round care for all those aged between two and four. Together with a plan to extend paid paternity leave to a month, the price tag is a hefty £2.66bn per annum. As IPPR rightly suggests, over time this investment will pay dividends: by raising the percentage of women in work, savings could be made in the benefits budget while the Treasury will also gain additional tax revenues.
Nonetheless, as IPPR recognises, in the short term that additional investment will need to be funded by money from elsewhere. It proposes: scrapping the coalition’s marriage tax allowance (which is due to be introduced next year); restricting pensions tax relief (in particular the tax-free lump sum which costs the government between £2bn and £4.5bn in lost tax revenues each year); and, perhaps most controversially, freezing child benefit for school-age children.
Similar ideas have been floated over the past four years. In 2012, Progress’ Purple Papers compiled a selection of potential sources of revenue to fund free universal childcare. These included not only freezing child benefit and restricting pensions, but reducing welfare entitlements for wealthy pensioners, such as free TV licences, bus travel and winter fuel allowance.
For many in the Labour party, restrictions on universal benefits – even those going to the wealthy and even when that money is redirected to childcare, where it will disproportionately benefit those most in need – are not simply unpalatable, but anathema. Labour, indeed, moved quickly to distance itself from IPPR’s proposals on freezing child benefit, claiming that this is the wrong thing to do during a ‘cost-of-living crisis’. But this belies the fact that rising childcare costs are one of the principal drivers of that ‘crisis’. Powell’s reaction in her interview with Progress (see pages 24-5) is both more logical and nuanced: she accepts that freezing child benefit ‘in and of itself might not be a bad idea’ but questions whether it is right that parents of children at school see the value of their child benefit fall in order to fund a childcare programme which will benefit the parents of preschool children.
However, the real principle at issue, as Powell recognises, is whether Labour is willing to accept that the cost of universal childcare comes at the price of benefits for all children. That challenge was outlined three years ago in The Purple Book by shadow care minister Liz Kendall. ‘Labour needs to consider how to strike a better balance between funding for tax credits and benefits, and funding for childcare and care for the elderly,’ she wrote.
As IPPR notes, Scandinavian countries have resolved this dilemma: they invest a greater share of the public money which they spend on families in childcare services available to all families than in cash benefits. Labour is right to aspire to Scandinavian-style childcare services. Now it needs to give greater thought as to how these traditionally social democratic beacons pay for them.
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