To the point - Tax cuts miss the mark
Vidhya Alakeson, deputy chief executive of the ResolutionFoundation
Friday, February 8, 2013
The question Treasury civil servants ask most often about spending more on childcare is whether or not it will result in more people working.
We don't have a clear answer to this in the UK, but a largely unnoticed survey of parents published last month by the Department of Work and Pensions suggests that additional investment in the right parents could pay.
Not surprisingly, the survey shows that use of formal childcare increases with household income. Lower-income families are more likely to rely on informal care largely because it's cheap or free. Nearly half of parents surveyed reported difficulties meeting the costs of childcare, with lowand middle-income families struggling the most. Nearly a fifth of parents in families with incomes between £13,000 and £35,000 said that meeting the costs of childcare was very difficult compared to just over ten per cent among higher-income families.
There is no doubt that childcare is a heavy burden for parents, but how many would work more hours if childcare were cheaper and which parents would respond most? Nearly half of all parents who currently don't work full-time said that they would take on more work if the Government were to cover the extra costs.
But there are clear differences by family income. Lowand middle-income parents were more likely to want to increase their hours than those on higher incomes but were less likely to find a job that paid enough to cover extra childcare costs; while more than two-thirds of parents with family incomes over £60,000, who did not want to increase their hours, said that they did not need to financially.
These findings should reassure the Treasury. There are large numbers of parents who want to work more and would do so if childcare were cheaper. But as I showed last month, tax relief favours higher-income households and these are the very households that are least likely to change their behaviour as a result of greater investment in childcare. Parents in lowand middle-income families who want, and need, to work more are likely to see a smaller share of any new money, even though investment in these families would be more likely to pay.
