Labour Market

More cash won’t fix our broken childcare sector, says Professor Len Shackleton


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Tax and Fiscal Policy
Responding to the TUC’s call for an “urgent bailout” of the childcare sector, IEA Editorial and Research Fellow Professor Len Shackleton said:

“Government involvement in childcare is ​an expensive melange of ill-thought-out, virtue-signalling policies.

“Subsidies cost the taxpayer ​at least £6bn per year, yet parents pay on average three times more than those in France or Germany.

“We currently get the worst of all worlds. Government restricts supply with regulation and formalisation, squeezing childminders out of the market, while boosting demand at the same time.

“For instance, we have the highest teacher:child ratios in Europe, yet there is limited evidence to suggest they impact educational outcomes. 

“Childcare subsidies have a significant displacement effect on private sector activity. In the year after the subsidy was introduced, nursery closures soared by 153 per cent. Evidence suggests that the state pays below market rate, so more subsidies will either put nurseries under further pressure, ultimately leading to closures, or require ​yet more funding as more expensive public sector suppliers have to expand to take up the slack.

“There is only limited evidence that ​subsidies increase female labour force participation – and any increases come at a high budgetary cost. There is little to suggest that disadvantaged children’s future educational progress is significantly enhanced. There is a lot of what economists call ‘deadweight’ involved with ‘free’ provision – subsidies going to ​better-off people who would have paid for childcare themselves anyway.

“We should deregulate and reassess childcare objectives. More cash – as proposed by the TUC today – isn’t the solution to fixing ​a damaged sector.”

ENDS

Notes to editors

For media enquiries, please contact Annabel Denham, Director of Communications, 07540770774

Professor Len Shackleton, IEA Editorial and Research Fellow, is available for further comment.

For more on childcare:
Getting the State out of Pre-school and Childcare
Childcare: the government is trying to achieve too many things – and ends up achieving none

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.

The IEA is a registered educational charity and independent of all political parties.



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