The Childcare Problem

An increasing number of women are being forced to give up their jobs or reduce their hours because of the high cost of childcare, with long term effects on women’s career prospects. The average cost of full-time childcare is currently £385 a month but this rises to £729 for children under the age of two. Child tax credits are being cut while the cost of childcare increases, and those trying to buy childcare find provision patchy in both availability and quality.

Among those casting about for solutions to this seemingly intractable problem is the Social Market Foundation, which has proposed the introduction of a ‘use now, pay later’ childcare scheme. Under this National Childcare Contribution Scheme (NCCS), the government would provide upfront financial support for formal childcare, which parents would pay for later through the tax system.

NCCS is based on the student loan finance system. Parents would be able to access up to £10,000 from the government using a voucher scheme, paying back contributions once the income of the ‘main earner’ in a family hit a certain level. Parents would stop monthly repayments once they had paid back the amount in full, or after 20 years. Low-earning parents would not pay in full what they had initially received, but this underpayment by some parents would be recovered through a 3% above inflation interest rate on the amount borrowed.

The design of NCCS makes a number of assumptions. It assumes that parents do not object to expensive childcare and are happy to borrow money to pay for it. It assumes, presumably, that childcare providers will be willing or able to meet the infrastructure costs, like installing smart card facilities and administering aspects of the scheme. It assumes that the childcare sector, which has low margins and is characterised by unstable, low-paid employment, is sustainable.

Solutions such as NCCS, which tinker with the demand-side, do not address the fundamental problem. Childcare is extremely expensive from the perspective of the purchasing parents, and represents a significant allocation from family budgets. It is, however, very difficult to run a good quality childcare service funded only by what parents are willing and able to pay.

There is overwhelming evidence that more radical, less individualised solutions to the childcare conundrum are worth considering. A recent cost-benefit analysis by IPPR has shown that universal childcare for pre-school aged children pays a net return to the government of £20,050 (over four years) in terms of tax revenue minus the cost of childcare for every woman who returns to full-time employment after one year of maternity leave.

Affordable, universal childcare is associated with higher female employment rates, particularly for mothers. Increasing maternal employment maintains a woman’s link to the labour market, increases family income and also increases the tax base which, in turn, generates a positive cost-benefit return to the government. Wage equality within families even reduces other consequences of women’s inequality, like domestic abuse. Countries with higher maternal employment rates, such as Scandinavian countries, tend to have affordable and high-quality childcare provision alongside comprehensive, shared parental leave policies.

A universal childcare system might also offer the possibility of addressing the undervaluation of caring work. 99 per cent of those working in the early years and education sector are women. In 2009, the average pay for a qualified nursery nurse was £6.65 per hour, with this rising to £8.82 per hour for managers. Still seen as ‘women’s work’, the undervaluing of the role and the consequent low pay is a major contributing factor to the high turnover of staff and, in turn, undermining the supply of a high-quality service.

The challenge of how good quality childcare should be funded is unlikely to be resolved in the immediate future. Welfare reform by the UK Government has placed families’ ability to pay for childcare on an even more precarious footing. It’s vital for the economy, for women, and for children that any solution implemented in Scotland tackles the inequalities women face when trying to combine a career with parenthood, and in working within the childcare sector itself.