Labour slam ‘pathetic’ government plans to reduce childcare costs

Government needs to prioritise Childcare reform to boost growth

Amidst the UK political chaos that was 2022, with three prime ministers and even more chancellors sworn in, there was one policy idea that actually made sense: economic growth.

Understandably, the UK is keen on growing the economy after struggling to boost growth and trade post-Brexit. This is, partly, because the Conservative government has cut off business from their largest trading partner, the EU. The government is also trying to deal with the fact the Treasury’s coffers are running dry after years of Covid-19 pandemic support, rising inflation and energy costs and providing cash and arms to Ukraine after Russia’s invasion early last year.

UK inflation is also running rampant, and Britain is set to be the economic laggard out of comparable countries for the next few years. According to the International Monetary Fund last July, the UK’s economic output will only increase by 0.5% this year – the lowest level in the G7.

Brexit, Covid-19 supply-chain issues, and global economic headwinds are all reasons for Britain’s recent decline. The government has decided to scrap regulations and red tape – in the form of the Treasury’s Edinburgh reforms – and the ceiling on banker’s bonuses – in an attempt to jump-start the British economy and attract investment.

Attracting investment to the City of London and its financial institutions is all well and fine, but the UK job market is struggling, and, therefore, international funds can only go so far.

According to the Office for National Statistics (ONS), there were more than 9 million people between the ages of 16 and 64 that are now outside the labour market as of December last year. This group is made up of students, people with long-term health conditions, retirees and carers for young children or relatives.

But there is a rather large elephant in the room that is causing fewer people to return to the workforce, pay taxes, and contribute to the British economy, and that is an archaic, unaffordable and unfair childcare system.

Amidst the cost-of-living crisis, and with inflation north of 10% and energy bills at their highest for years, the British public – especially women – are struggling with the choice to either stay at home with their children or return to work. Recent statistics show that they are choosing to do the former as childcare prices rise and with no government intervention in the sector forthcoming.

A recent survey from campaign group Pregnant than Screwed revealed that 26,962 parents of young children found that 62% said the cost of childcare in Britain is now the same or more than their rent and/or mortgage.

More concerningly, 43% of mothers told the group that the cost of childcare has made them consider leaving their job, with 40% saying they have had to work fewer hours than they would like because of childcare costs.

In short, childcare in the UK is simply unaffordable for many. Recent analysis from the ONS and Coram family and childcare survey shows that people in the east of England and London spent a majority of their income on childcare, handing over 71% of their weekly earnings.

Last July, then-Chancellor Nadhim Zahawi, admitted the cost of childcare in Britain was the ‘biggest cost facing working families today’ when he announced a package of reforms. 

The reforms, which have now been kicked into the long grass after Zahawi was sacked after former Prime Minister Boris Johnson’s downfall last Summer, aimed to change the staff-to-child ratios from 1:4 to 1:5 for 2-year-olds.

The Treasury said at the time that this could ‘potentially eventually reduce the cost of this form of childcare by up to 15%, or up to £40 per week for a family paying £265 per week for care for their 2-year-old’, but only ‘if providers adopt the changes and pass all the savings on to parents’.

Essentially, the reforms would do almost nothing to reduce the cost of childcare and allow people to return to work and contribute to the British economy.

Elsewhere, Labour has promised to give all British families access to affordable childcare, but is yet to outline how it plans to do this, and what it will cost taxpayers. The new Australian Labor government has wasted no time in pushing through childcare reform in an attempt to boost the economy.

In July this year, new reforms will come into effect that will lift the maximum childcaresubsidy rate to 90% for families earning $80,000 (£45,000) or less, while the rate for families collectively earning under $530,000 (£302,000) will see the subsidy rate increase to 96%.

What will these reforms do? Make childcare more affordable for all families and encourage more people to return to the workforce and pay taxes.

Like many policy ideas over the past few years under various Conservative leaders, the end goal is admirable but the way of achieving it is wrong. The Treasury’s attempt to boost Britain’s ailing economy through investment and the City of London is just a sugar hit. The only way to ensure the UK gets out of its current funk, even with the detrimental effects of Brexit, is to make it easier for people to return to work, and that starts with actual, and meaningful, childcare reform.