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The Progressive Policy Think Tank

Cutting childcare regulation not best way to reduce cost for parents

Ministers urged to look to Denmark & not Netherlands

New Childcare Minister, Elizabeth Truss MP, should think again about the best way to cut the cost of childcare, according to a new report published today by the think tank IPPR.

The cost of a place at a nursery for a young child has increased by nearly six per cent in the past year, while a dual earner couple on the average wage with two young children spends over a quarter of their net family income on childcare. IPPR's report says the absence of affordable childcare is one of the main factors preventing well over a million women from taking up paid work.

New Childcare Minister, Elizabeth Truss argued that Britain could learn from the Dutch childcare system, before her promotion, in particular reforms enacted in 2005 to reduce the regulation of childminders and redirect public funding from providers to parents. Truss highlighted adult-to-child ratios in the Netherlands of 5:1 ratio for childminders caring for under-fives (compared to 3:1 in the UK) and a 2:1 ratio for children under one (compared to 1:1).

IPPR's report shows that in the Netherlands:

  • The share of children under the age of four enrolled in childcare has doubled since reforms in 2005 but that many of these 'new places' were grandparents taking advantage of their new right to public subsidies (there was a 25% reduction in the number of parents claiming the childminder subsidy during 2010, when the Dutch Government amended the 2005 reforms so as to stipulate that parents could only claim tax credits for grandparents' care if they also cared for other people's children).
  • The cost of childcare to Dutch parents is low because Dutch employers paid a third of fees. Without this contribution, childcare costs in the Netherlands would rank among the most expensive in the OECD. Dual earner Dutch parents would pay nearly as much for childcare as those in the UK, while single earner families would face much higher costs than their UK counterparts.
  • The large growth in maternal employment in the Netherlands over the last decade has been attributed, in part, to the expansion of childcare that followed the 2005 reforms but a big share of that increase in female employment has been in part-time, low paid work.

IPPR's report argues that the UK should instead follow Denmark and move from a system of cash subsidy to a system offering a national entitlement to a childcare place with high quality provider and capped parental costs, with fee relief for low-income families. The report says Denmark advanced their system through an emphasis on quality and not cost cutting.

IPPR's report shows that if Child Benefit was frozen in cash terms for a decade with the money diverted into childcare, an extra £2.5 billion a year would be available. If Winter Fuel Allowance and free TV licences (currently paid to all pensioners) were restricted to those on Pensions Credit this figure would rise to an extra £4.2 billion a year. This would generate resources sufficient to make a major impact on the quality and affordability of childcare in this country.

Nick Pearce, IPPR Director, said:

"Childcare in the UK is more expensive and of more variable quality than in many other European countries. Advocates for the Dutch system argue that the UK childcare system delivers poor value for money, for both parents and taxpayers because funding does not follow parental demand, our child-to-adult ratios are restrictive and regulation for childminders is overly burdensome, pushing up their costs.

"In reality, UK childminders can actually look after up to six children under the age of eight at one time, so long as no more than three are under the age of five and no more than one is under the age of one. The fall in childminder places over recent years have been among those catering for school-aged children, so competition from nurseries cannot be to blame.

"Rather than 'go Dutch', we would do better to look to Denmark, where parents benefit from high quality, affordable childcare but there is no additional cash payment akin to Child Tax Credit. Denmark spends only a slightly greater share of its national income on children and families than Britain, but it devotes a much greater proportion to parental leave and childcare."

Notes to editors:

IPPR's new report - Double Dutch: the case against deregulation and demand-led funding in childcare - will be available from: http://bit.ly/IPPR9763

In her report for the think tank Centre Forum, Elizabeth Truss argued:

  • Childminders should be regulated by Ofsted through childminder agencies, rather than individually. Such agencies could be developed from existing networks and offer a simpler route into childminding for those currently put off by the regulatory burden.
  • Adult-to-child ratios for childminders caring for under fives should be loosened to 5:1 and to 2:1 for babies, creating '40 per cent extra capacity'. This would allow either parental fees to be reduced, or quality to be increased (such as through attracting higher paid staff).
  • A simple, single system of demand-led support, channeled directly to parents, should replace the complex mix of public funding streams, with a 'pupil premium' element to target extra money on the most deprived youngsters.
  • Nurseries and children's centres should have the opportunity to become 'academies', independent of council control, with public funding following the child rather than coming through a local authority formula grant.
  • Parents should have the legal freedom to use their own money on informal childcare arrangements, such as with relatives or friends, who are not registered with Ofsted. Also, childminders looking after fewer than five children but not receiving public funds should go unregulated, other than having to undergo a Criminal Records Bureau check.

IPPR's new report shows that:

  • The UK is not as high a spender as the headline data suggests, and that funding is distributed unevenly across families. More importantly, we channel a far greater share of our spending on families with children through cash benefits rather than services, compared to many other OECD countries (such as the Nordics).
  • The decline in childminder numbers over the last 15 years cannot be attributed to the growth of centre-based early years providers, given that by far the biggest drops came among those catering for school aged children. Instead, the evidence suggests that a strong economy led to many childminders deciding to leave the sector for better paying work.
  • A relatively large amount of childcare regulation in this country is set out in national legislation and monitored by a national inspection agency. Elsewhere in the OECD there is a greater role for local authorities in determining and administering regulation, though such countries often have a stronger culture of quality and more established local institutions.
  • The rules on adult-to-child ratios in the UK (including for childminders) are slightly more restrictive than the OECD average for children aged under-five but countries with looser ratios tend to have much more highly qualified childcare workforces.
  • There is a strong body of evidence pointing to the benefits of high quality care on the healthy development of young children. To say that Sure Start or children's centres have 'failed' is a hugely misleading.

IPPR's report shows that in Denmark:

  • There is a national entitlement to a childcare place for all parents, from when their child is one until they start school. There is a level playing field on funding and regulation, with a mix of centre-based care and childminders in operation - with the latter supported both by local municipalities and a dedicated trade union. Parental costs are capped at a low level - a maximum of 25 per cent of the unit price - with a sliding scale of subsidies for the remaining fee. Parents pay the equivalent of £200 - £300 a month for childcare, accounting for between 7-10 per cent of their disposable income.
  • The majority of Danish childcare practitioners hold degrees in child development and earn the equivalent of £25,000 - £40,000 (just 10 - 15 per cent less than teachers). There is a union which upholds professional standards and a commitment from local municipalities to on-going training and development. This makes it possible to maintain less statutory regulation - such as on the curriculum, ratios and inspection - combined with strong local democratic oversight. The quality of care is fundamental to the impact of childcare provision on social mobility.
  • Generous leave, flexible working and good childcare make the trade-offs for Danish parents about working and caring much less sharp than for those in Britain. Even low-earning parents are able to take a full year of leave after having a baby, the options for childcare are attractive and affordable, and the workplace culture is family-friendly. Most parents receive full pay for at least six months, co-funded by employers and the state (with employer associations pooling the financial risk among firms).

In the UK, a MumsNet/Daycare Trust survey shows that over half of parents (61 per cent) said they would be happy to receive fewer benefits, such as a freeze in child benefit for 10 years, if childcare was made free or more affordable. Only five per cent supported a reduction in the number of childcare staff, even if it meant lower parental fees.

Contact:

Richard Darlington, 07525 481 602, r.darlington@ippr.org