The creeping nationalisation of childcare

Two recent news stories indicate the pressures leading us away from a sensible policy on childcare and towards higher levels of public spending – in an area where the state was not involved significantly until just a decade or so ago.

Firstly, the interim findings of a review commissioned by the Department for Education from Professor Cathy Nutbrown of Sheffield University. Professor Nutbrown believes that too many nursery staff and childminders are insufficiently qualified in maths and English. She wants to raise the standing of childcare: she says that it is looked down on and treated as on a par with hairdressing, which is a revealing point in itself. Hairdressing is actually a useful and important service industry which offers many people the opportunity to support themselves and build businesses, and is almost entirely privately-funded. This may be why it has been looked down upon by academics and politicians for decades.

Childcare, on the other hand, has become increasingly influenced in this country by state regulation and funding, linked to the excessively detailed and arguably unnecessary – few other countries appear to have anything similar – Early Years Foundation Stage. All ‘early years providers’, whether large nurseries run by big businesses, state primary schools or childminders in their own home, have to follow a structure of learning, development and care for children from birth to five years old, monitored and overseen by Ofsted.

This has had the predictable effect of raising childcare costs substantially, and driving out of the market huge numbers of individual childminders (although it may of course have increased somewhat the numbers of unregistered arrangements) and small nurseries.

Higher costs have meant fewer families can afford childcare out of taxed incomes. This has increased the pressure on government, which has responded by making a limited amount of pre-school education available to all three and four-year olds and 40% of two-year-olds. It is difficult to credit, given the continuous talk of poor provision by childcare pressure groups, but we now spend more as a proportion of GDP on publicly-funded state childcare and pre-primary education than any OECD country except Denmark.

Professor Nutbrown’s interim review has not shown convincingly that childcare provided by existing staff is of a poor quality. Her final proposals, which are likely to demand longer periods of qualification up to and including degree level, will no doubt be supported by caring MPs, newspaper columnists (who have already shown predictable outrage that our children may be being looked after by people without a GCSE in maths), unions and other organised pressure groups. But they will raise costs further and make it increasingly difficult to control state spending in this area. They will also probably make it much more difficult for socially disadvantaged groups, including recent immigrants, to enter the childcare occupation.

The other bit of news was that HMRC has announced the latest in a series of ‘crackdowns’ on those employing nannies. The argument seems to be that too many people pay nannies cash in hand and thus avoid tax and national insurance. Guidance suggests that families should behave exactly the same as businesses employing workers, and HMRC is threatening to demand huge amounts of back tax payments and will also impose 100% fines, potentially landing families with bills for tens of thousands of pounds. It is demanding that families inform them whenever they take on a nanny. This is bullying and illogical.

Given that nannies are often shared, and that their employment with any one family is likely to be only for a year or two, they would be better considered as self-employed. No evidence has been produced that those working as self-employed are not meeting their legal obligations.

If HMRC’s crusade succeeds (and I have doubts it can do so without excessive and expensive snooping), it is said that it could lead to an increase in the cost of employing a nanny by 40% or more. Assuming demand curves for nannies slope downwards, the predictable result of that would be that fewer would be employed and that more middle-class families would seek to send their progeny to nurseries. This would be another factor raising prices again in this sector, with knock-on effects of agitation for yet more public spending.

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.

3 thoughts on “The creeping nationalisation of childcare”

  1. Posted 27/03/2012 at 12:28 | Permalink

    Indeed. At the same time we are also witnessing a similar intervention in long-term care for the elderly. Despite efforts to reign in the size of the welfare state, we will soon be witnessing its control – and destruction – of our lives from cradle to grave.

  2. Posted 27/03/2012 at 13:50 | Permalink

    Fight the state – pay cash, and vote…for which party? Not the Tories. Why doesn’t any UK party support liberty? Check out Wirral First.

  3. Posted 29/03/2012 at 09:00 | Permalink

    A friend of mine observed the ridiculous fact that she can pay her secretary out of untaxed revenue, but not her nanny. The main difference being, that if needs be, she could work without the secretary, but she couldn’t possibly work without the nanny.

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