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Where was Osborne's break with Brown's childcare legacy?

By Paul Goodman
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There is a puzzle about yesterday's childcare announcement in George Osborne's autumn statement.  The Chancellor said that he wants "to ensure that children born into the poorest families have a real chance to become [engineering and science graduates]", and added that the Government will double the number of poorer children who receive free nursery care - "40% of two year-olds - 260,000 children - from the most disadvantaged families".

So on the one hand, Osborne is offering places to poorer parents.  But on the other, the cost of childcare places looks set to rise further - since, after all, there can ultimately be no such thing as a free childcare place, any more than there is such a thing as a free lunch.  As Elizabeth Truss wrote on this site about this subject earlier this autumn: "a basic economics textbook will tell you, if demand is fuelled whilst restricting supply, the price goes up".

And as she pointed out, "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".  Childcare costs have soared over the last 20 years: nurseries by 56%, childminders by 120%.  Add new regulation to restricted supply - the one helping to drive the other - and parents face a combination of higher prices and fewer options.

The Chancellor could have tackled the problem by easing supply as well as increasing demand.  I have suggested examining the burdens private, voluntary and independent providers carry that schools do not, such as rates, VAT and the cost of inspections.  Truss has advocated allowing parental co-operatives to open - a parallel to Michael Gove's free schools policy - and easing the restrictions on childminders.

Some of these ideas would cost nothing.  It is thus strange that Osborne has shown so little interest in breaking down the barriers to market entry, and helping to make childcare more affordable.  It will be argued that the parents who will gain the new places will do so free of charge.  But providers tend to find ways of getting round what they sometimes claim is the double whammy of Government under-funding for the places and bans on top-up fees.

These include charging parents for extra hours - thus passing costs on even to the disadvantaged parents that the Chancellor wants to help.  Osborne's childcare strategy seems to be expanding a scheme which threatens higher prices for the same places, and which doesn't really tackle the most needy families by offering targetted early intervention: it can't do, after all, since it will be aimed at 40 per cent of all two year olds.

The essence of Brown's childcare policy was to boost the role of the state - first, by introducing more means-testing and thus undermining family allowances; second, by tilting the provision playing-field towards schools and away from PVI providers and, third, by centralising regulation and drawing children from birth into the Early Years Foundation Stage framework.  The Chancellor hasn't yet strained to dismantle this framework.

His plan to scrap child benefit for higher taxpayers is justifiable as a short-term deficit reduction measure.  But it dovetails suspiciously with the Treasury's long-held sympathy for scrapping universal family allowances altogether and replacing them with means-tested benefits.  This explains its institutional resistance to the kind of tax breaks that Nadine Dorries made the case for on this site yesterday.

Osborne will be eager to avoid the "Osbrowne" label.  It's odd, then, that the main childcare announcement in the autumn statement invites it to stick.


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