‘Tax breaks’ wrong solution to rising childcare costs


Economic Theory

New IEA research shows that free-market reforms insulate countries from the worst effects of economic crises

Government and Institutions

Response to the 2014 Budget

Housing and Planning

Further government interference in childcare will not lower costs

Commenting on the government’s extension of childcare tax breaks, Mark Littlewood, Director General at the Institute of Economic Affairs, said:

“Childcare costs have swelled because of increased government intervention in the sector. Further interference is not the solution. Yet again, politicians have caused a problem and then claimed to have found a means to solve it.

“Childcare is not inherently expensive, but it has become one of the most heavily regulated sectors of the UK economy. The costs of compliance, monitoring and inspection have proliferated. Minimum staff-per-child ratios have ramped up prices. Strict planning laws have led to very high fixed costs for nurseries.

“It’s high time the government realised that the lack of affordable childcare is not going to be solved by increasing subsidies, but by driving down costs. Restoring affordability through deregulation is a much more promising approach than pumping ever more resources into an unreformed sector.”

Notes to editors:

To arrange an interview with an IEA spokesperson, please contact Stephanie Lis, Head of Communications: 0207 799 8900 or 07766 221 268.

In December 2012 the IEA published Redefining the Poverty Debate – Why a War on Markets is No Substitute for a War on Poverty.  Chapter Four addresses childcare costs.

In July 2011 the IEA published Sharper Axes, Lower Taxes – Big Steps to a Smaller State. Chapter Five looked at how increasing regulation of the childcare sector has driven up costs.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

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