Elizabeth Truss MP: We need a childcare revolution

Elizabeth Truss is MP for South West Norfolk and founder of the Free Enterprise Group of Conservative MPs.

Rising childcare costs are affecting families and businesses. If parents are not able to afford to work, we lose skills in the long term. Highly educated women can end up on the “mommy track” later in their careers, taking on less responsible and less well paid positions than their male counterparts. Labour’s record on the issue is dire; since 2005 the number of childcare places has stagnated and in the last decade costs have almost doubled. The Government needs to instigate a revolution in childcare, like the free schools and academies policies in education that puts parents in the driving seat.

The left has made the running on childcare. They have perpetuated the myth that it’s all about Government spending, in fact British state childcare spending as a proportion of GDP is already almost twice that of other leading countries. The problem is the policy has been excessively rigid, focused on state provision and cost a bomb. Conservatives have shied away from the debate, partly due to divisions over the best ways of caring for children.  We should not confuse strong childcare policies with parental choice. The economic reality is that many low and middle-income families cannot afford long periods out of the workplace.  More than half of couples with children both go out to work.

Labour’s legacy to working parents has been rising costs and static supply, with the number of childcare places constant since 2005. In 1997, half of all childcare was provided by childminders.  This is hardly surprising given that childminders, like informal childcare provided by friends or relatives, are cheaper, more flexible and based in the home. Since then the number of childminders has dropped dramatically.  By 2010, only 15% of the total number of registered childcare places was provided by childminders.  The number of registered childminders fell by 45% from 100,000 in 1996 to 55,000 in 2010.

Once a cheaper option, childminders are now burdened with all the costs of nurseries. Childminders are subject to compulsory registration requirements, mandatory staff-child ratios limit the number of children a childminder can care for, and the Early Years Foundation Stage imposes a compulsory curriculum with 69 targets for children to achieve by their fifth birthday. Those who argue that all of these regulations are necessary to ensure quality should consider that forty two percent of families rely on informal childcare that is subject to none of these checks at all.

The previous Government rebalanced the market towards formal childcare, with targeted subsidies. These places are suitable for some but difficult for those who work shifts or unpredictable hours.  Initially, free places for 3 and 4 year olds allowed the expansion of many quality private sector nurseries.  But the guarantee of 15 hours of free childcare has placed a huge strain on providers because the value of the Government voucher is often less than providers need to supply the service. In 2006, the Government banned nurseries from charging top-up fees, preventing parents from making up the difference.   As a result, 10% fewer providers of full day care were making a profit by 2009, just over a third in a total, compared to 2003.  Providers are faced with the undesirable choice of charging a large amount for the 16th hour of care to cover their costs or being pushed out of the market.

Meanwhile Labour poured huge sums into demand-side subsidies: the childcare element of the Working Tax Credit, electronic vouchers, the Child Tax Credit, Child Credit, and the Sure Start Maternity Grant. In 2005-06, £23.2 billion was distributed to families with children through demand-side funding.  While many of these schemes suffered from poor take-up, only 26% of eligible families benefited from the Working Tax Credit in 2008 and 1 in 50 employers operated an electronic voucher scheme, they also reinforced inflexible, state-controlled systems.  Families must use OFSTED-registered providers to make use of the benefit.

As a basic economics textbook will tell you, if demand is fuelled whilst restricting supply, the price goes up. Thus it has proved with nursery fees increasing beyond the rate of inflation every year during the past decade.  The average family spends a third of their income on childcare, the highest of any leading country, despite the UK devoting nearly twice as much of our GDP to early years spending as most other OECD countries.

Freedom and choice is needed for modern parents and businesses to function. Top-ups, which were banned in 2006, should be allowed and vouchers made more flexible. In the same way that Michael Gove has successfully pursued a policy of free schools and academies that puts parents in control, he should do the same in childcare.  Nearly half of all parents already use nannies, childminders, and after-school groups which are not OFSTED-approved, along with care provided by friends and relatives. Government policy needs to find a middle ground which supports these choices rather than penalising them.  A “free childcare” policy would not just benefit one-size-fits-all institutions under the bureaucracy of Ofsted.  It would be parent-centred, meaning that parents were trusted to make the best judgments about their children’s care.