What's the issue?

Although few governments of industrialised countries provide universal childcare, most recognise that accessible and affordable provision of high-quality pre-school childcare is an investment in the future wellbeing of children as well as a way to increase (women’s) employment.

UK childcare policy represents the failure of state-subsidised market-based provision, with parents being charged some of the highest fees in the world and a marked socioeconomic gradient in accessibility and quality of provision. Yet, investing public money to provide universal high-quality childcare is not only beneficial socially; it also has fiscal advantages due to creating large employment effects on both the demand and supply side.

Analysis

The childcare system in the UK is totally inadequate. Because of the public good nature of childcare – a service whose benefits reach beyond its direct users – relying on private funding is insufficient. Unless the government pays for those additional benefits to society, no one funds them, and childcare is underprovided. This means government intervention is required to sustain childcare provision at an optimal level.

However, over the last 20 years, increased government investment in the sector – through a complex combination of cash subsidies to low-income working parents, tax breaks and direct support to providers – has failed to tackle the issues of quality, accessibility and affordability. Quality remains poor, mainly due to low pay and qualifications, despite strict staffing ratios being required.

Access is highly unequal, too. In 2009, under-three-year-olds in the 20 per cent highest-income families were six times more likely than those in the bottom 20 per cent to be in formal childcare in the UK, compared to 1.5 more likely in Germany, Belgium and Italy, and 1.2 in Denmark and Sweden. And, since then, austerity cuts have made childcare support to low-income families even less generous.

The government also funds direct subsidies to providers for the entitlement to 15 hours of free childcare (early years education) for all three-and four-year-olds (and, more recently, an additional 15 hours for those with parents in employment), with slight variations across the four nations of the UK.