Repositioning Childcare – A Silver Bullet for Prosperity

Blue background of outside school gates, pink outline of parent holding the hand of a child on the left hand side of image.

Childcare in this country is broken. The UK has the second most expensive childcare costs in the world. The average cost of a full-time nursery place for a 2-year old is just under £14,000 a year, for two-thirds of families this equals the costs of mortgage fees or rent. Childcare providers are closing at staggering numbers, with 20,000 shutting between 2015 and 2022. Yet, what are parents left with in this dire situation? What does it cost, not only for parents, but the economy and the country? In order to ground an economic vision that is relevant for parents and families, Labour must reframe and reposition childcare as an essential economic enabler for productivity.

Today, many parents – significantly, a huge number of mothers – are deciding that it simply does not pay to re-enter the workforce in the early years of a child’s life. It is not difficult to see why. The high cost of childcare has meant, according to the Office for National Statistics (ONS), 43,000 women dropped out of the workplace to look after family in the last year, this was a rise of 3% on the previous year. In a cost-of-living crisis, with headline inflation of 10% (and the real rate of inflation for many food items much more than that), alongside soaring gas, electricity and petrol prices, in addition to an interest rate and mortgage cost crisis, childcare is an item that may be first on the chopping block for parents thinking about clawing back on costs.

When we talk about costs, we often think about what the parents pay. But what is the cost that society pays for this market failure?

Firstly, the impact to children is significant. Of course, there are some parents who will choose to be stay-at-home parents and that choice is to be wholeheartedly supported. However, there are many parents who will have to do that, not out of choice, but out of sheer financial necessity. That is wrong. Parents are being financially disincentivised and children’s exposure to an early years nursery or pre-school will be sacrificed, depriving those children of key nurturing opportunities to build their social skills, confidence, communication, and emotional intelligence in an environment with other children. The early years of life are increasingly recognised as the most crucial period of development for a child. All childcare providers must apply the EYFS (Early Years Foundation Stage) framework, preparing children for school in an enabling environment of positive relationships that focuses on their learning and development. Even before COVID, childhood inequalities were rising. In post-COVID Britain, we must recognise early years childcare as a great leveller. Pricing out families does nothing but entrench development inequality.

Secondly, putting parents – and mainly mothers – in a situation where they feel they have no choice but to stay at home leads to a loss of their career and skills development, removing them from the working world for a considerable period. Mothers who end up leaving the jobs market completely are three times more likely to return to a lower-paid or lower-responsibility role than those who do not take a break in their career. This means their colleagues, typically Male and typically those at a more junior level, will likely surpass them in terms of development and promotional opportunities. Professor Susan Harkness from the University of Bristol supports the Understanding Society study, the largest longitudinal study of its kind in the UK, and has said “This loss in work experience, and in particular full-time work experience, is an important part of the explanation for the gender pay gap and suggests women still suffer economically as a result of taking on childcare responsibilities. Worryingly, it appears that women who return to employment typically see their chance of moving up the occupational ladder decrease. Women who return to the same employer risk becoming stuck in their job roles with limited career progression.”

Thirdly, we have not fully reckoned with the detrimental impact that having such a significant portion of the workforce as inactive does to the economy. In a time when there are record job vacancies, there is an army of underactive and inactive workers waiting in the wings. A recent survey of 27,000 parents revealed that childcare costs have forced 43% of mothers to consider leaving their jobs and 40% to work fewer hours. Some will say, “Everyone wants a handout, why should the taxpayer pay for someone’s childcare?” But the logic is clear. A study by the Centre for Progressive Policy last year estimated that investing in childcare would boost the annual income of working mothers in the UK by as much as £10 billion, generating up to £28.2billion in economic output per annum. It is time we stopped looking at subsidising childcare as social spending, but instead look at it as an economic weapon in the fiscal arsenal to build growth and unleash productivity. Supporting childcare can yield huge economic rewards in the immediate term.

And this is not just a theory coming out of public policy think tanks. This year, Canada passed a C$30 billion (£19 billion) package for its childcare sector which would mean that parents would not have to spend more than C$10 a day (equivalent to around £6.40) on childcare. Internationally, the United Kingdom does not fare well. A 2021 Unicef report found the UK ranked 35th out of 41 rich countries on childcare provision, looking at leave entitlement, access, quality and affordability. There is much to do. But there is no shortage of ideas. One only has to look at the ambition articulated by Senator Elizabeth Warren during her 2020 Presidential Campaign to know that an informed, passionate, economically driven vision can be presented with a courage of conviction. Domestically, in addition to the studies quoted by the Centre for Progressive Policy, childcare is starting to be discussed more and more. The March of the Mummies protest in October of this year caught national attention, with campaigning group Pregnant Then Screwed advocating for “affordable childcare, flexible working and properly paid parental leave”. Mandu Reid, leader of the Women’s Equality party, has even suggested that the government appoint a permanent cabinet minister dedicated to childcare.

There is an opportunity now – a groundswell of demand for real change. Many now realise that our current economic model simply isn’t working for working people. A flagship policy that is focused on supporting workers – largely working mothers – that unlocks talent, that is pro-child and pro-parent, can spearhead a vision for a new economic settlement, where a proactive and targeted government policy can unlock the potential of an army, addressing systemic gender inequality while helping to ensure that all children get the best possible start in life. It’s time to seize it.