Because of my work for the Female Founders Forum I was invited to appear before the Work and Pensions Select Committee to talk about Universal Credit and childcare.
The current Universal Credit system, at least as it is used to fund childcare, seems to be broken. There are multiple different systems for subsidising childcare and they are clunky and difficult to navigate. The support parents can access varies a lot with their circumstances; how much they earned in the past month, how much other members of their household earn, term times, how many children they have, and how old their children are.
Parents giving evidence to the committee said they weren’t aware of all forms of funding, like the flexible support fund, and many said the fact that they had to pay for costs upfront, before they knew how much universal credit they were going to receive, made managing their budgets difficult.
To make matters worse, the maximum reimbursement for childcare has been frozen since 2005 and the cost of childcare has almost doubled since then. This is over twice the rate of inflation. Effectively, what this means is that the number of hours of childcare that a family has funded has halved over time and this effect is strongest in London and the South East. Currently, in 99% of local authorities, the cap does not cover a full-time place for a child under two and in 9% of authorities it doesn't even cover a 25-hour, part time place.
On the panel, Gavin Rice, from the Centre for Social Justice, said that in the UK, a higher proportion of childcare benefit is going to wealthier families than in other countries, and that this is a mistake. Respectfully, I disagree with him.
I do not believe that childcare policies should be written with redistribution as the primary aim - there are other parts of the benefits and tax systems that are better suited to these goals. When writing childcare policy, we should be thinking about how to build a world where women can “have it all”. With childcare costs as high as they currently are, supporting women into work will mean giving tax-payer money to ordinary families as well as the worst off.
Across heterosexual couples with children, the bulk of unpaid labour falls to the wife.While significant culture change is happening, and more men are contributing to managing a household and taking care of their children, as things currently stand, women are much more likely than their husbands to reduce their hours or stop working entirely. Over half (60%) of mothers who don’t work say that they would prefer to be working and 29% say that the reason they are not working are issues with arranging childcare. Almost half (46%) of mothers who are working say that they would increase their hours if childcare were not a barrier.
The fact that childcare is so difficult to access is plausibly the greatest driver of gender-based inequality in the country. As low-income mothers struggle to care for their children and work, more children end up living in poverty. On top of that, locking women out of work holds back economic growth. And, to state what should be obvious, it isn’t fair that women should have fewer employment opportunities and less time to build their skills.
When creating childcare policy, a decent rule-of-thumb should be that no one is made worse off by working. When you account for tax, national insurance, student loan repayments, and childcare costs, some women with young children face a very high marginal tax rate when reentering work. One woman, when giving evidence to the committee said that she was made worse off by about £80 per month but that it was important for her to continue working so that she could progress in her career and set a good example for her daughter.
A simpler and more generous system would be helpful but I think something important has been lost in this conversation about how the benefits and subsidies work.
We should be asking ourselves why childcare is so expensive in the first place? The UK has some of the most expensive childcare costs in the developed world. Full time care costs 30% of the median person’s earnings - twice the OECD average.
Regulation is a key driver. We have very strict ratios regarding how many children can be cared for by an adult. For children under two years, we require one staff member for every three children. For two-year-olds, it is one adult for every four children, and for three and four year olds the ratio is usually one to eight.
The UK’s ratios are much stricter than in other countries. Countries like Sweden, Denmark and Spain have no such prescriptive ratios at all. Economic analysis suggests that if we relaxed our ratios to Norwegian levels, we could halve childcare costs. If this is true, adopting Norwegian-style regulations would reverse much of the damage caused by the past two decades of sky-rocketing costs.
There’s also evidence to suggest that we are incredibly undersupplied when it comes to childminders and nursery staff. In an earlier committee session, Helen Donoghue said that members of the Professional Association of Childcare and Early Years (PACEY) members turn away 16% of parents because they lack capacity.
Part of the reason this is happening is that it has become increasingly difficult for people to receive informal care from their parents’ friends. In 2009 there were two policewomen who would look after each other’s daughters when the other was on a shift. They did this about twice a week for ten hours. The officers were reported to Ofsted, they think by a neighbour, because this counted as illegal, unregistered childminding.
I am surprised that these rules still have not been rolled back. It takes a village to raise a child and for most of history children were cared for by a broad, trusted network of friends and extended family. It is incredibly strange that we have chosen to outlaw this practice.
These policies were put in place to improve the quality of early-years care for children. Of course, there is some benefit to children being taken care of by professionals but we know that children also benefit a lot from spending time with adults who are heavily invested in them. By making it difficult for people to start up small-scale and flexible childminding businesses in their own communities, we decrease the quality of care that children are given. And by banning informal childcare, we increase the pressure on the formal sector - which is often a worse option for parents and children alike.
Of course, the regulations exist because the government shares parents' concerns about the quality of childcare provided and they want to make sure that the children are with safe and responsible adults. One way we could increase the number of childminders, while also ensuring that children are safe, is to allow people who are already trusted with children’s welfare to do childcare. We could automatically grant licences to the parents of other children, doctors, teachers, nurses, social workers, and so on.
By both simplifying the childcare subsidy system and by tweaking our needlessly strict regulations, we have the ability to dramatically reduce the cost of childcare for parents. This would free mothers to follow more of their ambitions and would be an important step towards gender parity in workplaces.