The coalition risks following the wrong path on childcare reform

Global experience shows that increasing subsidies to parents, rather than investing in services directly, is a costly and ineffective approach.

As part of next week’s Budget, the Chancellor is expected to announce reforms to the funding of childcare. While action on childcare is welcome, it is likely the changes will see a greater proportion of childcare funding flowing via parents to purchase childcare, rather than invested in services free at the point of use. The experience of other countries with a similar market-led system is that rather than leading to cheaper care, pumping more money into the market via parents leads to greater cost inflation, with little change in affordability. If the government really wants to go big on childcare, it should invest more money in services, rather than benefits.

What is going to be announced? Since the 're-launch' of the coalition in January, there have been numerous hints in the media. Despite widely-reported disagreement between the coalition partners, it appears the government has settled on offering greater funding to better-off parents via some kind of tax relief, combined with additional money tied to Universal Credit for poorer families. Beyond the previously-announced extension of the free Early Years Entitlement to the 40 per cent of poorest two-year olds, there is little sign that the coalition is looking to expand the free offer, preferring instead to give money to parents.

While it is good that the government is looking at greater childcare funding, we have to ask whether this is the best use of extremely scarce resources. The coalition hopes that putting more money in the hands of parents will lead to greater purchasing power in the market for childcare, with increased competition and innovation among providers acting to keep prices low and stable. But will this actually be the case?

In order to answer that question, we should look to the country that has been most committed to this style of funding. Australia enacted wide-reaching reforms to childcare over the last two decades, combining a mixture of de-regulation and increases in childcare benefits, whilst at the same time effectively shutting off direct funding to childcare providers.

What happened to prices? The Australian Bureau of Statistics collects robust inflation data on the cost of childcare. Looking at how prices evolved before and after the reforms provides a stark picture of the dangers attached to the changes being considered here in the UK.

In the ten years before the 1997 reforms, the price of childcare rose on average by 5.2 per cent a year, around a fifth higher than the general rate of inflation. But in the decade after 1997 relative cost inflation rocketed, with childcare prices rising by 7.2 per cent annually, more than two and a half times wider inflation. In 2008, rather than reverse course, the Australian government doubled down on their inflationary approach, increasing the value of the tax rebate offered to families. If anything it appears this worsened childcare costs – In the year to March 2012 prices rose by almost 10 per cent.

What is it about childcare that leads to this outcome? Why doesn’t parental purchasing power manage to keep costs low? Simply put, the market for childcare does not function like most competitive markets. It is inherently localised, risky for those looking to set up a business and vulnerable to severe cost pressures from staff outlays and rent inflation. Like many other public goods, it is better to let the state pool these risks and offer long-term and sustainable funding to keep costs low, rather than leave it to the market.

Will this experience be repeated here in the UK? All the signs are that the UK, which already has internationally high childcare prices, is set for further inflationary pressure. The sector in general is unprofitable, with a quarter of childminders operating at a loss last year, meaning prices may need to rise just to keep many businesses afloat. And surveys of the UK market suggest that the qualifications profile of staff in the sector has risen in recent years, but with little change in real wages. Having a higher-skilled workforce in the sector is welcome, but is likely to exert cost pressures in the near-term. All this will be compounded by the changes that will be made next week.

Throwing more money into a system that is struggling to stay afloat, as the coalition is planning to do, may look good on paper, but without controls on prices there is a real risk that the instant benefit families feel after next weeks changes will soon be eroded by price rises. Providers will see their existing set of users have a greater ability to pay, and, because of the difficulty of turning a profit in the sector, will understandably look to raise prices. Far from being a gold rush for the sector, these changes are more likely to re-enforce the status quo. At a time when there is little money around, this risks being a highly wasteful use of public resources.

What the childcare sector and parents really needs is higher and more sustainable funding for providers, with a greater number of hours offered free or at low cost to parents. It would be wrong to claim this comes cheap. Indeed, countries that have followed such a route, like Denmark and Sweden, tend to spend a larger proportion of GDP on childcare and early years provision. But by controlling the cost to parents directly, and offering a longer-term and more predictable source of funding to providers, there are real efficiency gains to be made under such a system.

All three main political parties realise the importance of childcare, and accept there is a role for the public sector in making it affordable. This is welcome. But how we go about funding childcare, either via parents or through providers and price controls, needs to be rigorously debated. We currently have a mixed system in the UK, with some free places through the Early Years Entitlement and some subsidies via the benefits system. It appears the coalition favours the latter. It is important that we realise the dangers of such an approach, and look towards a much more sustainable future for UK childcare.

David Cameron is pictured during a visit to a London Early Years Foundation nursery in London. Photograph: Getty Images.

Spencer Thompson is economic analyst at IPPR

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The internet was supposed to liberate us - let’s claim our freedom

This week the Women's Equality Party launches an e-Quality campaign against online bullying and harassment in all of its forms.

Yesterday – a sunny, energetic day in our office - someone appeared on our website, wrote that he would like to “rape all the sluts” in the Women’s Equality Party, and signed off again.

Our team of female staff read his comment, deleted it and continued working.

If we paused at every message like this, we’d never get any work done. Facing up to daily abuse might not have been formally included in my job description – or in that of our administrative officer, or our digital officer, or any other member of WE staff. But it has swiftly become part of our daily duty, nevertheless.

The abuse has heightened as our party grows. Wearying perhaps, but also a reflection of the space we now occupy on the political scene. After the fantastic results of our first election in May – when the Women’s Equality Party won more than 300,000 votes in London alone – WE provoked as much rage in some quarters as jubilation in others.

Since May we have been pressed to say what we will do next. All of those questions focused on which election we would next fight.

Our next move in fact was to prepare our submission for the Women and Equalities Select Committee inquiry into sexual harassment and sexual violence in schools. Evidence submitted to that inquiry showed the torrent of sexual abuse that young girls now face in school, including pressure to take and send sexual images that are sometimes shared widely without their consent.

Women’s rights offline have a long way to go. Women’s rights online are practically non-existent, and worse, there is an even more ingrained acceptance that this is just the way it is.

So this week WE launch our next fight for women’s rights: our e-Quality campaign against online bullying and harassment in all of its forms. We’re focusing on revenge porn because if we can get that faulty and ineffective one-year-old law rightly focused on consent and compensation, we can set a template for wider use.

Later this year we will be rolling out a national campaign for mandatory sex and relationships education in all schools; we refuse to accept the government’s opposition to this vital tool that can help end violence against women and girls.

No, it’s not the Tooting by-election that many people expected us to contest. But politics doesn’t just happen in Parliament. It happens in our communities and in our homes and in our schools.

And we want to do politics differently. We will always be looking to engage in electoral contests. But we are also looking for other ways to empower people to take action and build the broadest possible movements for change.

So with this in mind we are calling on all parties of all sizes to work on this with us - and we are optimistic as we initiate those conversations they will bear fruit.

Later this week Yvette Cooper and a group of politicians will re-launch their campaign to reclaim the Internet for women. WE are delighted to hear this and extend to them for inclusion in that campaign the specific policies that today we are unveiling:

  • To refocus UK law on revenge porn on whether the victim gave consent, rather than primarily on the perpetrator’s intention to cause distress
  • To give victims of revenge porn recourse to civil law in order to seek justice and compensation not just from the perpetrator but also from the website operators that repost non-consensual porn for profit
  • To construct digital legislation that adequately protects against online abuse and harassment in all its forms and particularly recognizes the double discrimination faced by BME women, disabled women and LGBT+ women.
  • To build equality into technology and the forces that police it by increasing the numbers of women in both fields.

The Women’s Equality Party was established with the aim of doing politics creatively. WE showed in May’s elections that we have earned the right to be heard. Now WE are asking all of the other parties to listen to our voters, set party politics aside and ensure urgently-needed protections for women and girls online.

You can read more about the campaign here. To support equal rights for women online, tweet your support with the hashtag #CtrlAltDelete so that women’s voices are no longer controlled, modified and deleted online.

Sophie Walker is leader of the Women's Equality Party.