Book Chapter The IFS Green Budget: February 2014 8
State support for early childhood education and care in England
05 Feb 2014
• Policymakers have devoted increasing attention to the challenge of enabling parents to access high-quality, cost-effective early childhood education and care (ECEC) over the last 15 years. The government currently subsidises childcare costs in England in three major ways: employer-provided vouchers that are tax advantaged; support for low-income working families via tax credits; and access to a free part-time nursery place for all 3- and 4-year-olds and disadvantaged 2-year-olds.
• The last Budget announced that tax relief for employer-provided vouchers would be phased out in favour of a more accessible scheme that is equivalent to making childcare spending free of basic-rate income tax. It also announced a number of changes to the way in which childcare support will be provided via universal credit. Because of the way these two systems will interact, there will effectively be three different regimes subsidising working families’ spending on childcare from 2015, each with different rules. It would be simpler if these different schemes were combined into one.
• As well as the government’s latest reforms, policies to help families meet the costs of childcare have received increasing attention from other parties, with proposals to extend free entitlement to nursery education (at least for some families) having been made by both Labour and the SNP. Yet despite increasing cross-party support, there is a remarkable lack of clarity over the objectives and evidence underlying the current public debate.
• It is not clear whether the main aims are to improve child development, increase parental labour supply or reduce socio-economic inequalities: a clear overarching strategy would help bring some much-needed focus to the debate in this area. And while there is good evidence that high-quality childcare benefits children’s development, especially children from less advantaged backgrounds, robust evidence on the impact of ECEC on parents’ employment is surprisingly limited. We also know very little about the impact of the policies to support childcare that have been introduced in England in recent years.
• Given all these uncertainties, the case for further extending universal provision of ECEC is in fact not as easy to make as would seem to be implied by the growing consensus in this area. There is a danger that the current policy bidding war – welcome as it will be to many parents looking for additional support – will result in ill-targeted and inefficient use of scarce resources. We have already stumbled a long way in the dark in this policy area. It is time to stop stumbling, shine a light on the policy landscape, and plot an effective route forward.