Will more govt spending on childcare really help?

The UK government is expected to make childcare free of charge. Parents with young children in the UK spend on average a third of their household income on childcare, compared to just 13% in other countries, according to OECD figures, and 25% of parents in severe poverty in the UK have given up work, and 33% have turned down a job, because of high childcare costs.

However, UK already spends more of its GDP on government support to families than any OECD country except Denmark and France. State-funded childcare in the UK starts at three, or two for lower-income families, but it is limited to 15 hours per week. Some 10% of government support for families goes towards maternity and paternity leave, compared to 17% in Denmark. Around 26% goes on day care, compared to 49% in Denmark. Another big concession is tax credits, which Denmark does not use.

In Denmark, 97% of children aged three to five, and 92% aged one to two are in day care. While around 55% attend centres, the rest are looked after by registered childminders in private homes. Generous parental leave, flexible working hours and the absence of long-hours culture all help families with young children to be able to manage. But childcare is not free. In Denmark, families pay up to 25% of the cost of day care, with those on low incomes or single parents paying less (for the poorest, nothing), with discounts for siblings, and with the government funding the difference.

There is a case for subsidising childcare, if it makes parents able to take a job, rather than depending on state benefits. A paying job is the best welfare programme for families yet devised. But such support should go to the parents who need it, rather than in subsidies for the childcare industry. In our 1995 Pre-Schools for All, we proposed that poorer families would be given vouchers to cover the full cost of a pre-school place, with families on basic and higher-rate taxes receiving proportionately less. "Because the pre-schools provide integrated education and care," wrote our author David Soskin, "access to them would give many parents the choice of going out to work, reducing dependency on benefits." The government heeded this advice, but unfortunately, experiment with childcare vouchers became a bureaucratic nightmare – which it need not have done.

There are of course other possible models. In our 1989 report Mind the Children, we argued that employers should be able to provide childcare facilities or vouchers without employees having to pay extra tax on the benefit. We have also argued that the restrictions on home-based childcare are too onerous, raising the cost to unaffordable levels, and discouraging informal arrangements between parents.

If we are to make childcare available to all, instead of trapping poorer families on benefit dependency, then we need to address the costs of regulation and taxation, and to employ market principles and competition rather than dash towards indiscriminate subsidy or become swamped in bureaucratic red tape. Not an easy task for any government.