Do-able ways to make childcare more affordable

If government is serious about making childcare more affordable for low and middle income families, then its Childcare Commission will have to persuade the Treasury to invest significantly more in childcare. There are no short cuts – but the pay-offs for families, employers and the economy will be substantial. 

With British parents facing some of the highest childcare costs in Europe, many - particularly women - are finding it almost impossible to make work pay. Evidence from other countries shows that dropping out of work while having children has significant lifetime effects on women's income and on the economy. The Resolution Foundation’s latest report, Counting the costs of childcare, confirms what we already know: the cost of childcare is the biggest barrier stopping parents, mostly women, entering and staying in employment.

Childcare costs British parents much more than elsewhere in Europe because the state subsidy is much lower here. Let’s not beat about the bush - radical reform is needed, not more sticking plaster. We need to ensure that all the various funding streams are used as effectively as possible through a Treasury review that should aim to simplify the current system.

Substantial extra funding by the government is then needed to make childcare more affordable for parents. We must not compromise on quality - better targeted funding not deregulation is the answer.

The last government invested heavily in early years and childcare but there was not enough joined-up thinking when various piecemeal initiatives were introduced. The legacy is an overly complex funding system which must be unpicked and overhauled.

But there are do-able solutions to make childcare more affordable:

• the offer of free 15 hours early education for all three- and four-year-olds should be extended to all two-year-olds, but providers must be properly funded for delivering this offer and there has to be sufficient capacity available

• the childcare element of the working tax credit should be improved to cover up to 85 per cent of childcare costs for working parents on low incomes. It should also not be reduced for families using childcare for a second or third child

• the childcare element of the working tax credit should cover up to 100 per cent of childcare costs for parents entering work for the first six months. This was piloted and could be reintroduced

• the tax exemption cap on employer-supported childcare vouchers should be raised from £55 to £75 a week.

Once Treasury has reviewed current funding, a national ‘oyster-style’ card should be introduced for all parents to pay for childcare. This card could include the free early education entitlement, the childcare element of working tax credit and the tax exempt employer-supported childcare vouchers. It would ensure that help with childcare costs could only be used to pay for childcare while giving parents choice of childcare provider.

It’s crucial for parents, children and our economy that we get this right now.

Denise Burke is director of United for All Ages and www.goodcareguide.co.uk