The political problem of parents priced out of work

The government is slowly waking up to the crisis in affordable childcare.

With the economic climate looking unremittingly bleak, government will have to focus on ways to ease the pain for people on low and middle incomes feeling the famous squeeze. One area that has grabbed ministers’ attention is the rising cost of childcare. This is problematic not just because it is a drain on parents’ income, but because it can even discourage them from going to work. Eleven per cent of full-time mothers say they stay at home because they can’t afford the costs of childcare. Twenty-four per cent of those using childcare say they struggle to meet the cost.

Those statistics — and plenty more that are equally interesting — are contained in a new pamphlet by the Social Market Foundation thinktank. It catalogues in some detail the factors that have driven up the cost of childcare as a proportion of household income. Funding and benefits that were introduced at the end of the John Major government (the ability to discount childcare costs from income when applying for housing benefit, for example) and during the Labour government (childcare vouchers, free nursery hours and tax credits) have been frozen or cut, while costs have risen. Meawnhile, as general wages have stagnated, ever more households are relying on two incomes to make ends meet. I recommend the pamphlet — it isn’t too long and is full of useful data — for a more detailed account of what has happened.

The bottom line is that government will have to step in and rebuild some of the lost subsidy or face more women — and some men too — dropping out of the labour market just to look after their children, which is bad for the economy and, in terms of developmental research cited in the report, bad for kids too.

This is an issue that poses a bit of a problem for Iain Duncan Smith, whose Universal Credit (UC) is supposed to make work a more lucrative and attractive option for people currently on benefits. As currently modelled, the UC contains a disincentive for second earners in households with children going back to work (their benefits will be withdrawn faster than would be the case when there is just one earner in a household.) This is either a mistake or, just possibly, the result of a small “c” conservative prejudice about what constitutes a healthy family set-up — ie. reflecting a view that “second earners”, usually mums, should be staying at home with their kids. Official government policy, of course, is to get as many people who can work into work as quickly as possible.

In any case, the government is desperately trying to work out ways to make childcare more affordable, which means finding ways to move money around within a limited pot. Then there is the secondary problem of who in the coalition gets the credit for helping families pay for nursery places. I’ve written before that this is an area where Nick Clegg and IDS compete for the right to sound compassionate. It is plainly within the DWP remit, but it is Clegg who has flagged up the problem and pushed it at “quad” level — that is, the committee of four top ministers who coordinate coalition policy.

I understand that an announcement on more childcare support is ready, but that it has been delayed by arguments over who in the coalition should have the privilege of doling out goodies when there is so much doom and gloom dominating the rest of the news agenda.