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Despite a decade of intensive reform on services for young children, parents in Britain still pay 70 per cent of their childcare costs compared to the European average of 30 per cent. The cost of a full time nursery place has risen above the rate of inflation every year for the last five years. Although Government spending has increased significantly since 1997, it is still lower iteBios iacn hlcr Choice Childcare Financing Britons: Little than in many other European countries. Above all, State funds are largely targeted to institutions not families and the financial support that is available for families in the form of tax credits does not support parental choice and is difficult to access.

Cultural and social diversity are increasing in twenty first century Little Britons: Britain. Flexible working arrangements have become routine, even essential in many industries and atypical jobs have become the norm. In most public services now the focus is on Financing the consumer and on leaving people free to make their own decisions as to how, where and when they receive services. But this is not the case for families with children. Despite Childcare Choice Government’s many policy initiatives and increased spending, choice remains limited and ignores parents varied needs and preferences when it comes to looking after their very young children. ahrn ai,KrnBaly ml rc n oiaMitchell Louisa and Price Emily Bradley, Karen Hakim, Catherine

This report assesses whether spending differently, by shifting the balance of funds from institutions to children, as well as spending more, would better meet twenty-first century family needs. We assess research on parental preferences and review how State childcare is currently funded, how it supports individual families and its impact on the private and voluntary sectors. We conclude that money should follow the child to provide families with real choice regarding childcare in the first three year’s of a child’s life before pre-school commences and make policy recommendations based on that conclusion. editedCatherine by James Hakim, O’Shaughnessy Karen Bradley, Emily Price and Louisa Mitchell

£10.00 ISBN: 978-1-906097-21-9 oiyExchange Policy Policy Exchange Clutha House 10 Storey’s Gate London SW1P 3AY www.policyexchange.org.uk Little Britons Text_HDS:Little Britons Text_HDS 28/3/08 10:12 Page 1

Little Britons: Financing Childcare Choice

Catherine Hakim, Karen Bradley, Emily Price and Louisa Mitchell

Policy Exchange is an independent think tank whose mission is to develop and promote new policy ideas which will foster a free society based on strong communities, personal freedom, limited government, national self-confidence and an enterprise culture. Registered charity no: 1096300.

Policy Exchange is committed to an evidence-based approach to policy development. We work in partnership with academics and other experts and commission major studies involving thorough empirical research of alternative policy outcomes. We believe that the policy experience of other countries offers important lessons for government in the UK. We also believe that government has much to learn from business and the voluntary sector.

Trustees Charles Moore (Chairman of the Board), Theodore Agnew, Richard Briance, Camilla Cavendish, Richard Ehrman, Robin Edwards, Virginia Fraser, George Robinson, Andrew Sells, Tim Steel, Alice Thomson, Rachel Whetstone. Childcare_HDS:Childcare_HDS 27/3/08 13:26 Page 2

This report was compiled by Emily Price to the 2005 General Election when she and Louisa Mitchell of Policy Exchange worked on the development and costing of with Dr Catherine Hakim and Karen a broad range of policies. She has a degree Bradley as consultants. in Mathematics from Imperial College, London Dr Catherine Hakim is Senior Research Fellow in the London School of Economics. Emily Price has been involved in a num- An internationally recognised expert on ber of Policy Exchange projects. This is her women's employment, social and family first on the childcare sector. Emily does policy, and labour market trends, she is a fre- much voluntary work and has trained as a quent contributor to media debates on fam- documentary maker for a London based ily policy, women's position in society and charity that supports projects in Ghana. gender equality issues. Her publications She read PPE at Oxford University, before include over 70 papers published in social spending a year working in Thailand and a science journals and edited collections. year working in China with pre-school Recent books include Models of the Family in children and studying Mandarin. Modern Societies (Ashgate Press), Work- Lifestyle Choices in the 21st Century (Oxford Louisa Mitchell is a Senior Fellow of University Press), and Key Issues in Women's Policy Exchange. She recently published a Work (Glasshouse Press). report on building a culture of philanthro- py in the financial services industry and Karen Bradley is a Chartered Accountant this is her first in the childcare sector. and Chartered Tax Adviser with 15 years Before joining Policy Exchange she wrote experience advising clients in the City of for the Financial Times, was Director of London. She has also worked in the two non-profit organisations in the envi- Conservative Research Department advis- ronment sector and spent eight years as an ing on economic and fiscal issues and in investment banker. She read Chinese at the Conservative Policy Unit in the run up Cambridge University.

Published by Policy Exchange, Clutha House, 10 Storey’s Gate, London SW1P 3AY www.policyexchange.org.uk

ISBN: 978-1-906097-21-9

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Contents

Acknowledgements 4 Foreword 6 Executive Summary 8 Introduction 11

1 Parent Power 13 2 Sure Start 34 3 Funding for Families 49 4 Proposals for Reform - Family Choice and Flexibility 64

Appendix A 75 Appendix B 78 Appendix C 80 Glossary 83 Bibliography 86

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Acknowledgements

Thanks go to Abi Senthilkumaran and Emily Dyer for their research support, James O’Shaughnessy for being the driving force behind the project and Philippa Ingram for her editorial support. We also benefited greatly from the expertise of numerous individuals and organizations. We thank all those named, and unnamed, for the generous gifts of their time and expertise:

Annette Brooke MP,Liberal Democrat Spokesperson for Children, Schools and Families Carla Cook, Just Learning Carole Edmond, Managing Director, Teddies Nurseries Denise Burke, Head of Childcare, London Development Agency Derek Mapp, Former Executive Chairman, Leapfrog Day Nurseries Donald Hirsch, Poverty Advisor to the Joseph Rowntree Foundation Professor Edward Melhuish, Executive Director, NESS Birkbeck University of London Eleanor Laing MP, Former Shadow Minister for Women & Equality, now Shadow Minister for Justice Emma Knights, Joint Chief Executive, Daycare Trust Hayley Wilson, National Day Nurseries Association Professor Helen Penn, Director, International Centre for the Study of the Mixed Economy of Childcare (ICMEC) University of East London Jay Belsky, Professor and Director, Institute for the Study of Children, Families and Social Issues, Birkbeck University of London Jessica Renison, Full Time Mothers Jonathan Bell, Director, Just Learning Julian Grenier, Head of Kate Greenaway Nursery School and Children’s Centre Juliet Chalk, Full Time Mothers Liz Gardiner, Policy Officer, Working Families Liz Roberts, Editor, Nursery World Mairead Sheerin, Full Time Mothers Margaret Mason, Managing Director, Children 1st at Breedon House Maria Miller MP, Shadow Minister for Children Marie Peacock, Full Time Mothers Maxine Hill, Policy and Research Manager, Daycare Trust Mike Brewer, Institute for Fiscal Studies Mike Thompson OBE, Chief Executive, Child Base Limited Norman Glass, Chief Executive, The National Centre for Social Research Pamela Meadows, Visiting Fellow, National Institute of Economic and Social Research Patricia Holding, Director, Oak Tree Kindergarten Ltd Paul Goodman MP, Former Shadow Minister for Childcare and Shadow Economic Secretary, now Shadow Minister for Communities and Local Government Dr Penelope Leach, Senior Research Fellow, Birkbeck University of London Professor Peter Moss, Faculty of Children and Health, Thomas Coram Research Unit Rosemary Murphy OBE, Former Chief Executive of National Day Nurseries Association Professor Shirley Dex, Centre for Longitudinal Studies, Institute of Education, London Steve Alexander, Chief Executive, Pre-School Learning Alliance Teresa Smith, Department of Social Policy and Social Work, University of Oxford

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Tim Loughton MP, Shadow Minister for Children Tom Papworth, National Childminding Association

The views expressed in this report are not necessarily those of the people we interviewed and acknowledge above, but are those of the people who researched and compiled this report.

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Foreword

What do families want when it comes to who should have maximum power in childcare? That is a question whose determining who will provide care for their answer seems to be considered all too children. How can anyone really argue rarely in so much of the discussion – and with that? Even if we must acknowledge heated debate – about childcare policy. that there exist households in which par- Evidence about developmental benefits of ents lack the ability to act in the best inter- good quality childcare and developmental ests of their children because they all too risks associated with extensive time spent often fail to act in their own best interests, in childcare is often selectively cited in such exceptions should not shape the rules policy-related discussions to advance for all. Yet all too often they seem to. Why causes that would in all likelihood be else, the authors of this report implicitly advocated even without putatively sup- ask, does so much childcare policy seem to portive evidence. This is not surprising support only certain parenting, employ- because children, families and childcare ment and childcare choices? If parents do are issues that are heavily shaped by atti- know best – on average, most of the time, tudes, values and ideology – probably just and in most cases – shouldn’t State as they should be. resources be given directly to them so that What Little Britons: Financing Childcare they can decide how the nation’s youngest Choice makes clear is that in Britain, just as citizens are cared for? Why should some in America, attitudes, values and ideology choices – for the parent to be employed not only inform analysis of family and and for the family to use registered care childcare policies, but most importantly rather than relatives – be more highly val- family decision-making about who will care ued, or at least subsidised, than others? for their children (for example, nannies, Despite the rhetorical nature of the two childminders, nurseries), for how long preceding questions which might seem to (part-time, full-time), beginning when imply that there is no counter argument to (aged 6 months, 18 months, 36 months) be made here, I am not naïve to the real and in what locations (at home, childmin- and fundamental disagreements that exist der’s house, childcare centre). Yet, as the regarding the role that the family and the report also makes clear, for many families State should play in deciding how taxpayer decision-making on a topic where, perhaps, funds are spent on childcare for very young real choice should reign supreme is deter- children. However much I endorse much mined by many factors other than simple of this report’s central plea for letting par- preference, not least what childcare is avail- ents choose how tax money is spent on the able, at what cost parents can afford and, care of children in their first three years of most notably with regard to this report, life, I simultaneously embrace the view what options government policies subsidise. that children do not belong only to their Were one to ask a very young child: families. As any country’s most basic and “What do you want?” the answer would be important natural resource, it is indis- clear: “Someone to care for me well, to love putably the responsibility of the me irrationally and to do so for many years Government to ensure that children are on end.” Even though the report never cared for reasonably well, most especially explicitly addresses this “children’s ques- when State funds are to be used toward tion”, it concludes that it is parents who are that end. in the best position to know what is best More perhaps than anything else, what I for their children; and thus it is parents most applaud about this report is that it

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seeks to expand debate on how the State Parental Care Allowance (PCA), similar to should fulfil this responsibility. For too long those implemented in Norway, Finland in my opinion, “what children want”, as and France. So let the expanded debate best, even if imperfectly reflected in “what begin with regard to how, in the diverse, parents want” has not figured as centrally in globalised, 21st century Britain in which policy-making, as the authors of this report we live, the needs of children, families and also think it should. As the report makes society can more generally best be met. Let clear, many parents do not have careers but increased consideration be given to what have jobs. And thus for many parents being parents really want in the case of childcare employed outside the home does not pro- and to increasing their power, by means of vide the intellectual and psychological nour- a PCA, to exercise real choice. The authors ishment that it does for those of us fortu- of this report have provided a thoughtful nate enough to have careers. As a result, for analysis of childcare research, policy, fami- many such parents, it is clear that were they ly employment patterns and parental pref- given greater choice than economic and erences, leading them to propose a policy even ideological circumstances often afford, based centrally on parental choice, while they would opt to spend more time caring estimating financial costs and even poten- for their very young children rather than tial sources of funding. As a result, there is arranging for others to do so. much grist for the intellectual mill. Not all will agree with this analysis, nor Perhaps some minds might even be should they. And certainly not all will changed. embrace the proposal advanced in this report of redirecting already committed Jay Belsky childcare funds to pay parents for caring Professor and Director, Institute for the Study of for their own children – or for selecting the Children, Families and Social Issues, childcare of their choice – through a Birkbeck University of London

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Executive Summary

Childcare requirements are most intensive considerable scepticism about whether during the first three years of a child’s life such ambitions will be adequately funded and these years are the focus of this report. and that poorly subsidised State provision We assess research on parental preferences will damage the market as a whole. The and review how State childcare is currently National Audit Office has commented funded, how it supports individual families that millions of pounds of public money and its impact on the private and voluntary are being invested to start up childcare sectors. We conclude that present arrange- services that may later collapse.3 ments, although a great improvement on The Early Years Entitlement is a pay- the past, are not flexible enough to meet ment to nurseries for 3-4 year old chil- the needs of today’s varied family struc- dren to provide each child with 12-and-a- tures and working hours. half hours a week of pre-school in a regis- Despite a decade of intensive reform tered nursery, 33 weeks a year. As this and total spending of £17 billion from report focuses on children up to 3 years 1997 to 20061 on services for young chil- and on childcare prior to pre-school edu- dren, parents in Britain still pay 70 per cation, we have not analysed it in detail. cent of their childcare costs compared to However, the creation of the Department the European average of 30 per cent.2 Our for Children, Schools and Families recommendations would mean increased (DCSF) – formerly the Department for government spending, but above all they Education and Skills (DfES) – may bring would mean different spending – rather the childcare and pre-school education than funding institutions directly (the sup- budgets together and our recommenda- ply side) we believe that the money should tions for funding childcare for 0-3 year follow the child (the demand side). olds would be simple to extend to 3-4 The Government’s two principal year olds. financing streams for institutions are Sure The two financing streams for parents Start and the Early Years Entitlement. are the childcare element of the Working Sure Start has been changed so often in its Tax Credit (WTC) and an electronic short life that, despite its name, people voucher scheme. A snapshot of the num- are unsure what it stands for. When first ber of the families claiming the childcare

1 Stanley K, Bellamy K and established it was intended to provide element of the WTC in December 2007 Cooke G (2006), Equal Access? integrated family support services and shows that £1.4 billion was being distrib- Appropriate and affordable 4 childcare for every child, promote social inclusion, especially in the uted through it. Although payments are Institute for Public Policy most disadvantaged areas. However there made directly to parents, the underlying Research is now a general perception that it exists policy aim of linking tax credits to child- 2 Daycare Trust (2007) Childcare costs continue to rise beyond primarily to provide centre-based daycare. care is to encourage lone mothers back parents reach http://www.daycare Some Sure Start Children’s Centres do into work as a way of addressing child trust.org.uk/article.php?sid=292 supply childcare, some have partnerships poverty. However, in 2005 only 223,800 3 National Audit Office (2006), Sure Start Children’s Centres with private and voluntary sector nurs- out of over one million eligible single par- 4 HMRC Child and Working Tax eries, but others do not. A cost-benefit ents claimed it.5 The electronic vouchers Credit Statistics – Provisional Awards at snapshot dates. analysis of its different services seems allow for childcare payments to registered http://www.hmrc.gov.uk/stats/pe impossible due to the lack of measurable providers to be deducted from gross rsonal-tax-credits/cwtc-quarterly-stats.htm outputs. Although it is hard to argue income so that parents can save tax and

5 Skinner C (2006) How can against Sure Start’s latest goal of a nation- National Insurance contributions on childcare help to end child pover- al network of Children’s Centres offering them. However, take-up is extremely lim- ty? for the Joseph Rowntree Foundation, University of York integrated services for children, there is ited because so few employers operate the

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scheme – it is estimated that only one in should no longer be linked to formal, reg- 50 eligible uses it.6 istered care so that those parents who pre- Eligibility is the key problem with the fer informal care (grandparents, childmin- WTC payments, as well as uncertainty ders) or to look after their babies and tod- regarding incorrect payments and reclaims. dlers themselves, are also supported. The work requirements are restrictive and We propose scrapping the childcare ele- families must use formal (Ofsted registered) ment of the Working Tax Credit, the elec- care, which limits parental choice. tronic vouchers and the one-off Sure Start Moreover, income cut-offs are very low as Maternity Grant and providing instead a the tax credit is largely designed to assist universal Parental Care Allowance to par- lone parents. Our analysis of individual ents with children of 0-3 years as follows: families illustrates that a low income couple working full time receive only 13 per cent of £50-60 per week paid direct to all par- their childcare costs per year for their child ents with children of 0-3 under two, compared to a low income cou- This is in line with parental allowances ple with one parent working part time and in other European countries at around therefore requiring fewer hours of childcare 15-20 per cent of GDP per capita and who receive 55 per cent of their costs and is equivalent to around 40 per cent of compared to an average income lone parent average income of the average part- who receives 40 per cent of their costs. The time job; Institute for Fiscal studies reported in 2005 Payable from birth or after maternity pay that, as a consequence, there were 50,000 has ceased until the child starts to use more single mothers in work – and 13,000 early years services in the first term after fewer mothers from two-parent house- the third birthday holds.7 In December 2007, just 145,000 Those receiving a maternity package are (35 per cent) of the total 427,600 families already financially supported and the claiming the childcare element of the WTC PCA should not commence until that were couple families where both parents support ceases, either through returning were working.8 to work or electing to stay at home to The Government’s own research reveals look after the child. All 3 year olds are that parents’ views about the care of their eligible for Early Years Entitlement 6 See research carried out by very young children vary greatly. However, a which, with a target of 20 hours per Childcare Choice, a childcare substantial proportion of first-time mothers week, provides childcare as well as edu- voucher specialist, at www.childcarechoice.co.uk/docu want to look after them themselves: in 2005 cational development. If successful for ments/Parentscantbebothered010 a study found that 80 per cent preferred the 0-3 group, the PCA could become 507AH.pdf them to be cared for in the home until their the principal non-schooling payment 7 Brewer M, Duncan A, Shephard A and Suárez M first birthday, dropping to 57 per cent by before compulsory education begins and (2005), Did Working Families’ Tax 9 could be extended to 3-4 year olds in Credit work? The final evaluation their third birthday. This preference conflicts of the impact of in-work support with the Government’s strategy to encourage place of EYE, which currently funds on parents’ labour supply and take-up behaviour in the UK, mothers back into paid work. institutions on their behalf; Institute for Fiscal Studies; Not tapered, meaning that the same www.ifs.org.uk/publications.php ?publication_id=3379 amount is paid to each child no matter 8 HMRC, Child and Working Tax Proposals for reform how many children are in the family Credit Statistics, December 2007

We propose that funding support for Tapering adds complexity. In addition, 9 Houston D and Marks G childcare should no longer be linked to few families have more than one child (2005), “Working, caring and sharing: work-life dilemmas in employment, so that parents have genuine between 0 and 39 months (average time early motherhood” in Houston D (ed), Work-life Balance in the choice over whether to work or not, rather a child starts to benefit from the Early 21st Century, Houndmills and than when and how to work. In addition it Years Entitlement) and fewer between 9 Palgrave Macmillan

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Financing childcare choice

months (average time Maternity Pay 1.5 per cent of GDP, in line with ceases) and 39 months; Scandinavian countries, in which case it Not taxed could easily cover the cost of this policy Although taxing the PCA sounds pro- recommendation. Leaving that aside and gressive and makes it a more attractive assuming 100 per cent take-up of the PCA, proposal to Government as it is a form this is a £5.4 billion proposal if it is of means testing, it may act as a deter- untaxed, £4.1 billion if it is taxed.10 This is rent to work for the second and third significantly more than is currently paid lowest income deciles; out through the childcare element of the Administered through Child Benefit Working Tax Credit, the electronic vouch- The administration mechanisms are in ers and Sure Start Maternity Grant, which place already making this payment easy total approximately £1.5 billion. However, to distribute. At £55, this payment, in if these policies were successful they would addition to child benefit which is now be costing the Government significantly £18.80 for the first child (£12.10 for the more than they do now and ending them second), would mean a total weekly, will save on administration (in 2005-06 universal, non-taxed cash payment to the total administrative costs of the tax parents of children under 3 of £73.80. credit system were £587 million11). We also suggest a closer evaluation of The key strengths of the proposal are that it is: Sure Start, especially the precise amount spent on childcare provision. Research Simple to administer; shows private day nurseries to be the most Certain in terms of delivery; effective providers of pre-school education, Flexible in supporting parents who stay supplying the largest educational gains at at home to look after their young child relatively modest cost,12 but competition or supporting them to select the child- from more expensive state-funded institu- care of their choice; tions has been squeezing them hard. Provides main carers with supplemen- Tapering away the family element of the tal income if they give up work; Child Tax Credit at a figure more in line Gives parents greater choice. with average family earnings and reassess- ing whether Child Benefit should be paid Information provision and education on to 16-18 year olds are other areas where parenting are critical to this recommen- savings might be made. dation. Sure Start would provide infor- The main aims behind the PCA are to mation and support for parenting and increase choice for parents and their chil- would perform a vital role in ensuring dren in their first three years regarding that the neediest parents use the PCA to care and development, improve the par- 10 Figures supplied by the the best advantage. Targeted outreach ent’s child-raising experience and keep the Institute for Fiscal Studies services to the neediest families and benefit simple to ensure high take-up and 11 Cooke G and Lawton K (2007) Working out of poverty: A Nurse Family Partnerships should be fur- reduce administration costs. By being paid study of the low-paid and the ther explored. directly to the principal carer, it would ‘working poor’¸ Institute of Public Policy Research provide much needed flexibility, reduce 12 Sylva K, Melhuish E, the social pressure on mothers to return to Sammons P, Siraj-Blatchford I and Taggart B (2006) Effective How to pay for it work quickly and recognise the role of Provision of Pre-School Of course the ideal would be if govern- parents who stay at home to care for their Education, London: Institute of Education ment increased spending on children to children.

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Introduction

Policy Context behind it, its policy switches and other Before Labour came to power the family associated issues of childcare provision are was regarded as being largely outside the discussed in detail in Chapter 2. scope of the State and childcare arrange- As well as Sure Start, the National ments were the responsibility of individual Childcare Strategy introduced the Early families. Parents of very young children Years Education Entitlement (EYE) – a who required nursery care generally had to free pre-school education place in a regis- turn to the private or voluntary sectors. tered centre for every 3-4 year old for 12- Since 1997 the situation has been trans- and-a-half hours a week.2 The principal formed; but it is not easy to discern any aim behind this initiative which began in simple pattern or underlying philosophy in 2004, was seen to be child development. the changes – one initiative has followed Meanwhile the Working Families’ Tax another in dizzying succession, without the Credit which was introduced in 1999 and Government even waiting for the results of subsequently restructured to its current its own impact assessments. At first it form, the childcare element of the seemed that child development was to be Working Tax Credit (WTC) and Child Tax the pre-eminent goal, then encouraging Credit, was clearly part of Labour’s welfare- mothers back into paid work in order to to-work agenda and its bold pledge to end reduce child poverty became a central child poverty by 2020.3 An electronic objective. The emphasis has also swung voucher scheme for daycare administered from universal provision to targeted provi- by employers was also added. The impact sion for the most disadvantaged – and back of the childcare element of the WTC and again. Therefore, it is fair to say that the electronic vouchers are analysed in government’s childcare strategy has never Chapter 3 with the aid of five model fam- had a single coherent aim. ilies of different sizes and incomes, and 1 The National Childcare Strategy emerged from the 1998 Nowhere has the confusion been greater Appendix B explains the calculations Green Paper, Meeting the than that surrounding the Government’s behind the WTC. Childcare Challenge. For more detail on the strategy see fact flagship policy, Sure Start, launched in In 2003 the Government published a sheet at www.pm.gov.uk/ out- put/page1430.asp. The 1998. Sure Start’s services for children aged Green Paper with a renewed focus on child Executive Summary of Meeting from 0 to 3 formed the core of the development, Every Child Matters.4 It the Childcare Challenge can be found at www.surestart. 1 National Childcare Strategy and in just informed the Ten-Year Strategy for gov.uk/_doc/P0000994.doc

ten years have encompassed Early Childcare of the following year, which pro- 2 Because this report focuses Excellence Centres, Sure Start Local posed a target of 3,500 Sure Start on childcare for children of 0-3 years we have not reviewed the Programmes, the Neighbourhood Nurse- Children’s Centres by 2010 and an exten- EYE grant which currently sup- ries Initiative and, most recently, Children’s sion of the free Early Years Education ports the educational development of 3-4 year olds

Centres. Despite a general perception that Entitlement from 33 to 38 weeks and to all 3 See Tony Blair’s 1999 Sure Start exists primarily to provide cen- 3 year olds as well as 4 year olds, with an Beveridge Lecture: http://news.bbc.co.uk/1/hi/uk_p tre-based daycare, this is not the case: only ultimate goal of increasing the weekly enti- olitics/298745.stm

some centres provide such care and some of tlement to 20 hours a week. However, a 4 See www.everychildmatters. those only on a small scale. It is easiest to recent proposal to provide free Early Years gov.uk /_files/EBE7EEAC90382 663E0D5BBF24C99A7AC.pdf understand Sure Start as an umbrella term places for 20,000 two year olds living in 5 See reports at, for example, for the Government’s projects that aim to disadvantaged areas may well take prece- http://education.guardian.co.uk/e improve opportunities for very young chil- dence.5 Many in the field are sceptical that arlyyears/story/0,,2224259,00.ht ml and “Ed Balls launches plan dren through a mixture of early education, enough money will be made available to for children” press release, 11 December 2007, at childcare, healthcare and family support. maintain such expansion. Details of cur- www.dcsf.gov.uk/pns/DisplayPN Sure Start, the research evidence that lies rent spending, and comparisons with other .cgi?pn_id=2007_0235

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Financing childcare choice

OECD countries, can be found in most public services now the focus is on Appendix A. the consumer and on leaving people free to The most recent expansion of Sure Start make their own decisions as to how, where required local authorities to have a wider and when they receive services. But this is executive role in planning and implement- not the case for families and their young ing Children’s Centres. The 2006 children. Despite the Government’s many Childcare Act formalised this and gives policy initiatives, choice remains limited local authorities in England and Wales “a and ignores parents’ varied needs and pref- duty to improve the well-being of children erences when it comes to looking after and reduce inequalities”. Local authorities their very young children. It is to those all- have become the principal co-ordinating important preferences that we turn in body for the childcare sector: they are sup- Chapter 1. posed to work with both public and pri- Finally, in Chapter 4, we put forward vate sectors and consider parents’ views to our proposals for reform. Specifically we ensure provision of the highest possible suggest a Parental Care Allowance (PCA), standards.6 similar to schemes that have proved very This will not be easy. Globalisation, successful in Norway, Finland and France. immigration and affluence are increasing The figures we present on its cost under cultural and social diversity. Flexible work- different constraints were prepared for ing arrangements have become routine, Policy Exchange by the Institute for Fiscal 6 For details of the Childcare Act even essential, in many industries and Studies. The methodology is set out in 2006 see www.surestart.gov.uk/ _doc/P0002262.doc atypical jobs have become the norm. In Appendix C.

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Parent Power

Democratic systems are supposed to pay the service they can have and who provides heed to the preferences and views of citi- it helps ensure that services are designed zens. But even though the Government around their customers. An element of claims to offer evidence-based policies, contestability between alternative suppliers which implies greater attention to deliver- can also drive up standards and empower ing what parents want, there is plenty of customers locked into a poor service from research evidence on parents’ preferences their traditional suppliers,” (The Prime and views about the care and education of Minister’s Office of Public Services young children that it has generally disre- Reform, 2002, quoted in Himmelweit and garded. Land, 2007: 46-47). In some areas – Parental preferences have frequently notably healthcare, public utilities and the played second fiddle to ideologically driv- postal service – there has been a consistent en policies that focus on women’s employ- drive towards opening up markets, increas- ment as a contributor to economic growth ing competition and choice. Childcare and and gender equality more often than on women’s roles have been treated differently children’s needs. Women ministers have however, and have been particular victims been quoted in the press expressing views of the nanny state, with the Government that were openly dismissive of women who routinely making consumer choices subor- chose to be full-time mothers; Patricia dinate to politicians’ and professionals’ Hewitt, the former Health Secretary, once decisions. Childcare policies have been described mothers who did not return to complicated by a focus on female employ- work in their child’s first two years as a ment and the promotion of expensive local “real problem” (Manne, 2005: 230). authority childcare services over the devel- However, these arguments fail to distin- opment of a fully free market encompass- guish between policy for pre-school and ing home-based family care as well as cen- young children, who need continuous care tre-based group care. from one main carer, and policy for older children who are at school and already establishing independent identities. 1970s patterns of childcare Different family set-ups further cloud the and parental preferences issue: there are as many differences Earlier patterns of childcare, and prefer- between lone parents as there are between ences regarding childcare, can be found in couple parents. If there is one constant, it the first major Government interview sur- is the lack of homogeneity in families. vey that looked at women’s lives in the Government rhetoric generally supports round and in some detail – the 1980 private sector provision of services on the Women and Employment Survey (Martin grounds that they are usually more effi- and Roberts, 1984: 36-40). In the 1970s, cient and better meet consumers’ and flexible working hours were still a novelty, users’ needs: “Giving people a choice about and a rarity, even for women. The great

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majority of full-time workers, even those childcare until very recently seems largely with pre-school children, had a standard to be a response to limited parental working day starting before 10am and fin- demand for such services. ishing after 4pm. Most part-time workers had a single shift – a morning, midday or evening shift, and these fixed shifts were 1990s patterns of childcare just as popular among women without and women’s preferences children as among mothers with children Two decades later, in 1998 and 1999, the under 16 years. Cabinet Office’s Women’s Unit organised a Individual care in their own home, or major research programme entitled someone else’s home, was the norm for Listening to Women. The research used children, partly due to the relative absence focus groups, social attitude surveys and of nurseries and childcare centres. Among opinion polls to collect information on those using childcare, the vast majority (94 women’s values and priorities, what per cent) relied on family care, sometimes women saw as the policy priorities and exclusively, and this typically meant their women’s perceptions of the main barriers husband or the child’s grandmother. One- to achieving their goals, including the dif- quarter used a nanny or childminder. Tiny ficulties of combining paid work and fam- numbers used other options: a neighbour ily life. The timing of the research coincid- or friend, sometimes on an exchange basis ed with the launch of Sure Start and the (3 per cent), a private nursery or school (2 introduction of the Working Families’ Tax per cent) or a playgroup (3 per cent). Credit. However its findings did not Overall, only 9 per cent of mothers used straightforwardly support the broad gov- centres providing collective childcare: a ernment policy of encouraging mothers tiny 1 per cent used their employer’s nurs- into work, so they were used very selective- ery, 2 per cent used private nurseries and 6 ly. per cent used state nurseries. So very few The research provided a rich portrait of mothers were paying for their childcare. the diversity of women’s views on jobs, Although flexible working hours were children and family policy (Bryson et al, still a novelty in the 1970s, most employ- 1999; Worcester et al, 1999). For example, ers were prepared to accommodate moth- the studies found that one-third of women ers’ needs informally, it appears. The vast believed home and family were women’s majority of mothers (90 per cent) said they main focus in life and that women should could easily get time off work to cover sick not try to combine a career and children. children or other family problems, and a Even in the youngest age group of women small minority would use annual leave who had not yet had children, one-fifth when necessary. Part-time workers report- still believed women cannot combine a ed greater flexibility of this sort than did career and children. On the other hand full-time workers. two-thirds of women also agreed with the These patterns of childcare were rou- statement “Having a job is the best way for tinely interpreted as due to the paucity of a woman to be an independent person”. nurseries: by availability problems, rather More women were attracted to the idea of than by parents’ preferences for family care having a job (possibly part-time) than to and informal individual childcare. the idea of a career, because most women However, more recent evidence indicates are secondary earners in their households that parental preferences are just as impor- (Hakim, 2000: 68-82). Women were even- tant as questions of nursery availability. ly divided on whether being a housewife is Indeed, the limited supply of collective just as fulfilling as working for pay.

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Many women with paid jobs did not see European Union surveys showing that, themselves as career women. Rather, they across all countries, the majority of moth- felt obliged to contribute to household ers would ideally prefer not to work at all finances because of housing costs and the or part-time only, while they had pre- riskiness of relying on a single breadwin- school children at home (Hakim, 2000: ner, given job insecurity. Paid work was 90). Full-time mothers insisted that child- often regarded as an unfortunate financial care problems were not important; the rea- necessity or insurance policy, while being son they were at home full time was eagerly welcomed as an avenue for self- because motherhood and parenting took a development and independence by others. central place in their lives until their chil- Women were clear that the role of the dren had grown up and left home. One in full-time mother is undervalued by society ten said they themselves would not do paid nowadays, and that all the social pressures work or use childcare in any circum- are towards mothers returning to work stances. quickly, and certainly after children start Only one-third of women (and one- school. quarter of mothers) thought employers should have to offer special arrangements “People always say ‘Oh, how do you to help women combine jobs and child- cope staying at home?’…You shouldn’t care. The most popular family-friendly be made to feel guilty, but I think some- arrangement was special leave for sick chil- times you are, as though you’re a cab- dren (paid or unpaid), but women were bage because you’re at home.” evenly divided as to whether employers (Mother not in paid work) should have to offer such a scheme or not. Otherwise, the most popular family- “I’ve found since my youngest started friendly policies were those offering time school that the pressure’s been there from flexibility, which was generally maximised everybody around, you know: ‘Now in part-time jobs. both of yours are at school, what are you The Listening to Women research pro- doing with all these hours?’” gramme concluded that we should stop (Mother not in paid work) thinking of women as a homogeneous group; that women want choices in their Women noted that some families valued lives; that most women have jobs rather material possessions, or career develop- than careers; that full-time mothers want ment, more than their children: their role as mother to be valued and respected; that most women were prepared “I find it strange when people want to to take any job that fitted in with their have a family and have two or three family and childcare commitments; that children and then leave them forever women thought greater societal value with a nanny. Why have them? It should be attached to the role of house- defeats the object.” wife; and that married women saw them- (Young woman without children) selves as secondary earners, with male partners regarded as having ultimate responsi- The study found that, in the absence of bility for household income. One-quarter financial need, only 5 per cent of mothers of men and women still thought complete would choose to work full-time hours, role segregation in the family worked best. three-quarters would prefer a part-time The diversity of women’s perspectives is job, and one-fifth would prefer not to highlighted by the contrasting comments work at all. These results are in line with received. For example there was recogni-

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tion that the social pressures had changed “I mean something’s got to give in the over time: end, hasn’t it? Either you, work, or the family and the home.” “I know from my mum’s point of view, (Mother not in paid work) when she had children there was some kind of social stigma about having to send your “It seems to me you have either got to wife out to work – people didn’t. But now keep the career going and not have kids, lots of wives work, don’t they, and I think or have the kids and lose your career, it’s the other way round, isn’t it? You’re very and you have got to make a choice.” lucky if you can afford to be at home full (Young middle-class woman) time.Whereas I think we managed on a lot less perhaps and we want a lot more now.” “I had quite a good job in a local author- (Mother in paid work) ity and I felt I was ready to be promoted to a decent position. But it was a choice Some mothers were clear that they were between a decent position or looking happier in a job, and as a result their fami- after my baby and I chose my baby.” lies were also: (Older middle-class woman)

“I also feel that it’s good for the mother to The general consensus was that women have an outside interest, because the time now have choices and opportunities: that the family has together is much better quality time…you have more to talk “I think if a woman puts her mind to about. I think for myself. I’m a much doing something she can do it. Nothing’s better person when I’m out working than impossible now.” when I’m at home all the time.” (Older woman) (Older mother not in paid work) “It is important for women to work if they “I think some children are better off want to. I think there should be a choice. If being looked after by someone else. A lot they want to stay at home with their chil- of people haven’t got the patience or the dren, then I think they should be able to.” life skills to look after their children.” (Older working-class mother) (Older middle-class woman) Younger women consciously planned their Other mothers were clear that they them- careers around family life: selves could never have left their children with other carers: “It is really important to me to have a family. I am only 19, I know, but even “The thought of somebody else looking when I was at school the decision I made after my babies – I couldn’t have coped. to be a teacher was partly because it was I have to say I would have found it very important for me to have children, and difficult to miss all of that – they’re only what with the holidays being the same, little for such a short time, and to miss and everything, you know…I think it that – you can’t go back and get that.” does greatly influence you, children.” (Mother in paid work) (Young working-class woman)

Overall, mothers were clear that a choice Occupations that would be treated as a usually had to be made; competing life career by men were often regarded as short- interests were too stressful: term jobs by women:

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“I knew from a very young age that I was going to get married and have children, The studies revealed more diversity of values and that was my career in life. It was purely “ a job. I went to work in a bank for four complexity of opinion than was useful, so the Government or five years. And I always knew it was did not take due notice of the results ” just a job until I had children.” (Older middle-class woman) Today, ten years on, we see in the con- Some women looked enviously at policies tinued shift of Sure Start away from the supporting mothers in Scandinavian coun- development of disadvantaged children tries: towards custodial childcare for working mothers, that the focus is on female “In several of the Scandinavian coun- employment to facilitate economic growth tries, including Finland, mothers do get rather than women’s divergent needs. paid a low salary for being at home with their children. It is a poorly paid job, bringing up children, but it is paid.” Is the problem childcare availability? (Older middle-class woman) Received wisdom, reinforced by government reports and feminist scholars alike, is that the key problem is the lack of decent Women: a varied group and and affordable childcare services. The a policy challenge Department for Education and Skills The studies revealed more diversity of val- (DfES) – now the Department for ues and complexity of opinion than was Children, Schools and Families (DCSF) useful, so the Government did not take –commissioned a series of studies on par- due notice of the results of the Listening to ents’ demand for childcare over the last Women research programme. Instead it two decades.1 These looked at existing pat- used the findings selectively to support terns of childcare, but also asked about predetermined policy positions – in partic- parents’ (usually mothers’) ideal prefer- ular policies promoting paid work as ences. All the studies appear to show a women’s central life activity. In the sum- large unmet demand for more and better maries published in an October 1999 mag- formal childcare outside and beyond the azine-style report the emphasis is on edu- informal care provided by family and cation and training, access to paid work, friends. A recent review of the results of

job segregation, the pay gap, and childcare these surveys by the Daycare Trust (2007) 1 The Parents’ Childcare Survey services for working mothers (Voices: turn- reiterates this conclusion that more and series started in 1999, with repeat surveys in 2001, 2004 ing listening into action, 1999). There is vir- better childcare is needed. Yet a careful and 2007. The survey will be run tually no mention of full-time homemak- reading of these survey reports shows this is annually from 2007 onwards. In 2004, around 8,000 parents ers and full-time parents, and there are no a one-sided interpretation of the results. were interviewed, typically the mother. Among the mothers, 25 policies listed to support this group which per cent were in full-time jobs, featured so strongly in the research results. 37 per cent were in part-time jobs, and 38 per cent were full- Even in modern societies, women’s Methods adopted influenced time mothers. The Childcare views are still often overlooked or disre- reported results Providers’ Survey series started in 1998, with repeat surveys in garded. An additional difficulty is that There are several problems with these sur- 2001, 2003, 2005 and 2006. The women display increasing diversity in their veys, but possibly the most important are the surveys are now carried out annually. Information is collected lifestyle preferences, so that policy develop- biased samples and the regular use of leading through telephone interviews ment requires more imagination and skill questions that automatically get majorities with senior managers from a nationally representative sample than in the past (Hakim, 2000). of respondents agreeing to them. Asking of childcare providers in England

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“Would you like more and better childcare?” parents will pay for childcare, how costs is a loaded question. Of course we would. might affect their choices and how to sell More objective and less loaded questions, government policies to the general public. questions that invite people to prioritise sev- The surveys are also structured to provide eral options or assign a financial value to pol- sound bite key “facts” to support a predeter- icy options, generally obtain quite different mined course of action. All the emphasis in answers. The surveys cover families with the reports is on users of formal childcare – children under 15, and often focus on those a minority of parents. who are already using childcare, thus exclud- As will be discussed in Chapter 2, govern- ing the substantial numbers of families with ment policy for pre-school education, a full-time parent at home, whose views through the Sure Start programme in partic- become invisible and uncounted. This ular, has been diverted away from the goal of restriction of the sample is lost from sight promoting children’s development and edu- when results are reported, so that the views cation to providing custodial care for chil- of parents who have already chosen to use dren to enable their mothers to return to paid childcare are routinely reported as the views jobs. Government surveys were thus com- of all parents regarding childcare. missioned to provide the evidence showing Technicalities of survey procedure thus con- that more women would return to work, and tribute to a seriously biased and one-sided would return earlier, if only good quality account of what parents want. affordable childcare were available. The reports tend to group together all families when reporting responses, with inadequate detail on parents’ preferences Three models of the family for regarding pre-school children, those already non-homogenous women: attending primary school and older chil- The real policy challenge dren. Many of the surveys also classify child- The diversity of preferences displayed care into just two types: informal (meaning clearly in the Listening to Women studies a family and friends, generally not paid for) decade ago is a permanent feature of fami- and formal care, which is usually paid for: ly life, not a temporary phenomenon (as childminders, playgroups, nurseries, crèches the Scandinavians have already recognised and so on. However for many purposes in their model of the family and childcare). other distinctions are more important, such More and more mothers hold jobs, part- as that between individual care and group or time or full-time, but perspectives on fam- collective care, and care in the child’s own ily roles and the needs of children are not home (or a childminder’s home) versus changing to any fundamental degree. institutional care. As noted in Chapter 2, it The three enduring models of the fami- is centre-based care, institutional and collec- ly, and of women’s role within it, were tive care on which the debate around dam- identified first from a comprehensive age to young children is focused, not formal review of recent research on affluent mod- (i.e. paid for) care generally (Belsky, 2001). ern societies and then from new surveys in It is curious that the distinctions applied in Britain and other European countries these government surveys do not take into (Hakim, 2000, 2003, 2007). Hakim labels account the relevant research on childcare the three groups of women as work-cen- and child development. tred and family-centred, with an in- To a large extent, these government stud- between group of adaptives. ies take the form of market research for gov- Work-centred people (men and women) ernment policy – evaluating how successful are focused on competitive activities in the policies have been, assessing just how much public sphere – in careers, sport, politics, or

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the arts. Family life is fitted around their The Government talks about providing work and a high proportion of these women choice for women, but in practice its poli- remain childless, even when married. Home- cy is designed to encourage mothers to centred or family-centred women prefer not choose paid work in preference to full-time to work after they marry and have children; motherhood, even if that is what they pre- they give priority to home and family life and fer. At present, employment policy trumps tend to have larger families. Adaptive people family policy and women’s interests are (mostly women but also some men) seek to given priority over children’s interests – an combine employment and family life with- easy thing to do when feminists campaign out giving a fixed priority to either. They for women’s interests but there are few gravitate quickly to part-time jobs and other pressure groups campaigning for children’s forms of flexible working that offer good interests (especially at European Union work-life balance, or alternate between spells level). This pattern is illustrated by the of full-time family work and full-time development of the Sure Start programme. employment. Survey estimates for Britain Originally, the scheme was designed for indicate that the three groups account for children, to promote their development one-quarter, one-quarter and half of all and health. Sure Start centres did not pro- women respectively, with the adaptive group vide childcare and mothers in Sure Start roughly twice as large as the other two. areas were generally not interested in jobs However the three groups are found in all until all their children were in primary social classes, income groups and at all educa- school. Subsequently, the programme was tional levels (Hakim, 2000, 2007). The three diverted into providing custodial childcare groups are also found among lone parents as for working mothers, and the key policy well as among women with partners (Bell targets were changed to include raising the and La Valle, 2004). employability of mothers (Meadows and This pattern of preferences explains why Garbers and the NESS team, 2004). studies repeatedly come up with diversity in perspectives on family life, childcare and policy options. This diversity also explains Parental preferences and childcare use why there is always scope for people to The surveys commissioned by the DfES identify research results that confirm their show that use of childcare has increased view of the model of the good life, or the slightly. Between 2001 and 2004, any use good family – there are substantial num- of formal childcare rose from 31 per cent bers of all three types. to 41 per cent, and any use of informal The three groups espouse three different childcare rose from 36 per cent to 42 per value systems and three different models of cent (Bryson, Kazimirski and Southwood, family life, each with its own ideological 2006: 4). However the reports fail to perspectives on appropriate family roles underline the three key findings: informal and norms about child rearing. All recent care is still used far more often and more studies have observed the enormous widely than formal care; the majority of importance of values and attitudes in influ- parents (59 per cent) still never use formal encing parents’ use of childcare, if any. care at all for children aged 0-14 years; Women who fail to take up childcare and parents who refuse to use formal places, or childcare subsidies, who are childcare have strong preferences for often among the most disadvantaged social parental care. Users of formal childcare groups, could be acting on fixed prefer- remain a minority, and there are no ences and firm values, rather than out of important differences between lone par- ignorance of the supposed benefits. ents and couple families.

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A 2001 survey of parents’ demand for time workers did not seek or prefer longer childcare carried out for the DfES failed to hours even if good childcare were available. get mothers to give the desired answers, Overall, a two-thirds majority of working despite several leading questions mothers of pre-school and school-age chil- (Woodland, Miller and Tipping, 2002). dren would prefer to work fewer hours or not When parents of children aged 0-14 years at all, even if better childcare were available. were presented with the statement “There Given the choice, what mothers prefer is to should be more childcare places for pre- be at home with their children, not more and school children”, three-quarters cheerfully better childcare (Table 1.1). agreed with the idea. However, when they Similar findings emerge from another were asked what they themselves would government survey on childcare and early prefer to do, and how better childcare serv- years provision (Bryson, Kazimirski and ices would improve their employment Southwood, 2006). Only half of parents options, responses showed parental care without a paid job said they would choose to was the dominant preference. return to work if they had the ideal childcare Mothers with jobs were asked what they of their choice. In the real world where ideal would ideally prefer: to work more hours if childcare is not always possible, clearly far they had access to good quality, convenient, less than half would get a job. The great reliable and affordable childcare; to reduce majority of parents without a job and not their working hours in order to spend more using childcare said they were content with time with their children if they could afford their situation. Leading questions with a to do so; or to give up work to stay at home “work ethic” bias failed to alter responses in to look after their children. Given a real most cases. Parents of pre-school children are choice, half of working mothers with one or most likely to say they prefer to care for their more children under 15 years said they children themselves. would prefer to give up their jobs to stay at When asked why they refused to use home full time with their children. Notably, childcare, the most important single reason the great majority of women working full- was simply preference, not cost or conven- time hours said they would prefer to work ience or other considerations. The majori- fewer hours. Similarly, the majority of part- ty of mothers give priority to looking after

Table 1.1: Working mothers’ preferred working arrangement

MOTHERS IN TWO-PARENT FAMILY LONE MOTHERS Total Part-time Full-time Part-time Full-time

%% % % %

Work more hours 28 12 46 18 24 Work fewer hours 52 76 58 85 63 Give up work 44 43 46 46 44 Weighted base 1387 894 297 223 2802 Unweighted base 1626 1087 363 287 3363

Base: All working mothers Note: Answers were not mutually exclusive therefore percentages add up to more than 100

Source: Table 10.11 in Woodland S, Miller M and Tipping S (2002) Repeat Study of Parents’ Demand for Childcare, Research Report 348, HMSO for the DfES

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their children themselves. Those with pre- 2004. The only change was a small shift school children were especially likely to say from jobs with fewer than 16 hours a week they wanted to raise their children them- to jobs with more than 16 hours a week, selves. Parental care is an active and posi- probably to comply with requirements for tive choice for most mothers (Table 1.2). the Working Families’ Tax Credits These results are not broadcast in the (Daycare Trust, 2007: 56-62). media. Most parents use the halfway house of A further analysis of these government informal childcare providers: grandpar- surveys by the Daycare Trust underlines ents, other relatives, neighbours and the conclusion that a two-thirds majority friends, in preference to centre-based of non-working parents would ideally pre- care. The most important reason for this fer parental care for children up to the age choice is the trust factor: a relationship of 15 years. The study also pointed out of trust with the carer was crucial for the that lack of suitable childcare was becom- parents’ confidence in the child’s well- ing unimportant as a barrier to mothers being. Centre-based care in nurseries getting a job; that there was a substantial was understood to have more education- decline in the proportion of mothers who al and developmental benefits for the said they would prefer to work or study if child, but trust in the carer was the over- suitable childcare were available. This pref- riding factor – not cost as is popularly erence for parental care of children con- argued (Table1.3). Other studies also flicts with the Government’s strategy to find trust and flexibility to be the two encourage women into paid work and may factors that trump informal care over explain why there was no increase at all in formal childcare (Vincent and Ball, maternal employment in the decade up to 2006: 36-38).

Table 1.2: Childcare-related reasons why the respondent is not working

Childcare-related reasons why the respondent is not working %

I want to stay with my child(ren) 50 My child(ren) is/are too young 27 My child(ren) would suffer if I went out to work 21 None of these 19 I cannot find childcare which would make working worthwhile 15 I cannot afford quality childcare 10 Child(ren) has/have a long term illness/disability/special needs and need(s) a lot of attention 10 I cannot find childcare for the hours/days I need 6 I cannot find good quality childcare 5 I cannot find reliable childcare 4 I cannot find childcare near where I live 4 Other 3 Unweighted base: 2774

Base: Families where the respondent is not working + <0.5 per cent

Source: Table 6.60 in Bryson C, Kazimirski A and Southwood H (2006) Childcare and Early Years Provision: A Study of Parents’ Use, Views and Experience, Research Report 273, London: HMSO for the DfES

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Table 1.3: Reason for using main informal providers, by provider type

Reason for using main informal providers, by provider type Grandparent(s) All informal providers %%

I could trust this person/these people 69 66 I could not afford to pay for formal childcare 77 I wanted someone who would show my child affection 66 I knew they would bring up my child the same way I would 44 It was low cost 22 I wanted reliable arrangements 22 No other choices available to me 22 So that my child and a relative could spend time together 12 I wanted my child to be looked after at home 11 It is easy to get to 11 I wanted my child to mix with other children 11 His/her brother(s)/sister(s) went there +1 It fitted in with my/my husband/wife/partner’s working hours 11 I wanted my child to be educated while being looked after 1+

It has a good reputation + The person is family +1 No other choices available to me 22 Other reason(s) 23 Unweighted base 302 414

Base: All families with a pre-school age “selected” child, who only used an informal provider for this child in the last week, plus those parents who did have a formal provider but identified an informal provider as their main provider + <0.5 per cent

Source: Table 7.9 in Bryson C, Kazimirski A and Southwood H (2006) Childcare and Early Years Provision: A Study of Parents’ Use, Views and Experience, Research Report 273, London: HMSO for the DfES

The relatively low importance of child- children, but is still the main reason even care costs, compared with an active prefer- for school-age children (Table 1.4). ence for parental care, is shown in Table Independent studies carried out by aca- 1.4. The most important reasons given for demics address quite different questions, not returning to paid work are that parents and paint a rather different picture from prefer to stay with their children, regard government sponsored surveys. They are their children as too young to be placed in concerned with establishing parents’ prefer- childcare, or feel the children would suffer ences and goals, where children are happi- if the parent went out to work. Cost factors est, what is in the child’s best interests, what were mentioned less often, especially in works for parents and children alike, and families with pre-school children. When how having and raising children fits into parents were asked why they did not use people’s wider lives and value systems. There any childcare at all in the last year (formal is no attempt to support (or question) gov- or informal), the main reason is again an ernment policy. At the same time, academ- active preference for raising children at ics may have their own predilections. For home, not cost factors. This active prefer- example feminist scholars invariably con- ence is strongest in relation to pre-school clude that children are happy in nurseries

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Table 1.4: Childcare related reasons for not working and reasons for not using childcare in the last year by presence of pre-school age children in the family

Childcare related reasons for not working, by Pre-school children School age present presence of pre-school age children in the family present children % %

I want to stay with my child(ren) 58 48 My child(ren) is/are too young 42 24 My child(ren) would suffer if I went out to work 23 22 I cannot find free/cheap childcare which would 18 13 make working worthwhile

I cannot find good quality childcare 65 I cannot afford good quality childcare 12 10 I cannot find reliable childcare 45 I cannot find childcare for the hours/days I need for work 67 I cannot find childcare near where I live 43 My child(ren) has/have a long term illness/disability/special need 6 11 Other reason(s) 33 None of these 11 20 Base (unweighted)= 100 per cent 1643 2317

Reasons for not using childcare in the last year by presence of pre-school age or school age children in the family

I’d rather look after my child(ren) myself 70 57 I rarely need to be away from my children 14 22 I cannot afford childcare 20 10 There are no childcare providers available that I could trust 65 The quality of childcare is not good enough 21 My child(ren) are old enough to look after themselves 2 24 My child(ren) need special care 53 I have had bad experience using childcare in the past 11 I would have transport difficulties in getting to a provider 11 Other reasons 17 8 My/partner’s work hours or conditions fit around children 37

Base (unweighted)= 100 per cent 183 791

Note: Because some families have both pre-school and school age children present, some families may be represented twice

Source: Tables 6.64 and 6.56 in Bryson C, Kazimirski A and Southwood H (2006) Childcare and Early Years Provision: A Study of Parents’ Use, Views and Experience, Research Report 273, London: HMSO for the DfES

because their focus is on promoting high nists are unwilling to address the conflict of female employment and the type of gender interests between mothers and children, and equality defined by spouses with equal across Europe, feminist women are least earned incomes and symmetrical family likely to value children generally (Jones and roles. Research has demonstrated that femi- Brayfield, 1997: 1260).

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What the academic studies show is that tional (e.g. children should obey teachers) affordability of childcare is rarely the main or progressive (e.g. children can learn by problem for parents. People find the themselves). money for the things they regard as impor- In the US, these attitudes and values tant. The crucial factor is parental values, were strong predictors of parents’ decision which are sometimes presented as psycho- to use childcare or not. In Britain, these logical factors because values and attitudes values again emerged as important predic- are most often studied by social psycholo- tors of the decision to use any childcare, gists. how many hours of care were used and the Ideology and values in two areas are choice of family-based care versus nursery- important: family roles and child develop- based care. Of course, a family’s financial ment and discipline. Together, these values situation and other practical matters also structure parents’ use and choice of child- influenced decisions. But parental values care. This has been found both in Britain and ideology regarding child development, and America, so is likely to be a very solid and the maternal role were crucially finding indeed. The crucial importance of important factors in both countries (Sylva values as determinants of childcare usage and others, 2007). emerged early on in the National Institute Leach’s study also shows that parents’ of Child Health and Development study criteria for assessing childcare quality differ in the US and is also very clear in the from those of educationists – and this recent British Families, Children and clearly affects their choice of carer (Barnes Childcare Study (FCCC). Both these stud- and others, 2006). Affordability was never ies are described in Chapter 2. the over-riding criterion, as so often The NICHD study is the most impor- implied by media debates on childcare. For tant longitudinal study of the impact of mothers, a warm and loving carer was the early childcare on children that has ever top priority, plus a relationship of trust and been mounted. Set up in 1987, it is fol- good communication between the carer lowing the progress of the sample of 1,364 and parent. Dependability of the arrange- children into late adolescence and early ments was also valued, and clearly cost was adulthood, and is the basis for Belsky’s a factor, but never the over-riding one. The research reports on the damaging impact education and training of the carer was of long hours of care from an early age. thus a much lower priority for parents than The FCCC study is modelled on the it might be for a policy analyst or policy- American study and uses many of the maker. This explains why mothers of chil- same measurements and scales so as to dren under 3 years generally prefer family permit comparisons between the two care or in-home care to centre-based care, countries. Led by Penelope Leach, an and why childminders were preferred to internationally renowned expert in child nurseries. Ethnic minority mothers were development and parenting, it followed a especially likely to prefer informal child- sample of 1,200 infants from birth care arrangements. (around the year 2000) up to age 4.5 years Overall, satisfaction with childcare was – with the possibility of further follow-ups highest for family-based care and lowest in future. Both studies looked at mothers’ for nursery care. Nurseries, and centre- beliefs about the consequences of maternal based care generally, were disliked because employment (i.e. maternal absence) for it was much harder for mothers to establish children, and they also collected informa- a relationship with one particular carer tion on parental perspectives on child with whom they could discuss the child’s development, which were labelled as tradi- needs and have an ongoing relationship.

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Parents feel the need to have some contin- uing control over their young child’s life, Table 1.5: Childcare preferences and nursery care is not seen as providing at the child’s first birthday this because it involves a much large number of staff and, frequently, high staff Child’s father 38 turnover or lack of continuity for other Grandparents 30 reasons. Nanny/childminder 12 What is often overlooked in debates Employer nursery 9 about childcare is that parents generally Private nursery 8 (mothers in particular) are making choices State nursery 3 about their own lifestyles as well as, and Total 100% usually before, making decisions about childcare (if any). It is these lifestyle prefer- Source: Houston and Marks (2005) p 89 ences that make values and ideology the most important factor predicting whether By the time of the child’s third birthday, any childcare is used, and what type. childcare preferences had changed, with Another longitudinal study of 400 first- around 40 per cent favouring nurseries and time mothers in England carried out by the same proportion using nurseries. But Diane Houston (2005) shows clearly how the clear majority still favour, and use, mothers’ thinking regarding sex-roles and family-based care over centre-based care, family roles meshes with their attitudes to and individual care over collective care. and use of childcare. Overall, mothers are Working mothers chose childminders and able to find the childcare of their choice nannies almost as often as nurseries when and return to work after the birth if they care by their spouse/partner did not mate- want to. The most important predictor of rialise (Table 1.6). their decisions is their own lifestyle preferences. Table 1.6: Childcare at the child’s In Houston’s study, during pregnancy, third birthday only one-quarter of new mothers planned to return to full-time work, and half planned to return to part-time work. One- Preference Working mothers’ fifth had decided not to work at all after actual use the birth and look after the infant them- Father 27 6 selves. A slightly larger one-third of new Grandparents 17 18 mothers planned to stop work completely, Nanny/childminder 13 29 or seriously reduce their hours as soon as Nursery – private 27 the second child arrived. These plans were Nursery – state 6 42 broadly met. At the baby’s first birthday, Nursery – any 6 half of the mothers were in part-time work, Friends/other family 45 one-fifth were in full-time jobs, and one-

quarter were at home full-time with their Source: Houston and Marks (2005) pp 92-93 infant. In line with the results of all other studies, childcare preferences at the time of the Non-centre care remains the majority infant’s first birthday overwhelmingly preference. Informal arrangements with favoured family care over nursery care, pri- friends and family were still used by almost vate nurseries over state nurseries, individ- one-third. Home-based care, with a nanny, ual care over centre-based care (Table 1.5). childminder, partner, grandparent or

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friend was by far the most common (57 more psychological distress. Overall, the per cent). mothers themselves were all equally happy In line with the FCCC study, mothers with the choice they had made. As other had many reasons for disliking nursery researchers have also discovered, mothers care, which they regarded as “institutional” are happy if there is a good match between care and very inflexible. For example one their personal preference and the actual mother noted the nursery’s inflexible outcome (Hakim, 2000: 183). approach to food and children’s prefer- The unique contribution of Houston’s ences. Others noted that children in nurs- study is that it explored the way women’s eries passed on every bug going, so that preferences for their own activities (paid children were ill more often, leading to work and/or family work) mesh together more problems with one parent having to with their perspective on child develop- take time off work, often at impossibly ment and preferences regarding childcare. short notice with some disruption to work It answers the question “Which should plans and obligations. Many parents take priority – women’s needs or the child’s actively believed that parental care, or a needs?” and shows that there is no single close equivalent, was essential for small solution to the potential conflict. On the children, so that the mother would have contrary, there are three dominant solu- stopped work if this had proved impossible tions, all equally successful for the mothers to arrange. Mothers who were at home who choose them. full-time reported the most content and At their child’s third birthday, Houston happy children; working mothers reported asked the new mothers what their ideal more fractious and difficult children and lifestyle arrangement would be. From a

Table 1.7: Ideal world choices for family division of labour at child’s third birthday

Ideal world choices for family division All new No paid Working Working of labour at child’s third birthday mothers job part-time full-time

1. Father works full-time 30 53 21 9 Mother cares full-time

2. Father works full-time 31 17 39 36 Mother works part-time plus childcare

3. Both parents work part-time 38 29 40 49 and share care

4. Both parents work full-time 11 06 and use childcare

Total ( per cent) 100 100 100 100

Source: Table 5.1 Houston and Marks (2005)

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much longer list of possible options, only in continuous employment (apart from four were chosen, and only three attracted using maternity leave). One-third of substantial interest (Table 1.7). mothers were not working at all in these The mothers divided roughly into three three to four years, before and after a groups: one-third ideally preferred to be a birth. Another one-third had intermittent full-time homemaker and mother, sup- spells of work after the birth, mostly part- ported by the father working full-time; one time, including a few who only got a job third preferred to work part-time, and use as their child approached 3 years of age. some childcare; one third ideally preferred When the child was age 3, only half of both spouses or partners to work part-time mothers had a job, 18 per cent working hours and share all the childcare between full-time and 37 per cent part-time. Half them. It is notable that by the time their were full-time mothers at home, includ- child was three years old almost none of ing a few who were taking courses, or had the mothers chose the Government’s started to look for a job. Only a one-third favoured model of both parents remaining minority of mothers used any formal in full-time jobs with centre-based child- childcare at all. Most commonly, mothers care for the children. Even among women relied on partners and grandparents for in full-time work, only 6 per cent, one in substitute care. 17, said this would be their preferred option. At the time of the child’s third birthday, employment patterns corre- “ Results show that, in an ideal world, only one-third of sponded roughly with lifestyle preferences. mothers in Britain would use any childcare at all before Houston’s study is unusual in exploring the child’s third birthday fully mothers’ preferences regarding ” employment, childcare and parental care after a birth and up to the child’s third birthday. Her results show that, in an ideal Finally, these findings are reinforced world, only one-third of mothers in Britain by yet another major government survey would use any childcare at all before the series, the Families and Children Surveys child’s third birthday, and even then only (FACS) funded by the Department for part-time childcare would be used. Work and Pensions. FACS collects infor- However, her survey was based on a small mation from parents in a representative sample of 400 first-time mothers and an cross-section of families across Britain, ideal world is not an attainable goal. More with annual interviews. FACS also shows mothers use childcare before their child’s that among families with a working third birthday than they might like mother, the majority used informal or because of financial necessity, or pressure family-based childcare (57 per cent of of expectancy from colleagues or family those with pre-school children and 73 that they will continue to work, or because per cent of those with school-age chil- they believe that taking three years off dren) – with grandparent care a domi- work will make their eventual return to the nant choice. A minority of families with workplace more difficult. a working mother used registered formal Houston’s findings also dovetail neatly care (nursery, crèche or childminder): 39 2 This is a large national study with the results of the Millennium per cent of those with pre-school children that follows the progress of over 16,000 mothers with babies born Cohort Study on mothers’ employment and 21 per cent of those with school-age in 2001. It is co-funded by the patterns during pregnancy and in the first children. And of course, many women Economic and Social Research Council, the Office of National three years after a birth (Dex and Ward, choose to be full-time mothers (Vegeris, Statistics and relevant govern- 2007).2 Only one-third of mothers were 2004). ment departments

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Addressing the challenge of the three to choose their own timetables and child- models: recognising paid and family care, and is thus far more flexible than any work institutional care can ever be. Arrang- Designing policies that are neutral ements can be altered from week to week, between the three dominant family mod- or mixed and matched according to local els but that address values-based decisions options and opportunities. The parent is difficult. This is particularly the case in remains in control. The PEA has proved Britain where families vary so much in popular in Finland, Norway and France, in structure, women choose very different part because of this flexibility (Hakim, lifestyles and parents have wildly differing 2000: 232-3). It is difficult (and expensive) views on parenting and raising children. It for formal childcare providers to offer real is harder to design policies and schemes flexibility and cover non-standard hours that work with different family models (Daycare Trust, 2007). and lifestyle choices without discriminating against or favouring one of them than Finland’s Homecare Leave Allowance it is to target one particular group. (Hoitovapaa) However, parental carer allowances and In Finland (and Norway) the scheme is equivalent schemes can achieve this diffi- called the Homecare Leave Allowance cult balancing feat. (HLA), and has been hugely successful, with high take-up rates. Finnish policy had previously prioritised public daycare Parental Education Allowances and services and lengthening maternity leave equivalent schemes plus earnings-related benefits that allowed In some countries, a caring allowance is mothers to stay at home during the first paid to one parent for his or her role as year after childbirth, similar to the carer-educator. As a relatively new benefit, Swedish model (Ilmakunnas, 1997). But it remains the least well-known of family in the late 1980s, Finland introduced a policies. The Parental Education Allowance new policy that gave parents the right to (PEA) as it is usually known, pays one par- choose between publicly provided child- ent –typically the mother – financial com- care services and a cash benefit for child- pensation for the job she does. The PEA is care at home. The new allowance is paid given to families who do not use state-sub- to all families who do not use the public sidised childcare services, thus ensuring daycare services, effectively providing a parity between users and non-users. The subsidy to fund one parent at home full- money can be regarded as a wage for child- time or to help pay for private childcare care at home, as a partial replacement for services.3 earnings forgone, or it can be used as a sub- In addition to the basic state benefit for sidy for purchased childcare services that one child, there are 20 per cent supple- enable the parent to return to work, full- ments for each additional sibling under time or part-time. school age. Some municipalities (including The key advantage of the PEA is that it all the big cities) provide their own addi- can be used for the childcare of choice, tional allowances, in addition to the statu- including grandparents, close neighbours tory, nationwide scheme, because the or friends to whom the parent is happy to homecare allowance still costs half as much entrust their child. It can also be used to as a nursery place. For example in 3 The Finnish HCA is a complex subsidise the cost of private crèche or nurs- Helsinki, the municipal addition is worth benefit, which is fully described by Ilmakunnas (1997). A simpli- ery care. It has proved a popular alternative about €50 a week or €2,600 a year fied picture is presented here to state nurseries because it allows parents (OECD, 2005: 33). The income is taxable.

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Finnish labour law provides job-protected (or fathers) who did not use public daycare parental leave until a child is three years nurseries (Ronsen, 2001). The Norwegian old, so with closely-spaced children, quite foreign minister, Janne Matlary, described long periods of absence from work are pos- the underlying philosophy as “giving free- sible. The scheme was introduced when dom of choice, nothing more, nothing demand for labour was strong; it was never less”, and giving equity between parents at designed as a solution to high unemploy- home and those at work (Manne, 2005: ment. 309). The allowance is not taxable, is Funding is generous. The exact value of worth about £300-£400 a month, over the allowance varies according to family £3,000 a year, and at present it is payable and local circumstances, as noted above. for children up to the age of two. Again, The maximum allowance for one child is the logic of the scheme is that it expands equivalent to about 40 per cent of the aver- choice, and offers an equivalent cash sub- age monthly earnings of female employees sidy to parents who choose not to use pub- in Finland. In 2006, the basic allowance lic nurseries, but it still prompted a fierce was worth about €300 a month for the first debate in Norway. One expected conse- child, with another €100 a month for each quence is that mothers’ employment pat- additional child under three years, and €50 terns will become more polarised. 4 a month for each child over three but under school age. In addition to the basic France’s APE (Allocation Parentale allowance, the family may receive an d’Education, Complément de libre choix income-related supplement, up to a maxi- d’activité and Complément optionnel de mum of €170 a month, and there is also a libre choix d’activité) supplement for those who use private A similarly generous French scheme, intro- childcare (OECD, 2005:33). duced in 1986 and expanded in 1994, has The scheme is popular and successful. also proved popular with mothers. The From the start, two-thirds of all mothers Allocation Parentale d’Education (APE) was with a child under three used the scheme. initially a pro-natalist measure, offered By the mid-1990s, three-quarters used the only to parents with at least three children scheme in preference to the high quality and acted as an inducement to have a third public daycare services. Mothers with sev- child. When introduced in 1986, APE was eral pre-school children were most likely to a flat-rate benefit of about £300 a month, use the scheme and usage is twice as high not means-tested and not taxable, which among mothers with low earnings as was paid for three years, until the youngest among higher-paid women. A fall in child’s third birthday. It was paid only if workrates among women aged 20-39 the mother had worked for at least two immediately reflected its popularity years in the previous decade and if she (Ilmakunnas, 1997). By 2002, only half of stopped working completely, so it was orig- mothers of children aged 0-3 years were in inally dependent on having an employ- work; over one-third of Finnish mothers ment record. The scope of the scheme was remain on leave in order to use the widened in 1994, and the APE is now paid allowance for the full three years (OECD, from the birth of a second child. The value 2005: Table 1.1, pp 190-1). remained at around £300 a month in the

1990s (Hakim, 2000: 233). 4 The ethnic minority population Norway’s cash for care scheme (Kontantstotte) From 1994, mothers caring full-time for has recently been growing in the Nordic countries, and this seems A similar scheme was introduced in two children received a monthly benefit of to have prompted a diversifica- tion of policies and an expansion Norway in mid-1998, again offering a around £350 during the three years following of choice, according to some parental education allowance to mothers the second birth. APE was so popular and commentators

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successful that it resulted in a visible decline the whole family until the youngest child of around 10 percentage points in employ- reaches 18 years. A supplement for free ment rates for mothers aged 20-38 years, and choice of working time (CLCA) replaced was thus criticised by feminist scholars for APE for children born in and after January supporting sex-role differentiation and gen- 2004. In 2005, the French Government der inequality (Fagnani, 1998; Hakim, 2000: announced a new scheme of financial 233-45; Lanquetin, Laufer and Letablier, incentives to encourage higher-paid mid- 2000; Dixon and Margo, 2006: 38). dle class women to have a third child. At a By 1997, the scheme had surpassed all conference on family life, the Prime other childcare subsidies and services. Minister announced that the Government About one-third of mothers stopped work- proposed to pay up to €1,000 (£700) a ing at the birth of their second child. It month, double the current maximum and contributed to a sharp drop in workrates close to the €1,200 minimum wage, to among mothers of young children and also women who have a third child, in an helped to keep down unemployment rates. attempt to encourage highly paid and pro- The popularity of the APE scheme, and of fessional women to have larger families two others (known by the acronyms (Randall 2005). An optional supplement AGED and AFEAMA) that provide subsi- for free choice of working time (COLCA) dies for individualised childcare in the was made available for parents of children child’s own home or in a childminder’s born in and after July 2006 and is paid to home, can be seen in part as a criticism of families with at least three children and if public daycare services which, even in one of the parents stops working complete- France, are not flexible enough to meet the ly. The latter benefit is higher than CLCA needs of working parents. A 1987 national but it is paid for a shorter time.5 The survey found that, given a choice, 80 per French scheme pays a salary to parents (in cent of French adults preferred a policy of practice, mothers) who stay at home to financial incentives for mothers to leave look after their children – raising the total the workforce temporarily to care for their allowances to around €1,000 a month on children over an improvement in childcare top of family allowances (child benefits) services and facilities for mothers of young (Randall, 2005; Dixon and Margo, 2006: children who continue working (Hakim, 37). This new scheme builds on the success 2000: 234). It is clear that public policy of the APE. can sometimes be wildly out of sympathy It is notable that the Allocation Parentale with the preferences of parents and citi- d’Education was introduced, and is popu- zens. APE and similar schemes for individ- lar, in a country that already had an excel- ualised home-based childcare are successful lent system of écoles maternelles (nursery because they fit the preferences of adaptive schools or kindergartens) attended by women as well as home-centred women, almost all children aged 3-5 years, and rather than being targeted on a single treated as part of the educational system group. (Plaisance, 1986). The contemporary mis- The Allocation Parentale d’Education had perception is that the écoles maternelles are its origin in the long-standing pro-natalist a service provided for working mothers. In French policies that prioritise families with fact, they were introduced after the French three or more children, giving them larger Revolution as part of a wider policy of con- benefits than for families with only one or verting a Catholic country into a secular 5 More information on this and other aspects of the French two children. For example, French families State by eliminating religion from the edu- social security system are available at www.cleiss.fr/docs/ with three or more children are entitled to cation system. The idea of the écoles mater- regimes/regime_france/an_3.htm free train travel throughout the country for nelles was to extend this secular education

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down to the earliest years, thus counteract- Heitlinger (1991) rejects all subsidies for ing the influence of religious parents, most full-time mothers as sexist, and only especially devout Catholic mothers. Thus endorses family policies that keep mothers the service was never dependent on or in the labour market throughout their linked to women’s employment. If any- lives.6 Since these schemes are available to thing, it was aimed primarily at the chil- whichever parent stays at home, the dren of non-working mothers, whose ideo- schemes are not sexist. They are especially logical influence would be strongest in the attractive to family-centred men as well as family and the home setting. women, and there is no doubt that some fathers would want to use them. Almost all policies will vary in their attractiveness to The PEA: Recognising family work family-centred, work-centred and adaptive and creating choice men and women anyway. The Parental Education Allowance pays People who choose to become parents in full-time mothers (or fathers) a small salary modern countries are an increasingly self- for their work raising children at home. It selected group with a particular interest in is thus different in nature from the more children. Time-budget studies show that common policy of offering families with parents’ investment of time in childrearing children tax rebates, or tax credits. Tax activities is increasing in the long-term. allowances help to defray the additional However non-employed mothers are a par- costs of children, but do not actually ticularly self-selected minority, and their reward the caregiver directly and visibly for investment of time in their children’s their work. One reason for its success is development has risen more sharply over that it gives a public status and public the past three decades than that of fathers recognition to the job done, invisibly, in and employed mothers (Gauthier et al, the home. It follows that people in receipt 2004). Similarly, studies of the Finnish of the PEA could be classified in national homecare allowance have found that statistics as being employed, just like women using the scheme are more family- women on maternity leave who are also at oriented in their values and goals, and are home full-time with their baby or others more likely to have a third child (Vikat, who spend years on parental leave. Several 2004). studies have shown the substantial distort- In 1998, the European Commission ing effect this latter practice already has on asked respondents in one of its Scandinavian workforce statistics, and on Eurobarometer surveys whether they pre- cross-national comparisons of female ferred better childcare services or financial employment (Jonung and Persson, 1993). compensation for the mother who was This would address the main objection to not working while taking care of the child the Parental Education Allowance, which herself. In Finland, where there was con- is that it causes a slight fall in female crete experience of a PEA scheme, a 70 employment rates. per cent majority preferred compensa- The PEA and equivalent schemes are tion. In France and Sweden over half pre- routinely ignored or criticised in social pol- ferred the compensation to better child- 6 Feminists reject any division of labour in the family as sexist and icy and population policy reports (Fagnani, care services. Given that these are suppos- disadvantageous to women. 1998; Lanquetin, Laufer and Letablier, edly countries with the very best childcare However economists have pointed out that even a minor (female) 2000; Dixon and Margo, 2006: 38). money can buy, this seems a conclusive advantage in childrearing, or a Feminists dislike the allowance because it vote in favour of the PEA as the better minor (male) advantage in earnings, would lead to a rational recompenses and validates full-time moth- option. The EC has never repeated this division of labour in the family erhood and family work. For example survey question. (Ermisch, 2003)

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The EU policy context challenge: women, a job (however welcome) is only a work-friendly versus family friendly job and not a career, and that most moth- In the European Union, policy has given ers prefer to be at home with their young priority to the labour market over the fami- children instead of back at work. To the ly and children, essentially because family extent that the EU exerts any pressure on and social policy are matters for national the social policies of national governments, governments, whereas an integrated and it has been to prioritise work-friendly poli- competitive labour market has always been cies at the expense of families and children. central to economic activities and goals in A similar tug of war between the inter- Brussels. Similarly, EU gender equality pol- ests of babies and children and the interests icy has focused primarily on women’s posi- of working mothers, between pedagogical tion in the labour market, so that childcare concerns for children’s development and is treated exclusively as a benefit for working gender equality concerns for women’s life- mothers (a bias that bedevilled the 1986- long employment, are reflected in the 1996 EU Childcare Network which OECD’s two competing reports Babies and attempted to focus on childcare as an edu- Bosses (2002-2005) and Starting Strong cational benefit for children), and non- (2001-2006), the first produced for its working women remain invisible and disre- employment, labour and social affairs garded. This labour market bias is enshrined committee and the second for its educa- in agreements such as the Lisbon Strategy, tion committee. The problem with this agreed by all EU members, which sets the conflict is that (working) women have a objective of 70 per cent overall employment voice, but infants and babies do not. For rates throughout the EU. this and many other reasons, European It is thus not surprising that the EU’s societies are currently biased towards poli- concept of policies to promote work-life cies for working women. The views of par- balance is essentially about work-friendly, ents who are full-time carers, babies and not family-friendly, programmes. True, EU children are rarely heard, and even then, gender equality policy has now shifted often disregarded, at the international level from the pay gap and job segregation just as at the national level. towards an emphasis on the “reconciliation of work and family life”, but here, too, the perspective is that of the labour market Choice gives parents power analyst. The “demographic challenge” of In the 1970s, the standard working week declining fertility in Europe, an ageing was still the norm, and the 1980 Women population and an ageing workforce may and Employment Survey results reflected prompt the European Commission into that situation. Today, a two-thirds majori- more concerted action to raise fertility ty of working families have one or both rates and strengthen support for families to partners working non-standard hours to promote “demographic renewal”. But so some extent. Shift work, overtime and far it has only reiterated gender equality part-time work are far more common than and work-friendly policies: extended in the past. To these are added jobs with parental leave and childcare services to early starts, late finishes, weekend working enable women and men to remain in con- and a host of new arrangements: on-call tinuous lifelong employment (European jobs, annual hours contracts and other Commission, 2006, 2007). forms of flexible working that spread out As yet, the EU has not responded to the beyond the confines of the 9 to 5, Monday evidence from its own research studies to Friday job. The results of Penelope showing that, for the great majority of Leach’s and Diane Houston’s studies reflect

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these new working patterns. A recent study Britain seems to have embarked on this concluded that less than one-fifth of work- strategy just when other European coun- ing couples never or rarely work non-stan- tries are pulling back from the idea of uni- dard hours (La Valle et al, 2006). The versal crèches for all children from a Daycare Trust (2007: 64) estimates that 71 young age. per cent of households and 87 per cent of working households sometimes or usually work atypical hours. Nurseries and schools “ In a society that provides individuals with the freedom with rigid standard hours are increasingly to choose their own lifestyle, instead of conforming to a out of sync with working lives and family single common model of the good life, parents want and life. need flexibility In a society that provides individuals ” with the freedom to choose their own lifestyle, instead of conforming to a single common model of the good life, parents Today, many nurseries report vacant want and need flexibility. State nursery places, suggesting over-supply. One study care, with its fixed daytime hours and estimated that occupancy rates in day weekdays-only service cannot provide the nurseries fell from 95 per cent in 2002 to flexibility that people now seek. Even in 79 per cent in 2007, well below the sus- Finland and France, two countries that are tainable (and profitable) level (Daycare often held up as the models to follow as Trust, 2007: 48-50).7 Without permanent regards childcare services, most parents, government subsidies, the childcare servic- especially with children under three years, es created with pump-prime funding from still prefer to do the job themselves and are Sure Start and the previous associated ini- paid a small salary for it. tiatives are unlikely to be sustainable and Policies designed around encouraging will collapse (Dickens and La Valle, 2004). 7 The catchment area for nurseries is, of course, very local, so all mothers into jobs and their children As the National Audit Office has noted, there may be a problem of into nurseries conflict with the diversity millions of pounds of public money are matching supply and demand at neighbourhood level, and also at in the preferences and values of citizens being invested to start up childcare servic- different times of the day or that research has found. Paradoxically, es that later collapse. week

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Sure Start, the new Labour Government’s lem. Also in the 1970s, Community flagship social policy, was launched in Development Programmes were developed 1998 and over the last decade it has by central government to strengthen the become one of the most debated policies. social and economic structures of deprived Discussion is fuelled in part by the £20 areas in Britain, and to improve life million evaluation research programme, chances for their residents. the National Evaluation of Sure Start However, the Government cited Head (NESS) that periodically yields reports on Start, the American project that has been the policy’s results and impacts.1 Its origi- running for 40 years, as its most immedi- nal aims – to break the cycle of disadvan- ate inspiration along with other US initia- tage for young children in deprived areas tives like the Perry Pre-School scheme, on and to promote social inclusion – were the what works in early years intervention practical policy complement of its social (Glass, 1999, 2006). American schemes exclusion research programme at the have continued to provide examples of London School of Economics that was services for young children given the rela- funded by the ESRC (Economic and tively large number of genuinely experi- Social Research Council) and various gov- mental studies and demonstration projects ernment departments from October 1997 there (Melhuish, 2004). However, these to December 2007. But it had a long and are early education projects and there were distinguished pedigree. significant differences between (Glass, In the 1970s, Sir Keith Joseph invited 1999, 2006). the Social Science Research Council There are significant differences (SSRC), the ESRC’s predecessor, to devel- between Head Start’s and Sure Start’s op a large research initiative to clarify the designs and stated goals. Head Start is an processes involved in transmitted depriva- early education, centre-based project that tion from one family to the next genera- “promotes school readiness by enhancing tion, which had persisted despite the wel- the social and cognitive development of fare state and the opportunities opened up children through the provision of educa- by the educational system (Berthoud, tional, health, nutritional, social and other 1983; Brown and Madge, 1982). The services to enrolled children and families”.2 SSRC mounted a substantial programme In contrast, Sure Start began as an area-

1 A team at the Institute for the of research to inform policy interventions based programme (as opposed to Head Study of Children, Families and that might reduce obstacles to high Start’s centre-based approach) that was to Social Issues, Birkbeck University of London started the achievement for children from disadvan- address social exclusion of disadvantaged evaluation in January 2001 and taged families. That work was recently children in deprived areas and improve is scheduled to complete its work in 2008 extended and repeated in the ESRC their life chances. The childcare compo- 2 See US Health and Human research programme on Social Exclusion, nent was added later and is still not a cen- Services website: www.acf.hhs.gov/opa/fact_sheet and also by the EU’s broader attempts to tral component of Sure Start’s services. s/headstart_factsheet.html address social exclusion as a modern prob- According to Norman Glass: “Sure Start

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set out to work with parents-to-be, parents one side of a street could access all services, and children to promote the physical, while families on the opposite side of the intellectual and social development of street could not. This was later rectified.) babies and young children – particularly The original SSLPs were generally well those who are disadvantaged – so that they received and popular, in part because can flourish at home and when they get to mothers had a large say in how they were school, and thereby break the cycle of dis- run. Some areas hired local staff, thus advantage for the current generation of investing Sure Start funds in the neigh- young children.” (Glass, 2006: 55). bourhood and local labour market as well. Sure Start began with 29 pilot Early But there was no standardisation in the Excellence Centres, launched in 1997. services offered or how they were delivered These centres were supposed to transform and local variation could be extreme, mak- the patchwork of early childhood educa- ing it difficult to measure the success of tion, care and family support services into SSLPs. an accessible, affordable and integrated sys- Expenditure also varied. At first SSLPs tem that was open to all in the area. The were relatively unregulated when it came goal was to extend the number of centres to services and spending, and it was not to 100 by 2004, and at their peak there until 2003-04 that the Sure Start Unit were 107. But in 1999, in the first of finance system ensured that all pro- numerous changes, the Government intro- grammes produced standard information. duced Sure Start Local Programmes Spending of funds was monitored by (SSLPs). They were to bring together early regional teams attached to the Department education as well as childcare, health and for Education and Skills (DfES) – now the family support for children up to 3 and Department for Children, Schools and were targeted at families living in disadvan- Families (DCSF) – which paid a grant taged areas. By 2004, 524 Sure Start Local directly to SSLPs. The average expenditure Programmes had been established and per child in SSLPs that had been opera- were estimated to be offering services to tional for three years was £900 at 1999- around 400,000 young children, including 2000 prices (NESS report 15).4 a third of children under 4 who were living In 2001, the focus of Sure Start started in poverty (NESS, 2005). They have been to shift to formal childcare when the used to monitor and address a series of Neighbourhood Nursery Initiative (NNI) social problems, such as ante and post- was introduced. Its goals were to establish natal violence and depression. A host of 45,000 new full-day care places for under 5 targets were set out – for example, reduc- year olds and to narrow the gap in childcare ing the number of mothers who smoke provision between the most disadvantaged during pregnancy by 10 per cent (met by areas of England and more affluent areas. 2004), the number of 0-3 year olds with Care was to be high quality, accessible and speech and language problems requiring affordable.5 A capital investment of nearly

specialist intervention by 5 percentage £128 million was provided by the national 3 A list of targets and their sta- points (could not be assessed) and the lottery and the DfES and £240 million tus is in National Audit Office (2006) Sure Start Children’s number of 0-3 year olds living in workless from the DfES for the running costs of the Centres 3 households by 12 per cent (still not met). NNI for three years. Glass points out that 4 This ranged from a low of To avoid stigmatising families, the pro- Sure Start’s aims had been recast to increase £350 to a high of £2,500 grammes targeted particular deprived areas “the availability of childcare for all chil- 5 Information on the Neighbourhood Nurseries and everyone living there could access all dren…supporting parents as parents and in Initiative is available at the services offered. (Areas were sometimes their aspirations towards employment” www.surestart.gov.uk/surestarts ervices/settings/neighbourhoodn defined clumsily at first, so that people on (Glass, 2006: 55). Yet daycare was a long urseries/

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way down the list of priorities for parents in smoothly, and establish effective perform- deprived families and Sure Start evaluations ance monitoring and evaluation”. also show that formal childcare was active- A locally based assessment of needs ly rejected as inappropriate in most areas should be the most capable means of deter- (Meadows, Garber and the NESS team, mining relevant solutions for local markets 2004). The change of emphasis effectively and conditions, however, in practice stan- made the main customer the working dards and implementation have varied mother rather than the child and trans- enormously. The same NAO report found formed the program from one focused on that local authorities were sometimes not individual, family and community develop- doing an adequate job of analysing existing ment into an adjunct to labour market and provision: “The local authorities we exam- gender equality policies. ined had not all developed effective partnerships with health and employment services (18 of the [30] centres we visited “ Research in the US indicates that universal schemes reported problems working with health achieve better outcomes. But this is primarily due to the services, and six with Jobcentre Plus). As tendency for middle-class families to access available local authorities plan and establish new centres in less disadvantaged areas where services more fully and effectively than poorer families ” there are higher levels of existing provision, for example through private providers, they will need to undertake assessments of Targeted versus universal schemes need in order to inform decisions on the In 2004 these changes were consolidated in most appropriate allocation of resources the Government’s Ten-Year Strategy for and services across their whole area. Over Childcare, which placed emphasis on child half of local authorities we examined were development but through formal care. not carrying out any active performance Most Early Excellence Centres, Sure Start monitoring.” Local Programmes and Neighbourhood It is hard to argue against the idea of a Nursery Initiatives have become or are in national network of Children’s Centres the process of becoming Sure Start offering integrated services. A universal Children’s Centres, which are being rolled scheme has benefits that targeted schemes out in three phases. The first was from cannot offer: it becomes so well-estab- 2004 until March 2006 and was targeted lished, well-known and accessible that it at the 30 per cent most disadvantaged areas can achieve close to 100 per cent take-up in England. By the end, in 2010, there are rates because almost everbody knows planned to be 3,500 Children’s Centres exactly what is on offer and how it works covering the whole country and reaching in every area. Research in the US indicates all children under 5. that universal schemes achieve better out- However, as the 2006 National Audit comes (Barnett and Ackerman, 2006; Office (NAO) report found: “These new Ludwig and others, 2007). But this is pri- responsibilities present a substantial chal- marily due to the tendency for middle- lenge. For children’s centres, local authori- class families to access available services ties require the capacity and expertise to more fully and effectively than poorer fam- assess local needs across a range of services, ilies, and far better than the most deprived some delivered by organisations they have families. Children from middle-class fami- little experience of working with. They lies post greater gains and raise the average need to negotiate integrated services, scores on all evaluation measures due to ensure that local partnerships are working peer effects that change the culture of

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kindergarten classes. Some studies show assumptions and values invisible, turn sub- that those at the bottom of the ability jective perspectives and understandings range gain most. In addition, children into apparently objective truths, and deter- from poorer families also benefit from the mine that some things are self-evident and culturally and socially richer mix of chil- realistic while others are dubious and dren using the services. impractical, even inconceivable. The Overall, however, it is widely believed British childcare discourse claims that the that universal schemes increase social and rationale for providing childcare services is economic polarisation in the long run, first and foremost to enable parental partly because communities tend to be employment (Moss, 2006: 6). In contrast, socially homogeneous and partly because he points to the pedagogical framework funding levels are not usually increased applied in France and the Nordic coun- sufficiently: the additional gains may not tries, where access to early years education materialise at all or be greatly reduced. Sure and playcentres is regarded as a child’s Start appears to be following this pattern. right, irrespective of whether parents are in The average expenditure per child in work or not. Moss advocates integrated SSLPs that had been operational for three Children’s Centres run along similar lines years was £900 at 1999-2000 prices (NESS to the Nordic models, with children report 15),6 whereas we estimate that the regarded as a public good, and a greatly funding per child per Children’s Centre increased investment in their education. In has dropped to around £420 a year.7 This this truly pedagogical system of education, 6 This ranged from a low of is higher than other estimates such as £250 parental employment becomes an irrele- £350 to a high of £2,500

per child a year that have been cited in the vance (Moss, 2006). 7 This £420 is calculated by tak- press.8 The switch to Sure Start Children’s ing the £1.18 billion earmarked for spending on Children’s Centres nominally retains this integrated Centres in 2010-11, dividing it services principle, but is likely to be weak- by the target number of 3,500 centres due that year, and divid- Integrated services for children ened in practice. Health services are for- ing again by the average number Integrated services for children are one of mally separate from local authorities, so of 800 five year olds that each centre is meant to cover. We the most popular and effective elements of the integration of health and other services have not included any capital costs as all centres are meant to the original Sure Start programme because may not materialise when control passes to be up and running by 2010-11 they simplify life for poorer parents who them. The one-stop-shop idea could also and we have not included the allocation of £251,651,081 for have difficulty accessing resources. be weakened by a shift in emphasis towards Sure Start Local Programmes as Integrated children’s centres have long services for working mothers instead of we are unclear how these will run alongside Children’s been advocated by child development spe- child-centred services as Moss advocates, a Centres. If this allocation is cialists such as Penelope Leach (1994, change of focus towards wrap-around included in the amount earmarked, the amount per child 2008). In London, the Thomas Coram childcare as the primary service offered increases to around £510. Institute has been running a model centre rather than services for families and par- However, this calculation implies coverage of 2.8 million children for years and there are other examples ents who are full-time carers. A core goal of (3,500 centres x 800 children) and according to the August around Britain, run by enthusiasts and vol- SSLPs in the more deprived areas was to 2007 child benefit quarterly sta- unteers. contact those most difficult to reach. tistics there were over 2.9 million under 5s in receipt of child ben- Professor Peter Moss has been the Reach-out programmes are crucial in help- efit in England (based on child’s strongest advocate of integrated child-cen- ing mothers in families that prefer infor- age at 31 May 2007) tred services for children, including servic- mal care or are poor to discover desirable 8 For example, Jill Kirby, Director of the Centre for Policy es for pre-school children (early years serv- alternatives, such as getting a job or send- Studies, mentions “about £250 ices for 3-4 year olds). He also offers the ing their child to pre-school education per child, compared with £1,300 per child in the 2004 version of strongest critique of the childcare discourse classes. Subsequent government evalua- Sure Start” in an article in The Sunday Times in March 2006; that has emerged since 1998 (Moss, 2006). tions have, however, found that outreach www.timesonline.co.uk/article/0,, As Moss points out, discourses make to these families has been failing. 2092-2069657_1,00.html

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Does Sure Start work? school education helped poor children to Sure Start Local Programmes had fund- become ‘ready to learn’, so they achieved ing guaranteed for ten years, and the better results in school, were less likely to evaluation research was planned to take drop out of school, more likely to attend as long. However the Government did college, were less likely to become not to wait to assess the results before involved in crime, and less likely to expanding the scheme into the nation- become welfare dependent. The claimed wide system of Children’s Centres. As a benefits thus included positive outcomes result, there is almost no aspect of the (such as higher aspirations and motiva- Sure Start scheme that is so well estab- tion, better school performance) but also lished as to be unquestioned. Does the weaker negative outcomes (less criminal package provide appropriate parenting activity, less obesity and ill-health, less support and access to family and child- likely to end up dependent on welfare). care services? However, the evidence from USA Sure Start was unusual in claiming to schemes and interventions is more equiv- be an evidence-based policy (Roberts ocal and mixed than these optimistic and Hall, 2000). Much of that evidence accounts admit. Too often, research came from the USA, although not always reports underlined the best and most from directly comparable projects. positive results from complex and multi- Evidence from the USA was used partly faceted evaluations using at least four dif- because genuinely experimental studies ferent ways of measuring the impact of are more common in the USA than in an intervention, leaving the negative Britain, and these provide the most rig- results and failures almost invisible, often orous tests of scheme impacts, and part- relegated to footnotes. ly because the USA offers a larger num- Head Start has been providing pre- ber of demonstration projects and ‘mod- school programmes for children aged 3 to els of best practice’ programmes which 5 in deprived areas. It is very popular – demonstrate what can be achieved, at only two-thirds of applicants can be best, with substantial funding and offered places – hence the benefits of asso- enthusiastic staff in small model pre- ciating Sure Start with Head Start. school schemes. Head Start and the However early evaluations showed only Perry Pre-School schemes in the USA limited impacts and no further rigorous provided the main source of the research assessment was carried out until quite evidence on ‘what works’ in early years recently. Unfortunately this evaluation interventions and learning when the (Puma and others, 2005) also found only Treasury team conducted a policy and small short-term impacts: only 0.20-0.30 spending review on services for children of a standard deviation for measures of in 1997/98 (Glass, 1999, 2006). This cognitive and social-emotional develop- was the review that ‘informed’ Sure ment. The most disadvantaged children, Start, but what evolved was different to especially black children, gain the least the USA schemes which were focused on and the gains fade quickly. Scholars early education through centre-based repeatedly note that benefits attributed to intervention, in that Sure Start was Head Start are actually found only in focused on social inclusion through area- other, far more expensive demonstration based facilities. projects (Currie, 2001; Currie and Also attractive to the Government was Thomas, 1995). Thus the US evidence is the further research evidence from the more equivocal than the optimistic USA that was said to show that pre- accounts admit.

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Alternative measures of policy impacts There are three different methods of measuring the impact of a public policy.

Statistical significance The conventional test used in academic journals is the test of statistical significance. The problem is that this test is virtually meaningless in a policy context (Hakim, 2000: 7). If the study sample is large enough, all findings will be statistically significant. Most of the time, the test simply reflects the size of the study sample. For policy purposes, it is the size and strength of any effect that is important, plus the robustness of the results. It is not much use showing that a particular scheme has good results if it works only with a unique and small social group rather than with the general population. A great many statistically significant research results reported in academic papers are so small as to be negligible in the real world.

Effect sizes Policy research reports are more likely to present the magnitude or “effect size” of the policy’s impact. These are usually presented as a proportion of a statistical indicator called the Standard Deviation (SD) measured on a control group, and can vary from 0.00 (zero impact) to 1.00 (large impact). The convention is that effect sizes from 0.00 to 0.30 are interpreted as small and anything over 0.80 is treated as large (Ludwig and Phillips, 2007). Table 2.1 reports some effect sizes from the Effective Provision of Pre-School Education (EPPE) project: virtually all are small or even non-existent. A more useful way of measuring policy impacts is to report effect sizes compared to some other well-known factor. For example, the effect of high-quality childcare compared to high-quality parental care. But this method is rarely used.

Cost-benefit analysis Finally, policy researchers often use cost-benefit analysis to compare the overall costs of a policy intervention with the financial benefits achieved. In this test, very small effects may be shown to be worthwhile nonetheless. For example, if a policy produces only a tiny reduction in the numbers who get arrested and imprisoned in adult life, this could still represent a saving of hundreds of thousands of pounds to the criminal justice system and the prison service, quite apart from the “saving” of the victims’ misery. Ludwig and Phillips (2007) use this method to argue that the small impacts of Head Start and other, richer, pre-school programmes in the US bought substantial benefits in the long term.

Given the wide range of measures and tests of the effects of pre-school education and family support, it is not surprising that research reports offer apparently contradictory or inconsistent conclusions, especially as some studies focus on the short-term impact, in primary school, while others look at long-term impact on early adult lives. It also explains why scholars’ accounts of the effects of early childcare can differ so markedly – from claiming wide-ranging benefits to reporting no important effects or negative impacts.

Evaluation problems more recent forms. For instance, because the It has been difficult to assess the impact of SSLPs targeted disadvantaged neighbour- Sure Start schemes. Some of the research hoods their evaluation can tell us little about findings on the effects of the original Sure impacts of such a programme on average Start model may be of little relevance to its families. However early findings indicate lit-

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tle to no impact in the short term across all Because of the large variations between families in SSLP areas, or adverse effects for Sure Start Local Programmes in the servic- the most disadvantaged families but benefi- es they offer, and the lack of measurable cial effects on other families in those areas outputs, cost-benefit analysis of the pro- (Belsky, Barnes and Melhuish, 2007). The gramme is impossible (Belsky et al, 2006; NESS Report 13 (November 2005) found Belsky, Barnes and Melhuish, 2007; children in non-SSLP areas actually did bet- Melhuish et al, 2007). What is clear is that ter than their counterparts in SSLP areas. the average expenditure per child in a SSLP that had been operational for three years was about £900 per year; that about “ Private day nurseries emerge as the most cost effective one-quarter of SSLP funds went on over- providers of pre-school group education and care because heads – because small schemes generally do have disproportionate overheads; and that they register the largest educational gains at relatively other related local funding and subsidies modest cost ” substantially increased the total annual spending per child (Meadows and NESS, 2006). Sure Start Local Programmes were Schemes that built on pre-existing serv- very much cheaper than Head Start, which ices, such as health visitors, were the most cost around $7,000 per child on average in effective. A study by researchers at Durham 2006 (Ludwig and Phillips, 2007: 3).9 University has shown that, as yet, the Finally, the Effective Provision of Pre- expansion of nursery education and school Education (EPPE) project, a longitu- schemes in deprived areas have had no dis- dinal study that examines the effects of pre- cernible impact on measured abilities and school education and care on the develop- skills of four year olds starting school in ment of children aged 3-7 years provides a Britain. Between 2001 and 2006 there was rough measure of the value added by each a large increase in nursery attendance, how- type of non-family group care, in terms of ever there was no discernible narrowing of the child’s cognitive development, after tak- the skills gap between poor children and ing account of family background and others (Merrell, Tymms and Jones, 2007). income. Private day nurseries emerge as the

Table 2.1: Formal childcare costs and benefits (children aged 3-7 years)

Average cost Cost per Ratio of Effects sizes Effects sizes Effect sizes in per child £ session £ costs per in language in pre- early number per annum session development reading concepts

Playgroups 922 4.73 1 0.18 0.06 0.18

Private day nurseries 4183 8.71 1.84 0.21 0.26 0.17 Nursery classes 2875 14.74 3.12 0.14 0.23 0.02 Nursery schools 2294 11.76 2.49 0.17 0.19 0.24 9 Head Start expenditure per child costs half that of the higher LA day nurseries 6205 12.93 2.73 (ref) (ref) (ref) quality American interventions, Integrated centres 6880 17.37 3.67 0.28 0.24 0.40 such as Perry Pre-School. But according to Ludwig and Phillips (2007) the hidden costs of Head Start (policy administration and Local authority nurseries are used as the reference group for measures of effects on language development because they achieve the review, local costs, evaluation smallest benefits of all, despite being one of the most expensive providers. costs etc) probably double the Source: Appendix B in Sylva et al (2006) total costs of the Head Start scheme

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most cost effective providers of pre-school that the relationship between centres’ group education and care because they regis- expenditure and the number of children ter the largest educational gains at relatively and families they reached was unclear, modest cost. Local authority day nurseries, meaning that outcomes and benefits from nursery classes and Sure Start Children’s the Sure Start programme were difficult to Centres (currently still rare) are by far the evaluate or determine. The topic was con- most expensive providers, with the smallest sequently followed up by the Committee educational gains in the case of local author- of Public Accounts in 2007. ity nurseries and nursery classes (Table 2.1).

Does Sure Start damage existing Value for money? childcare services? Figures for reach and take-up are unclear Evaluations of the Sure Start Local and are based on estimates that each centre Programmes have assessed the effects on provides for a community of 800 children, local communities as well as on the fami- although actual numbers of children using lies and children using the services. centres and take-up rates are not certain. Although results have been mixed, general- What is known, however, is that between ly schemes do appear to have affected exist- April 1997 and March 2006 £2.1 billion ing services. The National Audit Office was spent on Sure Start Local Programmes warned in its 2006 report that not all local and Children’s Centres, and a further £1.8 authorities have yet developed effective billion will be spent up until 2008 (House partnerships with health and employment of Commons Public Accounts Committee services, or any performance monitoring. 2007, see Table 2.2). They did not necessarily carry out assess- The investment of increasing sums of ments of need before setting up Local public money requires greater financial Programmes and Neighbourhood Nursery accountability. The 2006 NAO report, Initiatives, and the result has been over- Sure Start Children’s Centres, discussed provision. A survey of day nursery some of the failings of Sure Start and noted providers in 2005 found that 71 per cent

Table 2.2: Sure Start expenditure for the period from 1997-98 to 2005-06

97-98 98-99 99-2000 2000-01 01-02 02-03 03-04 04-05 05-06 Total

Total Sure Start 4* 179 213 367 467 680 720 928 1,240 4,798 current and capital expenditure (£ millions)

Of which SSLPs/ 00 7 56 134 216 365 568 746** 2,092 Children’s Centres (£ millions)

Total expenditure includes Sure Start Local Programmes (SSLPs), childcare and some nursery education funding. From 2003-04, SSLP/Children’s Centres expenditure starts to include funding for Sure Start Children’s Centres

*1997-98 saw the withdrawal of the nursery education voucher and a move towards universal nursery education funding for all four year olds. Free early education provision for all three year olds came in from 2004. **Provisional figure. Source: House of Commons Committee of Public Accounts, 2007

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of respondents reported local authorities en to an average of 60 per cent, and the sec- were not yet involving them in the delivery tor has become unprofitable” (Penn 2007). of local Children’s Centres and 47 per cent Some private nurseries have had to increase felt that a local Children’s Centre or school their fees and rein in expansion plans; others had launched childcare services, aimed have had to close (see Figure 2.1). In 2006, specifically at the under-fives, which childcare costs rose by 6 per cent: fees directly competed with and duplicated reached as much as £21,000 a year and aver- their own services (National Day Nurseries aged £152 a week for a full-time daycare Association 2005). nursery place for a child up to 2 years old In some areas provision has been dupli- (Daycare Trust, 2007). In 2007 they rose by cated and the non-maintained sector (pri- almost another 5 per cent: fees averaged vate and voluntary initiatives not receiving £159 a week for a full-time daycare nursery state support) has been scaled back. At the place for a child up to 2 years old and the same time, concerns persist about the most expensive nurseries were £22,000 a financial sustainability of the maintained year (Daycare Trust 2008). sector once government “pump-priming” subsidies end. The long-term effect may be greater instability in the childcare market Competition and a weakening of the non-maintained The overwhelming majority of 4 year olds sector, rather than reliable, affordable (79 per cent) and a substantial proportion childcare for all, as intended. In addition, of three year olds (38 per cent) attend a the substantial funds available to the new maintained nursery school offering free schemes have meant that they could afford places.11 Public sector provision for 3 and 4 to employ significant numbers of the lim- year olds is often in the form of part-time ited local supply of skilled staff. education/care attached to schools, which The accepted rule of thumb is that, in strictly-speaking does not compete with order to be profitable, nurseries must fill 90 full-time (private sector) care services per cent of their places.10 Recently it has been catering for working parents, but it has a noted that “the private sector has experi- knock-on effect on the childcare sector as a enced turmoil, as occupancy rates have fall- whole. Tight regulation of centre-based

Figure 2.1: Growth in private sector places and children attending, 2003-2007

20 18 Places Children 16 14 12 % 10 8 6 4 10 Laing and Buisson quoted in Penn, 2007 2 11 See “Provision for Children 0 Under Five Years of Age In 2002-03 2003-04 2004-05 2005-06 2006-07 England: Jan 2006 (Provisional)” 27 April 2006, SFR 17/2006; www.dcsf.gov.uk/rsgateway/DB/ Source: Laing and Buisson, 2007 Children’s Nurseries Conference (Penn, 2007) SFR/s000652/SFR17-2006.pdf

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care affects costs, fees and provision of all Dedicated Schools Grant (DSG) for all 0- childcare. An increase of the Early Years 16 education funding. Local schools Education Entitlement for 3 and 4 year forums then decide how much of the DSG olds from 12-and-a-half hours to 20 hours is actually allocated for NEF. This allows a week will also increase access to public the local authority to decide how much it sector provision. wishes to give private and voluntary set- From ages 3 to 8 the legally required tings, and the remainder is usually redirect- staff-to-child ratio is 1:8, compared with ed into schools [including maintained 1:4 for 2 year olds and 1:3 for under 2s. nurseries]. This has led to vastly different The need for more staff means childcare is rates of NEF reaching private and volun- more costly to provide for children under tary providers from authority to authority.” 3. However, in maintained nurseries the (Pre-School Learning Alliance, 2007) staff-to-child ratios are lower because “the The Government’s goal of providing presence of a qualified teacher permits free nursery classes for all 3 and 4 year olds nursery classes to operate with 1:13 ratios has been a tremendous step forward in for children of three and four years old”.12 providing equal access to early years educa- This means it is cheaper for them to pro- tion for young children. However, these vide nursery education than it is for private part-time educational services are not inte- and voluntary institutions which are grated with working parents’ need for full- unlikely to have a qualified teacher present. time childcare services for pre-school chil- Furthermore, maintained nursery schools dren. The free early years’ education servic- do not have to pay rent on their buildings es are of most benefit to families with a because they are incorporated within the full-time carer at home as the restricted local authority school system, unlike the hours rarely dovetail neatly with part-time non-maintained nurseries, which must jobs. The recent proposal to extend free provide their own accommodation. early years education to 2 year olds in dis- Childcare is more costly to provide for the advantaged areas hints of a return to a tar- under 3s because of the lower staff ratios, geted rather than universal policy and may the impact of which is exacerbated by the delay the increase in hours for three and drift of 3 and 4 year olds to the maintained four year olds. This will delay the day sector – it becomes harder for non-main- when childcare and education can usefully tained settings to spread costs evenly from be brought together to benefit families and birth to 4 if their nurseries are heavily simplify government spending. The 20 dominated by children under 3 years old. hours a week would be of far greater value Maintained nurseries that are attached to to parents as a childcare tool than the cur- primary schools also attract 3 and 4 year rent 12-and-a-half hours whereas the olds because parents believe they will more extension of the free provision to two year likely later to get a place at the school. olds reopens the debate about the impact Another issue is the dual role of local of centre-based group care and education government: they provide public sector on toddlers. childcare in their areas, and they also com- The private and voluntary sectors sup- mission childcare from the private sector, ply the majority of nursery childcare for so there can potentially be a conflict of the under threes, helping parents to work, 12 Pre-School Learning Alliance, interests. One commentator concluded: train for work or have respite. If 3 and 4 Conservative Party Childcare “Nursery education funding (NEF) for year olds are siphoned off from these nurs- Consultation: Pre-school Learning Alliance Response, both private and voluntary and maintained eries into maintained nurseries based in (2007) www.pre-school.org.uk/ news/policy/pdf/Final%20Conse settings is distributed from the central gov- schools once they reach 3, this will distort rvative%20Party%20 ernment to local authorities as part of the the market and make the care they provide Childcare%20Consultation.pdf

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more expensive. If the public sector could day (for children aged over 2). Despite provide enough high quality, accessible, Sure Start being a national scheme, the affordable childcare for families the demise source of funding and the amount parents of the non-maintained sector would be of have to pay for childcare remains unclear little concern – except to those whose and inconsistent, even to those working in livelihoods and careers were directly affect- the centres. ed. But the maintained sector’s future The expansion of the maintained sector looks uncertain and many think that its has also had a detrimental effect on the ambitious plans to provide universal supply of informal childminding services affordable childcare and integrate chil- which are extremely popular.17 The num- dren’s health, education and social services ber of registered childminders has declined are underfunded.” Norman Glass has been from 98,500 in 1997 to 68,348 in 2007.18 quoted as saying of Sure Start: “It’s all Some were sucked into the emerging smoke and mirrors. It doesn’t all add up in maintained sector, but others were unable the amount of money available.”13 to respond to the progressive regulation of the industry and simply ceased to provide a service. It is still the case that many Financial viability? women who decide to offer childminding In August 2007 the Government allocated services do so on a relatively informal basis, a further £4 billion for Sure Start for 2009- even when they are paid for their services. 11 but it still leaves the system underfund- Many childminders do not regard their ed.14 For the year 2010-11 the work as a job in the normal sense of the Government has earmarked around £1.18 word, not only because they have the billion to be spent on Children’s Centres, autonomy of the self-employed rather than “sufficiency and access” and “outcomes, employees, but also because the service can quality and inclusion”.15 If targets are met be very personal in nature and can lead to there will be 3,500 centres by 2010. Each genuinely loving relationships with the is meant to serve 800 under 5 year olds and children they care for so that it is not a so, based on this allocation, spending per purely commercial sale of services (Kay, child in Sure Start Children’s Centre areas 1984). Regulation of the industry has thus 13 As reported by David Batty in 16 Society Guardian on 6 January will be around £420 per year. But this alienated many of these workers, reducing 2005; www.guardian.co.uk/ socie- amount is for all services provided by the level of flexible, personal and local ty/2005/jan/06/childrensservices.e arlyyearseducation Children’s Centres, including increasing childcare. 14 £1.7 million has since been the availability of childcare, improving added, so the exact figure is £4,102,933,482. The August health and emotional development and announcement was made in supporting parents in parenting and work, Group care: who benefits? order to allow local authorities to plan their budgets while also covering the costs of staff, The evidence from the USA which

15 The Government Sure Start administration and overheads. informed the implementation of the Sure spending breakdown is available We conducted an informal survey of 20 Start policy package was at best equivocal at http://www.surestart. gov.uk/_doc/P0002473.xls Sure Start Children’s Centres and found on the proven effectiveness of specific 16 See footnote 7 on page 37 confusion within the system. One centre interventions with pre-school children. It for a detailed explanation of this calculation claimed it was moving away from the Sure was from America, not Europe, and it was

17 Mooney A, Knight A, Moss P, Start name and another said that its fund- from early education programmes through Owen C (2001) Who Care? ing came from the Pre-School Learning nurseries rather than social inclusion pro- Childminding in the 1990s Alliance rather than Sure Start. The cost of grammes through multi-faceted centres 18 The Guardian, October 2007, “Case of the disappearing car- childcare provision ranged from free to targeted at deprived areas. Given the large ers” at http://education £3.30 an hour, or in cases where provided differences between America and Britain, .guardian.co.uk/earlyyears/story/ 0,,2191736,00.html on a daily rather than hourly basis, £47 per in culture, values, access to welfare state

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services (especially health services), income and social development – the attachment spreads, and community functioning, not theory (Biddulph, 2005; Manne, 2005; to mention the different structures and Bowlby, 2007). When people point to the goals of the UK and USA projects, there Scandinavian model as the one to emulate, was never any guarantee that schemes and they regularly overlook the fact that in interventions found to be effective in the Sweden public collective daycare is concen- USA context would necessarily have the trated among children aged 3 to 7 years; and same impacts (positive or negative) in babies under 18 months are rarely put into Britain. daycare because long parental leaves allow Some scholars have confidently con- one parent to stay at home with small chil- cluded from their literature reviews that dren (Meadows, 2000). early learning produced measurable In America, many parents put their improvements in school attainment babies into full-time childcare a few (Sylva, 1994). Others have underlined the months (or even weeks) after birth, so eval- fact that few interventions have been rig- uation studies cover children 0-3 years as orously evaluated; that few evaluations well as aged 3-6 years.19 In Britain, full- were scientifically rigorous and also fol- time childcare for children under 3 is not lowed children for a long enough period as common as in the US; part-time and to identify longer-term effects and out- family-based care are more common, comes; that unanticipated (and unwel- including nannies who work in the child’s come) outcomes were sometimes over- own home, childminders who take in tod- looked or not recorded; that outcomes can dlers of different ages, and care by neigh- often be hard to measure; that the benefits bours and grandparents in their own of small schemes staffed by enthusiastic homes. Thus the quantity, character and staff can be lost entirely when a scheme is quality of childcare varies a good deal standardised, institutionalised and rolled between the two countries, with group or out on a large scale with staff who may centre-based care less common in Britain, not share the original pioneering vision; although on the rise. and that what is labelled a positive out- Summarising research available up to come can sometimes depend on the values 2004, Melhuish found that family influ- of the observer, which may differ from the ences were twice as important as childcare values of the families involved. Jay Belsky influences. Childcare for under-3s some- has often reminded us that the evidence times had noxious effects, especially group that some interventions can work, in the care. Childcare by relatives generally long run, slid into statements that all improved social development. For children interventions do work – and have no over 3, part-time childcare contributed just downside. as much as full-time care to their educa- A review for the National Audit Office tional and social development. Local pointed out that there are at best mixed authority day nurseries produced the worst 19 Until 1993, there was no statutory maternity leave in the results on the effects of childcare in a child’s results. Pre-school programmes for disad- US, although some employers first three years, with damaging effects vantaged children could show positive provided such leave, sometimes paid for, on a voluntary basis. reported just as often as positive results effects in cognitive development in the The 1993 Family and Medical (Melhuish, 2004). Recent research on brain short term. However these generally faded, Leave Act requires public and private employers to offer job- development in babies shows that the social so there were no permanent or long-term protected family or medical leave of up to 12 weeks for environment can be a crucial factor in the benefits. In effect, a programme could workers who meet certain condi- first three to four years, and it is already well push children forward in their develop- tions. However the leave is unpaid and mothers often return established that continuous care by a princi- ment, but everyone caught up eventually. to work well before the 12 pal carer is important for babies’ emotional The lasting benefit appeared to be in chil- weeks is up

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dren’s social and emotional development, The importance of parenting their motivation and aspirations The most significant study of the long-term (Melhuish, 2004). effects of early childcare is the US National Subsequent reports on American Institute of Child Health and Human schemes confirm this overall picture (Loeb Development (NICHD) Study of Early et al, 2005; Puma et al, 2005; NICHD, Childcare and Youth Development. Starting 2005, 2006; Barnett and Ackerman, 2006; in 1991, this has looked at outcomes up to Belsky et al, 2007; Ludwig and Phillips, age 12, with the intention that people in the 2007). Social and emotional effects tend to study sample will eventually be followed up be very small, but longer lasting, while to age 15, then age 18 years. The NICHD educational effects wash out fairly quickly. study has so far cost $150 million over 15 Many studies find that long hours of child- years, far more than similar British studies. care increase behaviour problems and This study shows the importance of parent- aggression, while improving language ing quality (which is often ignored in other development. No lasting effects on IQ studies) on a child’s cognitive development have ever been found. In the US, one and also on social development, but notes important benefit is a decrease in adult that these positive impacts may be due in crime rates and special education needs. part to factors other than parenting quality Repeatedly, reviews conclude that the aca- and cannot be attributed only to parenting demic benefits of pre-school centre-based quality. The NICHD study articulates clear, childcare are bought at the price of independent effects of centre-based child- increased behaviour problems (Loeb and care and family care whereby both types of others, 2007). Barnett and Ackerman care can be additive in different situations. (2006) argue that local adaptation and Children receiving poor quality parenting control of schemes can produce inferior can benefit, at least with respect to cognitive schemes; that targeting the poor can be an development, from high quality centre- economically inefficient strategy; and that based care, for example. the community effects of schemes are The NICHD study confirms, once greatly exaggerated. For example, they cal- again, that most effects of childcare dissi- culate that providing completely free child- pate over time and have vanished by the care services would raise maternal employ- end of primary school. The only continu- ment rates by only 10 per cent. ing effects relate to reading skills and prob- Perhaps the best evaluation of Head lem behaviour, which arose primarily from Start’s long-term effects relied on the Panel centre-based and group care (Belsky, 2001; Study of Income Dynamics PSID, a very NICHD Network, 2006; Belsky et al, long-running longitudinal study of 2007). Further research on the effects on American households. It looked at out- classroom composition and culture of even comes for people aged 18-30 years in 1995 small numbers of schoolchildren with and compared those with Head Start expe- behaviour problems suggest that particular rience to those who had been in other pre- children who have experienced long hours school programmes. This definitive study of group childcare can later affect many found that disadvantaged whites achieved other children in their classrooms and better educational outcomes , but there schools (Dmitrieva, Steinberg and Belsky, was no effect on adult earnings, and all 2008; Belsky, forthcoming). The overall effects were small. For disadvantaged conclusion was that the NICHD results blacks, the only tangible gain was lower provide support for policies that reduce the arrest rates by early adulthood (Garces, amount of time children spend in child- Thomas and Currie, 2002). care (NICHD, 2006: 114).

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In Britain, the Families, Children and issue. One of the most well established Child Care (FCCC) project is replicating research findings is that family income is a the American NICHD study. Starting in strong predictor of a child’s attainment, in 2000, it has studied children from birth to reading vocabulary and maths. Although 4.5 years. Several preliminary reports are many parents involved in the EPPE project available, but full findings have yet to be refused to provide information on their published (Sylva and others, 2006; Leach earnings and others gave only rough esti- and others, 2007). The effects of childcare mates within bands, analysis showed that in Britain differ, but only in the detail of some pre-school contributed positively to findings rather than the overall drift of cognitive outcomes, in some cases less and results. Centre care and nurseries came out in some cases more than parental income the worst as regards a personal relationship did (Sylva et al, 2006: Appendix B). between parents and carer; a relationship of trust was important to parents. However nurseries achieved the best educational “ One of the most well established research findings is outcomes. Parenting quality varies a good that family income is a strong predictor of a child’s attain- deal, being highest among aspirational par- ment, in reading vocabulary and maths ents. Mothers’ ideology and values regard- ” ing child development and family roles were the primary determinant of what childcare was used, if any. There is slightly Childcare, especially formal childcare, is less evidence of the behaviour problems most commonly used by highly educated associated with childcare in the US, possi- and higher-earning parents in Britain, bly because it is fairly rare for children to women who are most likely to return to be put into 40 hours a week centre care work quickly but are also most likely to soon after birth, given that mothers are provide high-quality parenting. Conversely, entitled to up to 39 weeks of paid leave parental care is most commonly provided and a further 13 weeks of unpaid leave, by less-educated mothers with limited or compared with a three-month unpaid no employment experience, low pay when leave in America. However babies who in work, low family incomes, and some- spent long hours in childcare in their first times lower quality parenting. This makes year were reported to be less adaptable and it difficult, perhaps impossible, to tease out more fussy and difficult than those who the impact of centre-based care within an did not. “average” family context. The EPPE project, a longitudinal study of children aged 3-7 years, compares different types of childcare without looking at Conclusions parental care in the same detail. Here the Sure Start began as an evidence-based pol- results on assessments of childcare quality icy, but it was evidence from schemes in to children’s development show that any the US that cannot be directly transplant- positive effects washed out quickly, even by ed. Unlike the David Olds Nurse-Family the age of 7. It, too, showed that early day- Partnership research programme, which is care produces antisocial behaviour in chil- a true example of evidence-based policy- dren aged 4-7 years; once again, parenting making, taking years to gather data and quality was noted to be hugely important analyse impacts (see Box), the rapid roll (Sylva et al, 2004, 2006). An analysis based out and frequent changes to Sure Start sug- on the EPPE data produced for the gest a policy whose goals are constantly Treasury in 2003 attempted to address this changing.

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The David Olds Nurse-Family Partnership supports 20,000 first-time mothers, often teenagers, from low income families from the early weeks of pregnancy through to the child’s second birthday. The parents agree to sign up to the full programme and the specially trained nurses who visit them adhere to detailed guidelines on the care they are to provide. The aim is to establish health and parenting skills before bad habits set in. David Olds has spent thirty years refining the programme based on evidence gleaned from constant, careful evaluation and with an absolute refusal to compromise on any aspect of design, cost or implementation. It sounds simple but has been carefully designed to ensure maximum impact. The programme is staffed only by nurses since mothers trust them to know about both pregnancy and baby care; when a pilot was conducted with paraprofessionals instead it was simply not effective (Goodman, 2006). Since 2006 the Family Nurse Partnership Programme (a joint Department for Health and DCSF project) has replicated the scheme in ten pilot areas (Slough, Somerset, Tower Hamlets, Southwark, Southend, Derby, Barnsley, Co Durham, Walsall and Manchester). So far 90 per cent of families offered the scheme have agreed to take part. The initial phase from 2006 to 2008 had a budget of £7 million and a further £30 million has been allocated for 2008 to 2011.20 Recently, Beverly Hughes MP, Minister of State for Children, Young People and Families, announced details of 20 more new sites which will test the scheme.21 Some of the successes from the US experience that are hoped to be repeated are improved school readiness, fewer subsequent pregnancies, better pre-natal health, reduc- tions of 50 to 70 per cent in child injuries, neglect and abuse and an increase in father’s involvement. Like Sure Start, this project will be evaluated by the Institute for the Study of Children, Families and Social Issues at Birkbeck University of London.

First, the emphasis was switched from the under threes can produce behaviour- child development and support for the al problems that persist. For children most disadvantaged to providing centre- aged 3 and over, the results are different, based care for working mothers. This was and group care can be beneficial in terms reinforced with the decision to proceed of social and emotional development, but with a national network of Children’s part-time care can yield benefits just as Centres, but also changed it from a scheme great as full-time care. The Government’s targeted on deprived areas to an element in recent proposal to roll out the Early Years a universal childcare strategy. The transfer Educational Entitlement to targeted two of responsibility to local government year olds does not take this research into 20 This breaks down as £5 million for 2008-09, £10 million for recognised that central government cannot account and is rather designed to help 2009-10 and £15 million for micromanage a national childcare/early parents get back to work. 2010-11 £5 million for 2008-09, £10 million for 2009-10 and £15 years education programme on this scale. Third, even the generously funded million for 2010-11. See However, research shows that local author- Sure Start schemes receive much less than announcement by the Department of Health (October ity nurseries are the worst option for chil- Head Start and only about one-quarter of 2007) at www.gnn.gov.uk/enviro dren in terms of educational attainments investment that the very best American ment/fullDetail.asp?ReleaseID=3 27164&NewsAreaID=2&Navigate and relative costs and private day nurseries pre-school programmes receive. This dFromDepartment=True are the best (see Table 2.1). alone suggests that any educational 21 See Department of Health news releases at www.gnn. Second, research published since 2004 impacts will be far more limited in gov.uk/environment/dh confirms that long hours of daycare for Britain.

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Childcare funding distributed directly to all parents with children. The focus of this parents rather than to service providers is study is families with intensive childcare called demand-side funding. On the supply needs for children under 3, before universal side, Sure Start Local Programmes and pre-schooling begins in the first term after Children’s Centres calculate spending on the third birthday. At that stage, a child childcare combined with “learning and receives 12-and-a-half hours a week of free

play” and there is no public data available early years education and the Government 1 HMRC Child and Working Tax which breaks down the spending on these aims to increase this to 20 hours a week. Credit Statistics – Finalised Awards – 2005-06 Table 2.3; activities, nor, as we understand it, a formal Once they reach Key Stage 1 children www.hmrc.gov.uk/ process in place that would facilitate this receive a recommended 21 hours a week of stats/personal-tax-credits/cwtc- quarterly-stats.htm type of financial analysis. However, on the education, increasing to 23-and-a-half 2 HMRC Child and Working Tax 4 demand side, the funding streams to parents hours recommended for Key Stage 2. For Credit Statistics – Provisional Awards at snapshot dates; are more clearly defined. In this section we families with children under 3, there is no www.hmrc.gov.uk/ analyse how much parents are receiving such universal pre-schooling or universal stats/personal-tax-credits/cwtc- directly from the State for childcare and in support either to assist with childcare costs quarterly-stats.htm 3 HMRC Impact Assessments; what form. We also look at the effectiveness or to assist parents who are not in paid work www.hmrc.gov. and wider impact on the childcare market and remain at home to care for their child. uk/ria/emp-supp-childcare.pdf of these demand-side funding streams. In 2005-06, the Government distrib- 4 See www.teachernet.gov.uk/ management/atoz/l/lengthofsc There are two sources of funds directed uted £23.2 billion to families with children hoolday/ to parents: the childcare element of the of all ages through demand-side funding, 5 Child Benefit: Table T1.3, Monthly and quarterly Child and Working Tax Credit (WTC) and electronic of which the vast majority was the Child Working Tax Credits and Child childcare vouchers. Figure 2 in Appendix A Tax Credit and Child Benefit; £1.9 billion Benefit net payments; www.hmrc.gov.uk/stats/tax_recei shows the annual amount spent on each of was distributed to families through specifi- pts/table1-3b.pdf; Child Tax these streams: in 2005-06, £858 million was cally childcare related streams (Table 3.1). Credit: Table 1.1 Child and Working Tax Credits Statistics distributed through the childcare element of Finalised Annual Awards 2005- the WTC.1 A snapshot of the number of 06; www.hmrc.gov.uk/stats/ personal-tax-credits/cwtc-annu- families claiming it in April 2006 shows that Table 3.1 al-0506.pdf; Working Tax Credit £972 million was being distributed this way (non-childcare): Table 1.1 Child and Working Tax Credits over the course of the year and in December Funding Source5 Funding £bn Statistics Finalised Annual 2 Awards 2005-06; 2007 it was £1.4 billion. There was £20 www.hmrc.gov.uk/stats/personal million distributed through childcare Working Tax Credit – 0.9 -tax-credits/cwtc-annual- 3 childcare element 0506.pdf; Working Tax Credit vouchers in 2005-06. (childcare): Table 2.4, Child and Other streams of funding available Voucher Scheme <0.1 Working Tax Credits Statistics Child Tax Credit 8.5 Finalised Annual Awards 2005- directly to parents that are related to chil- 06; www.hmrc.gov.uk/stats/ dren though not specifically for childcare, Working Tax Credit – 4.0 personal-tax-credits/cwtc-annu- non-childcare element al-0506.pdf; Voucher Scheme: are the Working Tax Credit (WTC), the Table A2, Budget 2005 Full Child Benefit 9.8 Child Tax Credit (CTC), Child Benefit and Report, Chapter A Budget Policy Total 23.2 Decisions; www.hm-treas- Maternity Pay. Except for maternity pay, ury.gov.uk/media/E/2/bud04_cha these demand-side benefits are available to _190.pdf

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Despite a decade of reform childcare is earnings per family and the childcare test more expensive and inflexible than ever. requires an approved care setting (some- The cost has risen by nearly 30 per cent times referred to as formal setting) to be since 2000 and the Childcare Survey of used. These eligibility criteria are very Great Britain (2006) found that 62 per cent restrictive and inhibit the reach of the ben- of the working mothers questioned con- efit, significantly reducing its impact. In stantly worried about the cost of childcare.6 2003, the Work and Pensions Select In this section we analyse the costs and ben- Committee looked at the restrictions of its efits of the childcare element of the WTC predecessor, the Childcare Tax Credit, and the electronic childcare vouchers. (We which was based on the same eligibility do not include the maternity-related pay- conditions. The committee observed: ments granted to pregnant women and new mothers who are taking time off work.) “What it does not do is provide a subsidy across the majority of families with children because it has got this fairly aggres- The childcare element of the working sive means test and this work require- tax credit ment and this requirement that you use Tax credits are a means tested benefit, paid formal childcare. There are three hurdles to families and low-income workers with- [you] have to jump over in order to out children, who meet certain criteria. claim the credit: you have to have all the They are supposed to tackle child poverty, parents in the household working, you provide support to low and middle-income have to earn sufficiently low amounts families and encourage people away from and you have to use formal childcare, traditional forms of welfare and back into and not many families pass those three work, but have been much criticised for hurdles. It is good at helping low earn- the administrative complexities that have ing families with their formal childcare resulted in low-income families having to costs. It is just that there are not very pay back money they have already spent. many of those families, that is, low- The childcare element of the WTC is income families who work.” 8 available to working parents to help them towards childcare costs in approved settings, 6 The Guardian, October 16 7 The work test 2006, One in three working that is, Ofsted registered providers. Up to mothers unhappy with nurseries 80 per cent of a maximum £175 per week To qualify for the childcare element of the 7 The childcare element was first for one child or £300 per week for two or WTC in a two-parent family, both parents introduced as the Childcare Tax 9 Credit which was part of the more children can be reimbursed (ie up to have to work at least 16 hours a week, then Working Families Tax Credit £140 per week for one child and £240 per unless one parent is unable due to incapac- 8 House of Commons Work and week for two or more children). The maxi- ity, hospitalisation or imprisonment (such Pensions Committee – Childcare for Working Parents (Fifth Report mum is available only to those with very low families constitute 5,000, or just 1 per of Session 2002-03), page 24 earnings. The calculation is complex because cent, of the total number of families claim- 9 This criterion has not changed 10 since the introduction of it is dependent upon the overall amount of ing). Families where both parents regular- Childcare Tax Credit in 1999 Working Tax Credit that a family is entitled ly work 16 hours a week or more and meet 10 HMRC Child and Working Tax to. (See the Appendix B for more details of the “aggressive means test” are small in Credit Statistics, December 2007, Table 4.4. The December the stages involved in the calculation.) number. In December 2007, 427,600 fam- 2007 statistics show 5,100 fami- To be eligible parents must pass the ilies were claiming the childcare element of lies where one partner was inca- pacitated, in hospital or impris- work test, the income test and the child- the WTC of which 145,700 were couple oned care test. The work test requires all adults families where both parents were working, 11 HMRC Child and Working Tax Credit Statistics, December in a family to work at least 16 hours a just 35 per cent of the total number of 2007 week, the income test restricts the eligible families that received the credit.11

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Table 3.2: Changes in maternal employment 1999-2004

In employment (%) In full time Working <16 Working 16-29 Base employment (%) hours (%) hours (%) (unweighted) 1999 2004 1999 2004 1999 2004 1999 2004 1999 2004

All 60 62 23 25 12 9 24 28 4779 7694 Couple 65 66 24 26 13 11 25 29 3661 5890 Lone parent 45 49 18 20 74 17 24 1118 1804 Pre-school age child 48 48 16 16 10 9 17 22 2202 3529

Source: Butt S, Goddard K, La Valle I and Hill M (2007)

The 16 hours’ work requirement does proportion of mothers in employment not allow for any initial periods of training, over this period (62 per cent in 2004, retraining or interviewing for jobs. A Job compared with 60 per cent in 1999),” but Grant might be made available, but given the main change was the statistically sig- the complexity and inflexibility of the nificant increase in the proportion of childcare element of the WTC, some par- mothers working longer hours (see Table ents find it difficult to determine whether 3.2). “In 2004, 52 per cent of mothers they will do any better by coming off ben- were working 16 hours or more, com- efits and going back to work: pared with 46 per cent in 1999.” The report suggests that “these findings appear “Lone parents looking for work spoke to indicate that the WTC and its child- of their fear of entering the paid work- care element, which can only be claimed force and of the risks they associated if (both) parents work at least 16 hours a with leaving the security of benefits. week, could partly explain this increase in This is exacerbated by what they see as maternal working hours.”13 the high costs of childcare and the lack A policy that requires parents to be in of affordable places. Some parents the workplace for a minimum of 16 don’t think it would be worth their hours a week restricts parents’ freedom while to accept a poorly paid job to decide how much time they wish to because, after paying for childcare, spend working relative to caring for their their family would be no better off child and does not provide adequate financially.” 12 flexibility for individual family situations. More fundamentally, some parents may 12 Findings from Listening to Families research Daycare Trust, not wish to commit to a 16-hour working 2007: www.daycaretrust.org.uk week when they have small children; but The income test /mod/fileman/files/Listening_to_F amilies_Research_findings_ if they elect to work, say, 12 hours a week, Average individual earnings in the year to workstrand_1.pdf

they miss out on this childcare support. April 2007 were £26,300 according to the 13 Butt S, Goddard K, La Valle I They may find themselves increasing their latest survey of earnings published by the and Hill M (2007), Childcare nation? Progress on the childcare work hours beyond their desired amount Office for National Statistics on 7 strategy and priorities for the simply to qualify. A report by the Daycare November 2007.14 Families with one future, Daycare Trust 14 Annual Survey of Hours and Trust (2007) found that between 1999 child that have an annual income of up to Earnings (ASHE), First Release, and 2004 “there was little change in the £20,920 and families with two children 7 Nov 2007

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Figure 3.1: Families with one child

100 Childcare Element 90 80 70 60 50 40 % Received 30 20 10 0 37,500 27,500 39,576 20,920 22,500 25,000 32,500 30,000 35,000

Annual Income £

that have an annual income up to The actual amount of childcare costs that £26,266 are eligible for the maximum 80 can be claimed depends both on the annu- per cent reimbursement of childcare al family income as illustrated, but also on costs.15 Figures 3.1 and 3.2 illustrate the the actual family spending on formal declining proportion of the childcare ele- childcare up to the maximum amounts of ment of the WTC reimbursed to parents £175 for one child and £300 for two chil- as their salaries increase, based on parents dren. spending the maximum amount on child- Although the aim of the childcare ele- care allowed.16 ment of the WTC is to support families in Families with one child can claim a pro- poverty, in practice this may not be the portion of the childcare element of the case. To show just how much the sums can WTC to support the costs of formal child- vary according to circumstances we drew care where annual income is less than up five model families, with different £39,576, rising to annual income of structures and working patterns as well as £58,266 for families with two children. income:

Figure 3.2: Families with two children

100 Childcare Element 90 80 70

60 50

% Received 40 30 20 10 0

15 Figures supplied by the

Institute for Fiscal Studies 26,266 27,500 30,000 32,500 35,000 37,500 40,000 42,500 45,000 47,500 50,000 52,500 55,000 57,500 58,266

16 Figures supplied by the Annual Income £ Institute for Fiscal Studies

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Table 1.3

Family Income Family Parent one Parent two Use of Number of level status working hours working hours nursery care of children

1 Low Couple FT FT FT 1 2 Low Single FT n/a FT 1 3 Low Couple FT PT PT 1 4 Ave Single FT n/a FT 1 5 Ave Couple FT FT FT 2 17 Low income is calculated as 60 per cent of median income FT: Full Time, PT: Part Time (standard measure www.poverty.org.uk/01/index.sht ml) on an individual basis. We use 60 per cent of the median individual income in order to 17 Family 1 – Low-income couple , both Family 5 – Average-income couple, both compare the actual income dif- parents working full time, one child parents working full time, two children ference of single and couple parent families. Median individ- 18 (aged one) in full-time nursery care (aged 0 and two) in full- time nursery care ual income assumptions are Family 2 – Low-income single parent, based on the results of the Office for National Statistics working full time, one child (aged one) Family 1 in which there are two low- Annual Survey of Hours and Earnings (ASHE), First Release, in full-time nursery care income adults working full time does not 7 Nov 2007. Median hourly earn- Family 3 – Low-income couple, one receive much financial support for childcare. ings for all employees (adult rates, pay unaffected by parent working full time the other part It receives support for only 13 per cent of its absence) is £11.34 per hour. The time (16 hours a week), one child (aged total childcare costs through the childcare mean amount of paid hours per week (adult rates, pay unaffect- one) in part-time nursery care element of the WTC. ed by absence) is 39.4 hours 19 Family 4 – Average-income single par- However, a single parent in the same sit- 18 Cost of nursery care is calcu- ent, working full time, one child (aged uation (working a 39-hour week on a low lated on the basis of a full time place at 40 hours and a part one) in full-time nursery care income with one child under 3) would time place at 20 hours with the average hourly rate for a child under 2 at £3.04 and for a child over 2 at £2.80. These hourly Family 120 rates are calculated based on Daycare Trust weekly averages for 50 hour weeks (Daycare Trust, 2007). Nursery costs differ Type Hours Hourly Annual Weekly Hourly Weekly Annual CCE CCE as markedly across the sector as worked pay household hours CC cost CC costs CC costs support % of do operations – some nurseries income of CC childcare operate in blocks of morning used spend and afternoon sessions, others allow payment by the hour, but Couple 39.4 £6.80 £27,863.68 40 £3.04 £121.60 £6,323.20 £817.69 13 in many cases it is unlikely that parents can use the exact hours that correspond to their working 39.4 £6.80 hours. Modelling all scenarios was impossible so we took averages that would just about cover a full-time job or a part-time job

19 Average income is calculated Family 2 at the median hourly earnings for all employees (adult rates, pay unaffected by absence) of Type Hours Hourly Annual Weekly Hourly Weekly Annual CCE CCE as £11.34 per hour in accordance with the Office for National worked pay household hours CC cost CC costs CC costs support % of Statistics Annual Survey of income of CC childcare Hours and Earnings (ASHE), used spend First Release, 7 Nov 2007

20 CC is an abbreviation for Single 39.4 £6.80 £13,931.84 40 £3.04 £121.60 £6,323.20 £5,044.77 80 childcare, CCE for childcare element of WTC

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qualify for substantially more support, 80 However, unlike Family 1, a two-parent per cent of childcare costs, as is demon- family where only one parent works full strated by Family 2. time and the other part time (at the 16- Although we are not comparing like- hour threshold), both on a low income, is with-like in the sense that the total gross also eligible for substantial support household income for the couple family is through the childcare element of the WTC essentially double that of the single parent as illustrated by Family 3.22 (pre-tax and benefit payments), it illustrates These examples demonstrate that a two- how difficult it is for a low-income, two-par- parent family with one child, in which ent family to receive support with childcare both parents work full time earning a low costs if they are both working full time. wage, would be earning too much to qualify for meaningful childcare support. To receive a more substantial amount of help “ These examples demonstrate that a two-parent family a two-parent family would have to have a with one child, in which both parents work full time earning job paid significantly below the median a low wage, would be earning too much to qualify for hourly rate, or one of the parents would have to work part-time (but at least 16 meaningful childcare support ” hours a week). Family 1 used 40 hours per week of childcare, and yet received just 13 per cent of their childcare costs through Frank Field’s wider work on tax credits the childcare element. On the other hand, has highlighted the problems faced by even though Family 3 uses only half as families with two working parents when much childcare (20 hours a week) this it comes to receiving government assis- family is eligible for much more support, tance: 55 per cent of childcare costs, because of the effect that working fewer hours has on “In 2006, a lone parent with two chil- their overall income. Parents receive more dren under 11, working 16 hours a for working less and receive very little for week on the minimum wage, gained a working full-time in the lowest paid jobs. total net income of £487 a week, Because the structure of the childcare largely due to tax credits. In order to element of the WTC favours single par- attain the same weekly income, an ents, even a single parent on an average equivalent two-parent household need- income qualifies for disproportionately 21 Field F and Cackett B (2007), Welfare Isn’t Working for ed to work 116 hours a week; an more childcare assistance (40 per cent of Reform. Taken from House of the cost) than Family 1 (13 per cent of the Commons Library Note, 16 May extraordinary 100 hours more than the 2007, p4 single parent.” 21 cost). Family 4 demonstrates this. 22 Part-time rates have been set at the 16-hour minimum needed to qualify for the childcare element of the Working Tax Credit Family 3 and the pay at £5.52 (minimum wage www.hmrc.gov.uk/nmw/) because 60 per cent of the Type Hours Hourly Annual Weekly Hourly Weekly Annual CCE CCE as median hourly part time earn- worked pay household hours CC cost CC costs CC costs support % of ings (our usual calculation) income of CC childcare would be below minimum wage. Median hourly part time earnings used spend based on the results of the Office for National Statistics Couple 39.4 £6.80 £18,524.48 20 £3.04 £60.80 £3,161.60 £1,741.38 55 Annual Survey of Hours and Earnings (ASHE), First Release, 16 £5.52 7 Nov 2007 are £7.27; 60 per cent of £7.27 is £4.36 which is below minimum wage

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Family 4

Type Hours Hourly Annual Weekly Hourly Weekly Annual CCE CCE as worked pay household Hours CC cost CC costs CC costs support % of income of CC childcare used spend

Single 39.4 £11.34 £23,233.39 40 £3.04 £121.60 £6,323.20 £2,526.23 40

The income test tries to address the mation of single-earner couples (a 1.15 problems faced by a single parent who percentage point increase)”. Overall “the works full time and has to place her child changes in labour market participation in full-time care. A perverse consequence is arise because some workless couples move that a two-parent family in which one of to being single-earner couples and some the adults works full time and the other two-earner couples move to being single- part time will receive increased support earner couples”, and “the new tax credits even though they need less childcare are predicted to encourage parents in work, because one parent will be at home more on average, to reduce their desired hours of often. And the lone parent earning an aver- work”.23 23 Brewer M, Duncan A, age wage, still receives much more support This point is further emphasised by our Shephard A and Suárez M, than a couple family where both parents fifth family. In Family 4, the single parent (2005) Did Working Families’ Tax Credit work? The final evaluation are on very low income. on average income is eligible for financial of the impact of in-work support The Institute for Fiscal Studies has also support for childcare, but Family 5 is made on parents’ labour supply and take-up behaviour in the UK, highlighted this unintended consequence up of two full-time working parents on an Institute for Fiscal Studies; www.ifs.org.uk/publications.php of the childcare element of the WTC and average income who do not receive any ?publication_id=3379

reported that “the tax and benefit reforms financial assistance through the childcare 24 In 2006 the average UK between April 2000 and April 2003 element of the WTC. This family reaches a household income was £32,342 www.denbighshire.gov.uk/EN/En increased the labour supply of lone moth- household income above the average of vDirec.nsf/0fe70aef12d2674a802 ers by 3.38 percentage points”, which cor- £32,342 in 2006, but individually the 56763004d8527/ab69c47e8ab43 46980256d2000313627/$FILE/A responds to “around 50,000 extra lone adults are both on average hourly incomes verage%20Household%20 mothers in work”. Participation of mothers and with annual childcare costs for two Income%202006.pdf. We calculate our model family incomes in couples was reduced by 0.35 percentage children of £12,147, they may ultimately based on median individual earnings rather than average points, “or 13,000 fewer individuals” and change their working patterns so as to household earnings: see foot- the reforms were found to “favour the for- avoid such high childcare bills.24 note 17 in this chapter

Family 5

Type Hours Hourly Annual Weekly Hourly Weekly Hourly Weekly Annual CCE CCE as worked pay household hours CC cost hours CC cost CC costs CC costs support % of income of CC child 1 of CC child 2 childcare used used spend child 1 child 2

Couple 39 £11.34 £46,466.78 40 £3.04 40 £2.80 £233.60 £12,147.20 00

39 £11.34

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The childcare test ments would create daunting cash flow The childcare element of the WTC can problems. Financial worries would be like- only be claimed for costs incurred at an ly to persist, particularly given the recent approved setting (often called a ‘formal set- administrative chaos of tax credit pay- ting’ or ‘formal childcare’) which is an ments and reclaims. Ofsted registered setting. Informal net- Even with support from the childcare works of care such as relatives, neighbours, element of the WTC, parents still have to baby sitters and childminders that have not finance at least 20 per cent of formal child- registered with Ofsted do not count as care costs themselves, which alone can be approved settings. This is a particular hur- unaffordable. If the average cost of a full- dle for the very families at which the child- time day nursery place for children under care element is aimed. Low income, two- two in England is £152 per week (Daycare parent families (often where at least one Trust, 2007a), then 20 per cent of this parent works part-time) and single parents would be around £30 a week or £120 a more often prefer and use informal care month. The average payment for the child- than formal care, as shown in Table 3.3 care element of the WTC is £61 which is and discussed in Chapter 1. equivalent to 80 per cent of £76.25, the The high costs of approved care are pro- full payment. This means that the 20 per hibitive. Day nursery places in approved cent payment on top of the £61 is £15.25, settings cost an average of £152 per week or almost £70 a month.25 These figures in England for 50 hours of care (Daycare remain dauntingly high and mean many Trust, 2007). A single parent working a low-income parents who would benefit 39-hour week on low income, as in Family from assistance with their childcare costs 2, earns just under £268 a week. If she simply cannot afford to make up the 25 According to the Family Resources Survey 2005-06, 1.4 were spending the average £152 per week required 20 per cent of costs at approved million families paid for childcare on approved childcare for 50 hours in a providers. in the UK, amounting to total spending on childcare of £3.9 formal setting, around 57 per cent of her The Daycare Trust argues that “the billion a year. Of the 1.4 million, gross income (pre-benefit) would go on childcare element of Working Tax Credit 644,000 have children under 3 and spend an average of £70.24 childcare. Although this would come should be extended to meet 100 per cent per week on childcare – this is 26 total spending on childcare by down once childcare element tax credit of childcare costs”. The reason for requir- families with at least one child payments had been made, the initial paying parents to pay a proportion of the under 3, not necessarily spending on the under 3s alone; 965,000 families have at least one child under 5 and spend an Table 3.3: Use of childcare in the last week, by family yearly income average of £66.60 per week on childcare. This compares with the 413,700 families that claim the childcare element of £85.06 Under £10,000 £10,000-£19,999 £20,000-£31,999 £32,000+ per week which gives an aver- %% %% age weekly childcare element entitlement of £61.26. Source, Used any childcare 56 60 68 73 Table 4.4, HMRC Child and Used formal care 31 36 43 52 Working Tax Credit Statistics – April 2007. The average weekly Used both formal and informal care 14 17 22 25 childcare element entitlement in December 2007 given in Child Used formal care only 17 18 21 26 and Working Tax Credit Used informal care only 23 23 24 20 Statistics – December 2007 showed 427,600 families at the Base: All families average claim of £88.74 a week Unweighted base 1202 2202 1880 1965 leading to an average weekly entitlement of £64.19 a week

26 Daycare Trust’s 21 point plan, Source: Bryson C, Kazimirski A and Southwood H (2006), Childcare and Early Years Provision: A Study of Parents’ Use, Views and (2007), www.daycaretrust.org.uk Experience, Research Report 273, London. HMSO for the DfES /mod/fileman/files/Daycare_Trust _21_point_plan.pdf

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Table 3.4: Reasons for not using childcare in last year, by yearly family income

Under £10,000 £10,000-£19,999 £20,000-£31,999 £32,000+ % %%%

I’d rather look after 67 61 46 48 my child(ren) myself

I cannot afford childcare 17 10 12 5

I rarely need to be away 25 19 24 19 from my children

There are no childcare providers 85 55 available that I could trust

Quality of childcare is not good +1 32 enough

My child(ren) are old enough to 10 24 25 35 look after themselves

My child(ren) need special care 43 10 I have had bad experience using 1+ 00 childcare in the past

I would have transport difficulties 12 10 getting to a provider

Other reasons 87 12 12 My / partner’s work hours or 34 14 14 conditions fit around children

Unweighted base: 207 274 165 120

Base: All families who did not use childcare in the last year + denotes <0.5% Source: Bryson C, Kazimirski A and Southwood H (2006), Childcare and Early Years Provision: A Study of Parents’ Use, Views and Experience, Research Report 273, London. HMSO for the DfES

costs, according to Revenue & Customs, is Low-income families who need child- to ensure that a “shopping incentive” care choose informal rather than formal remains to avoid the risk of increasing provision and this cannot be explained childcare cost inflation.27 As long as this solely by cost and affordability, social and philosophy remains it is unlikely to alter cultural factors are also involved. Vincent the 80:20 structure. and Ball (2006) point to Duncan’s work Since eligibility barriers are high and (2005), which “analyses how women’s many parents cannot afford formal care choices around paid work and children are and anyway prefer to use informal care that ‘socially and culturally created’ through is more flexible, it is unsurprising that very various factors such as the extent to which few take up the childcare element of the parents share domestic labour and through WTC. the development of normative views in Table 3.3 shows that the majority of social networks.” Choices become social low-income families do not use formal moralities. In a study by Jordan et al care, and Table 3.4 shows that a clear (1992) on an Exeter council estate in the

majority prefer to look after their children late 1980s, respondents saw paid care as 27 Source: communication with themselves. inappropriate and unaffordable, and using HM Revenue and Customs

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family members or close friends was almost carer, such as trust and flexibility. As Table always preferable. By contrast the middle- 3.5 shows, 66 per cent of parents use infor- class respondents that Vincent and Ball mal childcare because they trust the person interviewed used largely formal care, to look after their child. Despite the trained including qualified nannies, registered and qualified professionals that are avail- childminders and private day nurseries. able at centre-based care, these parents pre- Affordability of formal care is often not fer informal care when it comes to trust. Yet the main concern regarding choice of child- parents who make their childcare decisions care, the preference for informal care across based on trust in this way are penalised all income groups tends to be based on the financially as they fail the childcare test for softer elements of the relationship with the the childcare element of the WTC.

Table 3.5: Main reason for using main informal provider by yearly family income

Under £10,000 £10,000-£19,999 £20,000-£31,999 £32,000+ Total %%%%%

I could trust this person/ 59 62 68 75 66 these people

I knew they would bring up 67234 my child the same way I would

The person is family 40001 So that my child and a relative 65002 could spend time together

It was low cost 02211 I could not afford to pay for 8 10 848 formal childcare

It is easy to get to 00211 I wanted someone who 65710 7 would show my child affection

I wanted reliable arrangements 32312 No other choices available to me 22522 I wanted my child to be looked 20111 after at home

I wanted my child to mix with 00+21 other children

It fitted in with my own/husband/ 40001 wife/partner’s working hours

Other reasons 42413 Unweighted base 80 115 120 82 397

Base: All families with a pre-school aged “selected” child who only used an informal provider for this child in the last week, plus those parents who did have a formal provider but identified an informal provider as their main provider + denotes <0.5% Note: The following reasons have not been included in this table due to low percentages: the child’s siblings went there, they would be educated while being looked after, a good reputation Source: Bryson C, Kazimirski A and Southwood H (2006), Childcare and Early Years Provision: A Study of Parents’ Use, Views and Experience, Research Report 273, London. HMSO for the DfES

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Regardless of whether the choice of fourth decile has just the right income childcare decision is informed by cost, spread to be eligible for support and there- social norms or some combination of the fore be able to use some proportion of for- two, few families in the lowest income mal care. The seventh decile would be at decile use the approved childcare that the high end of the spectrum for meaning- would make them eligible for the childcare ful support, but would be able to use such element of the WTC. This form of care is high amounts of formal care that it would generally used by “families [that] tend not benefit from significant support in terms to be the poorest in society” and “the ben- of the maximum value of the 80 per cent eficiaries…are mostly in the middle of the of £175 for one child or £300 for two chil- income distribution”.28 dren or more. The slightly lower propor- tional impact of the fifth and sixth deciles is likely to be an effect of these groups Impact on families earning too much to be eligible for signifi- Figure 3.3 shows that the childcare ele- cant support, but not enough to afford ment of the WTC offers very little support much formal care. As a result, as a percent- to those in the lowest income decile age of net income, the seventh decile has a because this group is predominantly made larger proportion of beneficiaries than any up of people who do not meet the 16 other income group, and a larger propor- hours a week work test. Data prepared by tion of families in the richest decile benefit the Institute for Fiscal Studies shows that than do in the poorest decile. the fourth and seventh income deciles also No detailed review of the number of benefit significantly more than the second eligible families claiming the childcare or third income deciles. This is most prob- element of the WTC has been undertak- ably due to the former using more formal en because the data on the number of care and passing the childcare test. The families who pass the work and income

Figure 3.3: The distributional impact of the childcare element of the working tax credit

Recipients as a % of families shown at the top of each bar

1.4 - 6.4 7.8

1.2 - 7.6 Gain including PBR 2004 changes 7.3 1.0 - 7.2 Gain as % of net income

0.8 - 8.3

0.6 - 3.5 0.4 -

Gain as % of0.2 net income - 0.8 0.4 0.7 0.0 - Poorest 2 3 4 567 8 9 Richest Income decile group of families with children

Note: Deciles are of families with children only; there are around 700,000 families with children in each decile. Results assume full take- up of tax credits. The graph does not show impact of childcare disregards in means-tested benefits, which will disproportionately ben- 28 Brewer M, Crawford C and efit low-income families. PBR is the Pre-Budget Report – in 2004 the limit that could be claimed for one child was £175 per week and Dearden L, (2005) Reforms to for two children £300 per week Childcare Policy, Institute for Source: Institute for Fiscal Studies, Reforms to Childcare Policy, from the Green Budget, January 2005 Fiscal Studies; www.ifs.org.uk/ budgets/gb2005/05chap9.pdf

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tests but not the childcare test is not say they want in order to claim the available. However, a snapshot shows childcare element of the WTC, but then that in December 2007 a total of never appear again. This is a flaw with 427,600 families benefited from the the tax credits, not only for that child, childcare element of the WTC.29 This but for the financial viability of the amounts to 26 per cent of the 1.65 mil- nursery holding the place” lion families claiming the WTC,30 but only (Jonathan Bell, Director, Just Learning) 30 per cent of all of the 1.4 million families with children paying childcare costs.31 These statistics show that few families ben- Electronic childcare vouchers efit from the childcare element of the Employers often offer salary sacrifice benefits WTC and, as shown by Figure 3.3, of to employees in the form of medical cover, those who do benefit, not many are likely insurance, shopping vouchers or other serv- to come from the worst off. ices. In these arrangements, an employee usually agrees to exchange a portion of his salary for a benefit that the employer can “ It is not uncommon for parents to register their child obtain at a lower price – often through bulk for a place at an approved childcare provider, claim the buying – than the employee. As these types of employee benefits arrangements became childcare element of the WTC, but not take up the place more common, the government saw them as as registered since they prefer not to use formal care ” a way to encourage employers to support childcare for employees. In the 2003 Pre- Budget Report and 2004 Budget, Gordon Brown announced that employer-supported Impact on the wider childcare market nursery vouchers would be exempt from tax We collected anecdotal evidence from and National Insurance from April 2005. private nursery providers regarding the This arrangement allows employees to sacri- impact of the childcare element of the fice a maximum of £243 of monthly gross WTC on their operations. We heard that salary and receive instead £243 of nursery it has at times resulted in outstanding vouchers. They can then use the vouchers to debts and empty places at nurseries. It is pay for approved childcare at a nursery that not uncommon for parents to register accepts the vouchers. their child for a place at an approved The saving for the employee can be childcare provider, claim the childcare worth up to £99 a month of tax and element of the WTC, but not take up the National Insurance contributions for

29 HMRC Child and Working Tax place as registered since they prefer not higher-rate taxpayers, and £80 per month Credit Statistics, December to use formal care. When a child takes a for basic-rate taxpayers. The benefit can be 2007, www.hmrc.gov.uk/stats /personal-tax-credits/cwtc- place, there is a cost incurred for provid- doubled for families in which both parents dec07.pdf, Table 4.4 ing the correct child to carer ratio that work for employers who offer the scheme. 30 HMRC Child and Working Tax remains even if the child does not turn Employers benefit because they can waive Credit Statistics, December 2007, www.hmrc.gov.uk/stats/ up. We have heard of private nurseries the application of Class 1 Secondary personal-tax-credits/cwtc- dec07.pdf, Table 1.1 recently employing debt collectors for National Insurance Contributions at 12.8

31 Figures supplied by the the first time to collect unpaid fees for per cent to the salary sacrificed in favour Institute for Fiscal Studies places held for children who never used of vouchers. The total cost to the Treasury 32 HM Treasury “Financial them. (the lost tax and National Insurance) of Statement and Budget Report, Budget 2004” Table A2; the nursery voucher scheme was £20 mil- www.hm-treasury.gov.uk/budget “We have had cases when parents do lion in 2005-06, rising to £25 million in /budget_04/budget_report/ 32 bud_bud04_repindex.cfm turn up once or twice for a place they 2006-07.

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Family 5-b

Type Hours Hourly Weekly Annual Weekly Annual Weekly Annual Annual Annual Voucher worked pay pay household CC cost CC cost voucher voucher voucher CC cost saving income value value saving minus as % of voucher CC cost saving

Couple 39.4 £11.34 £446.80 £46,466.78 £233.60 £12,147.20 £55 £2,860 £943.80 £10,259.60 16 39.4 £11.34 £446.80 £55 £2,860 £943.80

£110 £5,720 £1,887.60

Family 5 showed that, for a two-parent is £55 a week. In the adaptation of Family 4, family of average income with both parents called Family 4b, an extra child has been working full time, there was no financial added to the family so that the childcare support via the childcare element of the costs are directly comparable with the assis- WTC. However, if they both work for tance provided by the voucher scheme for employers who provide electronic childcare Family 5b. vouchers, these are of value to the family as Confusingly, the vouchers work against shown in Family 5b. the childcare element of the WTC: if A family wishing to take advantage of childcare is paid for with vouchers then it the electronic childcare vouchers relies on cannot be claimed as a childcare expense the participation of at least one of the par- for the purpose of childcare element of ent’s employer. These tend to be larger WTC payments. This means parents are companies, such as Pricewaterhouse not automatically better off using the Coopers, Shell and Sony, because the vouchers and could even find themselves administration is a significant burden for worse off by using them. The Revenue & smaller employers. Customs website informs parents: “Your The voucher scheme works against single- family will generally be worse off or, at parent families because the assistance is best, no better off accepting childcare linked to each working adult in a household, vouchers in return for a salary sacrifice if rather than to the number of children or the you can answer “yes” to both of the follow- number of hours of childcare used. A two- ing: you are receiving tax credits of more parent family can receive a childcare vouch- than £545 per year (or £1,090 per year if er worth up to £110 a week, but the maxi- you have a baby aged under one) and you mum that a single-parent family can receive are claiming for your childcare costs [or]

Family 4-b

Single 39.4 £11.34 £446.80 £23,233.39 £233.60 £12,147.20 £55 £2,860 £943.80 £11,203.40 8

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your eligible childcare costs are no more WTC and the electronic vouchers, give than £175 per week if you have one child parents no choice about the type of care or £300 per week if you have two or more they use and little choice about whether to children.” It adds: “These are only general work or remain at home caring for their pointers and there can be exceptions to children. Take-up is low because of the lack these rules.”33 of choice and flexibility the payments cur- In 2005, the chairman of the Low rently provide and because of confusion Incomes Tax Reform Group commented and concern about the way payments are that many families could make the wrong made. decision through no fault of their own because “the Inland Revenue has done little so far to explain the complexities for London Childcare Affordability ‘the man in the street…it will be the lower Programme paid and middle income employees that To help those in the lowest income decile will need to be most careful.”34 the London Development Agency (LDA) set up the Childcare Affordability Programme (CAP) in 2005, with funding “ Take-up is low because of the lack of choice and for three years from the Sure Start Unit flexibility the payments currently provide and because (£11 million from the DfES – now the of confusion and concern about the way payments are DCSF – and £22 million from LDA). Childcare places at day nurseries in made ” London frequently cost more than the maximum £175 a week per child threshold of support, so the CAP subsidises The onus is on the parents to navigate them by up to £30 a week with the aim of this maze. Not only do they have to estab- bringing the cost of the place down to lish which childcare setting is best for their £175 a week. This enables the parents to child, but they then have to work out benefit from the maximum childcare ele- which form of support they should use to ment of the WTC and only pay the 20 per assist with the costs. It is not surprising cent top-up over and above the support. that even where the scheme is available, Additionally there is a flexible-hours working parents seem reluctant to take scheme through which parents can receive advantage of it. According to research car- a subsidy of up to £68 a week to help with ried out by the voucher specialist, costs of care outside of typical working Childcare Choice, only one in 50 eligible hours. However, in some cases money has working parents uses the scheme.35 The been given directly to providers of places 33 For more details see HM reasons cited for the low take-up include and it was some time before families took Revenue & Customs website at www.hmrc.gov.uk/childcare/inde parents’ beliefs that applying for the advantage of the places. x.htm scheme would be too difficult or time con- 34 See Phillip Inman in The suming. “CAP has had very limited take up in Guardian, 16 April 2005; www.guardian.co.uk/money/200 Deciphering just how much the family the areas where our nurseries operate. 5/apr/16/childcare.familyfinance will, or will not benefit from using child- There are three main reasons: first, even 35 See research by Childcare Choice, a childcare voucher spe- care vouchers is further complicated by the though local authorities have the money cialist at www.childcarechoice possibility that the salary sacrifice may there is little incentive for them to .co.uk/documents/Parentscantb ebothered010507AH.pdf affect pension rights or maternity and encourage people to take up the places. 36 36 Lewis Hymanson Small, paternity pay. Secondly, some people see it as stigmatis- August 2007 www.lhs-solici- The two state childcare funding streams ing; and, thirdly, when it is taken up, tors.com/news/archive/08_07/1_ 090807_1.htm for parents, the childcare element of the it’s used for respite care and the forms

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required bring a huge administration subsidise childcare in place of the Working problem” Tax Credit. Denise Burke, Head of (Carole Edmond, Managing Director, Childcare at the London Development Teddies Nurseries) Agency calls it “the virtual cash method of simplifying the way childcare is funded”. Perhaps these situations could have been She explains it as follows: “Reforming tax avoided with better information and pro- credits – removing the childcare element motion of the scheme, but it is still unclear and putting it on an oyster debit card whether this scheme could meet the needs along with the early education grant and of today’s parents given its dependence on the employer supported childcare contri- the childcare element of the WTC. Even bution. The debits would then be with a top-up, fees at centre-based care set- redeemable at registered child carers giving tings are unlikely to be able to compete more parental choice as well as providing with informal networks of care. sustainability for childcare providers.” Nonetheless, the Chancellor announced The current forms of demand-side plans to extend CAP to other areas in the funding impose severe restrictions on UK in the recent 2008 budget. choice of childcare and inflexibility on A 2007 report recommended that a working hours and family structures. Even childcare affordability forum should be set the more creative projects such as the up to lobby and do further research into London CAP, specifically designed to 37 London Councils, London Development Agency, Children’s “long-term measures, integrated measures increase access to funding and to nursery Workforce Development Council to underpin the affordability and sustain- places, are too complicated. It still requires and Learning and Skills Council (2007), Solving the quality/cost 37 ability of childcare”. It suggested that it parents to use registered providers when conundrum for London’s child- the preference, or requirement for flexibil- care workforce, might explore the idea for a childcare cred- http://213.86.122.139 it card for low paid workers that would ity favours informal care. /docs/childcare_report.pdf

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Childcare policy for the 0-3s has moved in vey of 20 Sure Start Children’s Centres and the opposite direction to the rest of our pub- discovered that those centres which had lic services, which are increasingly consumer- on-site childcare provision had anywhere led. In Britain individual and home-based from 12 to 70 places available for under childcare is popular, including the use of nan- five year olds – in communities where nies, live-in au-pairs, and childminders who there are an average of 800 children in that go to family homes or look after just a few age group. Unsurprisingly, all but two of children in their own homes. The the centres we surveyed had a waiting list. Government has partially addressed this pref- The majority of the 20 centres refer par- erence with the decision to impose longer ents to an external provider who may or periods of maternity leave on employers, but may not be officially affiliated with Sure subsidies for childcare after maternity leave Start. The centres can play an important do not support informal or home-based care role in helping new parents and providing at all. There is a widespread failure to family services within local communities, acknowledge that parents generally prefer but they do not have the financial means their children to be cared for in the home in to provide childcare. the first three years of life rather than relying Many publications reviewing social pol- on centre-based childcare. When it comes to icy and its effects conclude by calling for working families the Government assumes increased public spending – a larger slice of that they only want (or need) to use formal the cake for the particular service in ques- care during standard working hours. tion. Spend more is always the easiest recommendation and it is very common in reviews of care work (Himmelweit and “ We agree with Penelope Leach, the child development Land, 2007). Although the core recom- specialist, that the money should follow the child mendations from this study would require ” the Government to spend more, its principal message is that it should spend differently and to greater effect. We agree with Penelope Leach, the child development Sure Start and childcare specialist, that the money should follow Contrary to the impression of a vast, cen- the child. tralised system often conveyed in the media, childcare is not Sure Start’s principal purpose although some of the Proposals for reform Children’s Centres are meant to provide it. A childcare policy with funding that fol- We conducted an informal telephone sur- lows the child should:

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increase choice for parents and their been bedevilled by overpayment and reclaim, children in their first three years; since a direct PCA payment could not be improve child development and the reclaimed at a later date. parent’s child-raising experience; An independent payment of this type keep policy simple to ensure reliability for parents could be considered either as and high take-up and reduce adminis- help with childcare costs, or supplemen- tration costs. tary income to make up for loss of earnings incurred while caring for a child. It would Instead of assuming that work is the key be paid for each child to the parent caring objective and designing childcare policy for the child and would be similar to the around it, the aim of our proposed reform Parental Education Allowances (PEA) paid is to provide main carers with choice and in other countries, such as the Complément flexibility about whether and when to de libre choix d’activité (CLCA) in France or work and what childcare provision to use. Homecare Allowance in Finland and Norway. It allows parents more freedom to choose whether or not to work (and if so A cash payment direct to parents how much to work) and whether to spend We propose the introduction of a Parental this money on formal or informal care. Care Allowance (PCA) in the form of a direct, universal cash payment of approxi- “A direct cash payment would be a great mately £50-60 per week. This would replace improvement. It would go some way to the childcare element of the Working Tax replacing the regular salary I forgo by Credit and the electronic voucher payments choosing to care for my children myself administered by employers, breaking the link and it would also avoid the agonising with work and with registered childcare. It paper work and phone calls that claim- would be paid in addition to Child Benefit, ing Tax Credits always seem to involve. but a simple way of administering the PCA, And because it would go to all parents, which would also link it to a secure benefit, not just earners, it would send a clear would be via the existing Child Benefit sys- message that bringing up children is tem. The Government estimates that 98 per vital work, worthy of recompense by the cent of all eligible parents claim Child Government and society.” Benefit, demonstrating that a universal bene- (Juliet Chalk, full-time mother and mem- fit that is both simple to administer and to ber of Full Time Mothers network, who claim reaches its target market effectively.1 It supplements her husband’s income by would remove the fear of being sucked into a freelance writing and editing when her worryingly complex benefit system that has children are sleeping)

Full Time Mothers (FTM) is a campaigning group founded in 1991 to counter social and economic pressure on mothers to return to work. FTM acts as a voice for the many parents who want to be at home to bring up their children and campaigns for changes to tax and employment policy that would allow more mothers – and fathers – a real choice to be full-time carers. It wants to improve the status of parents who stay at home and highlight children’s developmental needs, especially the benefits of consistent 1 House of Commons Hansard, written answers 7 March 2006, loving care. col 1296W; http://www.publi FTM is a non-profit membership organisation run by volunteers. For more details on FTM’s cations.parliament.uk/pa/cm2005 06/cmhansrd/vo060307/text/ work or to join see www.fulltimemothers.org 60307w18.htm#60307w18.html_s bhd0

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Information, information, information minding or nursery-based care. For Parents would need detailed local knowl- mothers and fathers on shift work who edge in order to make the best decisions for share the child raising role between them, their children. Structured educational pro- it would allow them the flexibility that grammes, such as the David Olds Nurse current arrangements cannot offer. Partnership and the similar pilot being tested in Britain, which are run by qualified professionals, are excellent for particu- Structuring a Parental Care Allowance lar vulnerable groups such as teenage first- Amount time mothers. A recent YouGov poll con- We have assessed the amount provided by ducted in association with the Family and similar schemes in France, Norway and Parenting Institute shows that 83 per cent Finland (see Table 4.1) as well as at the cur- of parents want support and advice in the rent average spend on childcare in the UK.3 home. The Health Visitor programme is The range of funding as a percentage of especially appropriate for this work, but GDP per capita for a child in our interna- the institute has highlighted how much it tional comparisons is 15-19 per cent. If varies from area to area.2 Sure Start parents in the UK were provided with a Children’s Centres could have a critical role similar range of between 15-20 per cent of to play here, particularly in the most disad- per capita GDP for each child under 39 vantaged areas where families have to be months, this would equate to a payment of sought out rather than being expected to between £45 and £60 a child a week.4 come into centres. Arriving at a PCA amount that it is enough to provide parents with choice but realistic for government spending is a chal- Flexibility lenge. If set too low, it will not provide real The Parental Care Allowance would sup- choice regarding work versus home care or port any family set-up as it has no the type of childcare; if too high the policy requirements attached to it and no will be ruled out of consideration. restrictions. It would support mothers or Ultimately, the PCA should be viewed with- fathers who decide to stay at home full in the Government’s overall childcare policy. time to care for their child in the first For example, since local authority nurseries three years before the Early Years are more expensive to run than private nurs- Entitlement begins. For the mother eries, yet less effective, does the allowance and/or father who decided to return to offer better value than government funding work it would help them to secure the directed to institutions? In Finland, women most appropriate childcare available – are said to have come under pressure to take family or other home-based care, child the parental allowance rather than a more

2 Gimson S, Why Campaign for Health Visitors?, (2007) the Table 4.1 Family and Parenting Institute www.familyandparenting.org/File Country Monthly Yearly Weekly GDP per Funding as % of store/Documents/publications/F payment (£) payment (£) payment (£) capita (£) (2004) GDP/capita/child PI_Health_Visitors5.pdf

3 All information is from the France 182.20 2,186.48 42.05 14,210.93 15% International Leave Network webpage: www.sfi.dk/ Norway 296.24 3,554.88 68.36 18,650.76 19% sw46603.asp Finland 211.72 2,540.64 48.86 14,526.66 17% 4 Based on the 2004 UK per capita GDP, which was £14,948.62

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expensive state-provided childcare place. instinct and made no financial sense for Such pressure needs to be avoided. If it is us. I believe that babies need the securi- not, or if the allowance is set too high, some ty of their own home and the love of a women who want to work may be deterred constant carer. Given this comm- from doing so. only accepted fact, why does current pol- According to the Family Resources icy pay someone else to care for my child Survey there are 644,000 families paying but does not support me in doing it for childcare for under 3s, spending an myself? Aside from the negative message average of £70.24 a child a week.5 In that this sends out to parents looking Europe parents pay 30 per cent of child- after their own children at home, we care costs on average; in Britain they pay could really use even a small amount of 70 per cent.6 A PCA of about £50 per week money to help with the basics for the constitutes approximately 70 per cent of family during what has been an anx- the average £70.24, bringing the parental ious time financially.” contribution to childcare into line with (Jessica Renison , full-time mother of other European countries. two boys under 3, FTM Network) The PCA would place value on the role of parents, particularly women, who want When should the PCA start? to stay at home to raise their children and We propose that the Parental Care reduce the social pressure on them to go Allowance should be payable for children out to work. Of those mothers who do from 0-3 years, meaning from after they work, a clear majority work part-time and are born to when they start pre-school. it is important to consider the value of the Specifically this means post-birth until the PCA in this context. The median earnings term after the third birthday that the child of working women with pre-school chil- becomes eligible for Early Years dren in 2005-06 were £173.7 However, the Entitlement at a registered nursery place. average part-time job pays around £140 “Post-birth” triggers the question of per week.8 A PCA in the region of £50 to whether the payment should commence at £60 would equate to around 31 per cent of birth or after maternity pay has ceased. In the median earnings for working women countries where a PCA or similar scheme with pre-school children and around 40 has been introduced the timing of the per cent of earnings for the average part- allowance varies. In Norway it runs from time job. This is broadly in line with the when a child is born until aged 2, in France value of the Homecare Allowance in it is available for one year during the peri- Finland which is equivalent to 40 per cent od from birth to 3 and in Finland it runs of average female monthly earnings of from the end of maternity leave until 3. 5 Figures supplied by the employees, albeit for full-time jobs which Parents in the UK are able to receive Institute for Fiscal Studies

are more common than part-time jobs, maternity pay through either Statutory 6 Daycare Trust, Childcare Costs and has had significant take up Maternity Pay (SMP) or the Maternity Survey (2007), www.daycare trust.org.uk/article.php?sid=292

(Ilmakunnas, 1997). Allowance (MA) from the 11th week 7 Figures supplied by the before their baby is due, for a maximum of Institute for Fiscal Studies “Living on one teacher’s salary instead 39 weeks. The amount paid is related to 8 From the Office for National Statistics Annual Survey of of two has never been easy, but we earnings, but is not more than £112.75 per Hours and Earnings (ASHE), always knew that when we had chil- week. Mothers who are not eligible for First Release, 7 Nov 2007. Part- time median weekly earnings are dren we would look after them at either the SMP or MA might be entitled to £144 per week home. Paying someone else to look after the Sure Start Maternity Grant, a one-off 9 In 2005-6 237,510 women 9 claimed the Sure Start Maternity my children while I look after other peo- payment of £500. The PCA should not be Grant at a total cost of ple’s goes completely against maternal considered supplementary to SMP or MA £118,755,000

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as it is not part of a maternity leave pack- of these 49,875 are in a family where there is age. However, parents who return to work at least one other child in the same age before 39 weeks are receiving neither group.10 Since our proposed PCA would maternity pay, nor childcare assistance and commence after maternity pay and since should be eligible to claim the PCA. about two-thirds of women work during Therefore, we propose that, as in Finland, pregnancy with the majority back in work by the PCA should be available from birth, but the time the baby is nine months old (Dex not while parents are claiming any other and Ward, 2007), many parents will not form of child-related leave benefit (including claim a PCA until then. Given the low num- Statutory Paternity Pay). However, we would ber of children with siblings in the 12-36 recommend replacing the Sure Start month bracket, and therefore the likely low Maternity Grant with the PCA, so that par- number within the 9-39 months bracket ents need claim only the one benefit. (data we could not find), the complications We propose that, at first, the PCA associated with introducing a taper for sec- should cease when a child begins to use the ond or later children are unlikely to justify Early Years Entitlement: at the beginning the cost saving to the Government. It would of the school term after the child’s third be a disadvantage too for working families for birthday. For our analysis we have used an whom childcare costs generally increase in average of 39 months. The extension of the line with the number of children they have EYE from 12-and-a-half hours a week to (not the case for those using a nanny or au 20 hours a week will subsidise both child- pair who looks after more than one child); in care and an early education service: the general large families have greater costs and extension will often enable a parent to take are more likely to fall into poverty.11 the average part-time job of 16 hours a week. Currently the hours provided by Should the PCA be taxable? EYE are not enough to constitute a child- One consequence of a universal benefit that care place and the focus is on this being a is not taxed is that the wealthiest benefit in child development initiative. The exten- absolute terms as much as the poorest. sion of the EYE may help to integrate However, a simple and easy to administer childcare and early education, which have scheme is critical to the success of the policy. historically been separately funded. Means-tested benefits are often not taken up If adopted and successful, the PCA by those who qualify and they increase the could be considered as the principle non- risk of families falling into the poverty trap schooling payment before compulsory (Bradshaw et al 2006, for the Joseph schooling, which would mean extending Rowntree Foundation). Universal payments, it from 0-3 years to include 3-4 years. We unlike means-tested ones, are not progressive have not analysed the EYE in detail but because they do not weight payments despite its popularity, it does undermine according to need. Instead of targeting the private and voluntary nurseries causing 3- few, the money is spread wider; if they took 4 year olds to drift to maintained settings, it up, those at the lower end of the income

10 Figures supplied by the as we discuss in Chapter 2. A Parental scale would not benefit as much from a uni- Institute for Fiscal Studies and Care Allowance that gives parents the versal as from a means-tested PCA. taken as a direct estimate from the Family Resources Study. The freedom to choose which nursery to use The two graphs below show who would exact number of children aged may remove some of these difficulties. benefit from a PCA that was taxed and who 12-36 months is 1,383,000 would benefit from a PCA that was not 11 See for instance Child Poverty Action Group campaign Should the PCA be tapered? taxed. Both take into account the loss of the to Make Child Benefit Count at cpag.org.uk and www.makechild In 2005-06 there were just under 1.4 million childcare element of the Working Tax Credit. benefitcount.org/ children aged 12-36 months in the UK and The impact of abolishing the electronic

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Figure 4.1: Impact of a PCA if neither taxed nor counted as income for tax credit purposes

20.00 12.0

18.00 10.1 17.28 16.27 10.0 16.00 15.13 14.00 13.56 12.30 12.46 8.0 12.00

10.00 6.0 % £/Wk 7.67 7.47 8.00 5.1 5.0 4.0 6.00 5.39 3.3 4.00 3.63 2.0 2.00 1.8 1.5 1.3 0.9 1.0 0.00 0.5 0.0 12345678910 £/wk % Decile

Source: Figures supplied by the Institute for Fiscal Studies

voucher scheme is generally negligible 7,000,000 families; some have children because the sums involved are so small. The under 2 years old and some do not, hence income groups that would benefit least from the average increase in income across all a PCA payment in terms of absolute value – families is well below the £55 payment that the middle-income deciles – are those that a family with one child under 2 years old currently benefit most from the childcare ele- would receive. ment of the WTC (Figure 3.3 in Chapter 3). In both cases the families in the lowest 10 The first graph shows the distributional per cent gain most: their income would impact in weekly income in both absolute increase by over 9 per cent on average. If the and percentage terms for the families that PCA were taxed, and assuming that decile would be eligible for a £55 weekly PCA one is largely made up of non-employed par- that is not taxed. This is the impact across ents, it is the second and third income deciles

Figure 4.2: Impact of a PCA if taxed and counted as income for tax credit purposes

16.00 12.0 14.81 14.00 13.62 9.8 10.0 12.00 11.08 8.0

10.00 9.82 9.50 8.00 7.78 6.0 % £/Wk

6.00 3.6 3.5 4.0 4.39 4.08 4.00 2.1 2.89 2.0 2.00 1.0 0.8 0.39 1.0 0.9 0.4 0.0 0.00 0.0 12345678910 £/wk % Decile

Source: Figures supplied by the Institute for Fiscal Studies

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that would be hard hit once they started to and that of the children, including earn taxable income. This could deter them essential items of clothing and special from getting work, but even if it did not, outings we couldn’t otherwise afford, working households are not necessarily able particularly school trips. It also helps pay to lift themselves out of poverty, as a recent for things we’d never budgeted for report from the Institute of Public Policy including, for example, dental treatment Research has highlighted. Its analysis shows and bus fares to school. My husband’s that the number of poor, workless house- rate of tax does not reflect the fact that as holds with children has declined by 300,000 well as supporting growing children, he since 1997, but the number of poor working also has to meet the needs of another households has increased by 200,000 and adult (me) as I have effectively been those with children face twice the risk of an unwaged carer for the best part of 14 poverty as those without (Cooke and years and we will always feel the effects Lawton, 2007). For such families the PCA of that period without a second wage. would provide far more security for covering Although I have very recently gone back the childcare costs associated with working to part time school-hours, term-time than the childcare element of the WTC. work I find it very difficult as there is no Taxing the PCA would also hit the highest help from extended family to step in income decile because of their higher tax when one of the children is off school for band. But as they are unlikely to receive the whatever reason. My income is negligi- Working Tax Credit now, their weekly ble as I have had to take a low- income is not reduced as much as that of paid flexible hours job as a freelancer families lower down the income scale who are and I do not even earn as much as the receiving the childcare element of the WTC. single person’s allowance. The children If the PCA were taxed and non-transferable, have to come first. There is no married then high-income families that could already couples’ allowance and no transferable support one non-working parent would tax allowance or income splitting as I receive more help than families where both understand exists in other countries and parents needed to work as a matter of finan- which recognise the responsibilities of cial necessity. However, as with Child Benefit caring. The latter would really enable us and any universal payment, the number of to keep more of our earned income as a these people is small enough to balance the couple raising children. It goes without advantages of a simple and certain allowance saying that I would be delighted for for the rest of the eligible population. some long overdue recognition of the Child Benefit is paid to the main carer work mums do, 24/7. It is not an and has proved highly successful. We pro- easy job and I have put my own finan- pose that like Child Benefit, the Parental cial security, independence and future Care Allowance is paid to the main carer pension at risk in order to provide for the and is non-transferable between partners. children, yet I feel as if I have been invis- This means that those carers who choose to ible and have not made any contribu- reduce their working hours (or stop work- tion at all.” ing completely) will be able to treat it as (Marie Peacock, mother of four children their own income, increasing their financial aged between 5 and 14 years old. security and recognising their role as a carer. Volunteer for the family charity Home Start and member of FTM Network) “I could not do without my child benefit money as it is money which helps me The graphs demonstrate the impact on fund some of my own general expenses families in each income decile not what

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Family 1 with PCA

Type Hours Hourly Annual Hours Hourly Weekly Annual Annual PCA as % Annual worked pay household of CC CC cost CC costs CC costs value of CC costs CCE income used of PCA payment

Couple 39.4 £6.80 £27,863.68 40 £3.04 £121.60 £6,323.20 £2,860 45 £817.69

39.4 £6.80

Family 2 with PCA

Type Hours Hourly Annual Hours Hourly Weekly Annual Annual PCA as % Annual worked pay household of CC CC cost CC costs CC costs value of CC costs CCE income used of PCA payment

Single 39.4 £6.80 £13,931.84 40 £3.04 £121.60 £6,323.20 £2,860 45 £5,044.77

Family 3 with PCA

Type Hours Hourly Annual Hours Hourly Weekly Annual Annual PCA as % Annual worked pay household of CC CC cost CC costs CC costs value of CC costs CCE income used of PCA payment

Couple 39.4 £6.80 £18,524.48 20 £3.04 £60.80 £3,161.60 £2,860 90 £1,741.38

16 £5.52

Family 4 with PCA

Type Hours Hourly Annual Hours Hourly Weekly Annual Annual PCA as % Annual worked pay household of CC CC cost CC costs CC costs value of CC costs CCE income used of PCA payment

Single 39 £11.30 £23,233.39 40 £3.04 £121.60 £6,323.20 £2,860 45 £2,526.23

happens in individual cases. They reflect order to assess the impact of the PCA at families with the average number of chil- an individual level we have examined the dren in each decile, the average claims for cases of the five families introduced in tax credits of all varieties, the average Chapter 3. claims for other welfare benefits, the Under the childcare element of the average marginal tax payment rates of WTC Family 1, in which both parents mothers/main carers in each income work full time for low pay, receives very lit- band, average spending on childcare and tle help, but the low-income one-parent average levels of support received. In Family 2 receives substantially more

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because total household income is lower. Remove childcare element of Working With the PCA, Families 1, 2 and 3 (the Tax Credit low-income couple with one parent work- The following table summarises the difference ing full time and one part time) would all in percentage of childcare costs covered that receive the same amount because they all the PCA offers over the childcare element of have one child and the money follows the the WTC for our five model families. child. Families 1 and 3 will be better off We conclude that, overall, the complica- than Family 2 because, with both parents tions and inflexibility associated with a in employment, their total household means-tested benefit linked to the welfare- income is higher. However, as discussed in to-work agenda cannot provide parents with Chapter 3, take-up of the childcare ele- adequate flexibility and choice over their ment of the WTC is low, even among sin- decisions with regards to work and childcare. gle-parent families; we would expect more Although the childcare element of the WTC families to take up the PCA than currently is available for families with children of any benefit from the childcare element of the age and our proposal is for children of 0-3 WTC. years, use of childcare is most intensive in Under the childcare element of the WTC, these first years befor pre-school and school. Family 3 is substantially worse off than They are also the years where parents have Family 4, the single parent on average the choice to care for their children them- income. The Parental Care Allowance would selves. treat these two families equally because both have one child. Both will be better off under “I have worked out that we get my hus- the PCA, but the lower income Family 3 band’s tax back, pretty much to the receives a larger increase in the percentage of penny, in tax credits so it would make costs supported. Again, this presents a fairer more sense to remove the expenses deal for all families as the money follows the involved in paperwork and just give us a child rather than favouring or discriminating direct cash allowance; £50/£60 would against family types. make life much easier, particularly if it

Table 4.2

Family Income Annual Annual % of childcare % of childcare childcare household covered with covered with cost income childcare element our PCA of working tax credit proposal

Full time couple, Low income £6,323 £27,864 13 45 1 child

Full time single, Low income £6,323 £13,932 80 45 1 child

Full/part time couple, Low income £3,162 £18,524 55 90 1 child

Full time single, Average income £6,323 £23,233 40 45 1 child

Full time couple, Average income £12,147 £46,467 0 24 2 children

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Proposals for Reform - Family Choice and Flexibility

Family 5-b

Type Hours Hourly Weekly Annual Weekly Annual Annual Voucher Annual PCA as worked pay pay Household CC costs CC costs voucher saving as % value of % of CC Income saving of CC costs the PCA costs

Couple 39.4 £11.34 £446.80 £46,466.78 £233.60 £12,147.20 £943.80 16 £2,860 24 39.4 £11.34 £446.80 £943.80

£1,887.60

removed the stress of dealing with of the WTC is the idea of a debit card in tax credits and all they entail. For exam- the style of the “oyster card” used for pub- ple, wondering if, through no fault of lic transport in London. Denise Burke, our own, we have been overpaid and head of childcare for the London will be landed with a demand for the Development Agency proposes this, money back in the future. Mistakes have explaining that it puts the choice and deci- been made a number of times with our sion in the hands of parents over when claim and it is only through our own and which nursery to use. Under this pro- diligence that they have been rectified.” posal, the money follows the child and (Mairead Sheerin, mother of two under 5s, provides parent choice over the provider. self-employed but caring for her children However, it might be administratively full-time, FTM Network) expensive and complex, and as it is linked 12 House of Commons Hansard, to a nursery place it provides choice to Written Answers 7 March 2006, parents only over which nursery to use col 1296W, www.publications. parliament.uk/pa/cm200506/ Withdraw electronic voucher scheme and when, it does not provide choice cmhansrd/vo060307/text/60307 Although voucher schemes provide funds about whether to use informal care or to w18.htm#60307w18.html_sbhd0 that follow the child, they depend on paid use the money to support parents’ own 13 For total cost, we have used £55 per child as the mean of the employment and can be used only for reg- care of their child. £50-60 proposed range. There istered childcare. They offer a significant are 1,383,000 children aged between 12 and 36 months. financial benefit to parents lucky enough Extrapolating this number, gives Financing the PCA 1,729,000 children aged to work for employers that use the scheme, between 9 and 39 months. If a but these are few due to cumbersome A simple, direct payment to a child’s parent third of children aged 0-9 months have mothers who are administration and the economies of scale could attract a similar take-up to Child not entitled to maternity required. We propose that the electronic Benefit (98 per cent).12 If our proposed £50- pay/maternity allowance, the total number of children who voucher scheme is withdrawn and replaced 60 a week PCA achieved 100 per cent take- might benefit from this could be with a universal PCA. up for children aged 9-39 months, it would around 1,902,000. Figures supplied by the Institute for Fiscal 13 We have used Family 5b to compare the cost £5.4 billion. Taxing it and making it Studies gain from vouchers with the gain from the count as income for tax credit purposes, 14 The saving to the 14 Government of making the pay- PCA. The allowance removes any assump- reduces that cost to £4.1 billion. These costs ment taxable is approximately tion that the parents work, but if both par- are based on current numbers of children in 10 per cent and the saving by making the payment eligible ents did work then this family would be the 0-4 years age range and extrapolated to income for tax credit purposes is better off with a payment of £55 for each reflect our policy covering post-maternity to 25 per cent. So the total if the payment is both taxable and eli- child, rather than with a voucher of £55 pre-Early Years Entitlement. However, in gible income for tax credit pur- for a parent. October 2007, the Office for National poses is £4.1bn. If it is taxable only, it is £4.9bn and if it is only Another proposal that has been put for- Statistics released figures for projected popu- eligible income for tax credit ward to address the problems with the lations that showed a larger increase in child purposes the total is £4.6bn. Figures supplied by the Institute voucher system and the childcare element population than previously anticipated – a for Fiscal Studies

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Financing childcare choice

14 per cent increase in 0-4 year olds in the school children where both parents work is next ten years.15 in the region of £35,000.19 If the family ele- The latest statistics for the childcare element of the CTC were tapered away at a fig- ment of the WTC from December 2007 ure more in line with average family earn- show that 427,600 families claim it, at an ings, for example £30,000, £900 million average weekly entitlement of £64.19 per would be released from current CTC pay- week, or just over £1.4 billion in total annu- ments – assuming that they are being paid ally. This sum would be saved under our out to 100 per cent of eligible families. proposal, together with the (unquantified) costs of administering this part of the 2. Childcare in Sure Start Children’s Centres scheme. In 2005-06 the total administrative Information is not available to determine costs of the tax credit system were £587 mil- how much of the Sure Start grant is spent on lion (Cooke and Lawton, 2007). Electronic childcare provision, so we cannot calculate vouchers cost approximately £20 million per how much would be saved if Children’s year and this would also be saved. Centres ceased to provide daycare places and Replacing these two schemes with the focused instead on providing family support PCA provides only £1.4 billion for a £5.4 and links to private, voluntary and inde- billion proposal if not taxed, £4.1 billion if pendent sector childcare. The £4 billion for taxed. Adding the Sure Start Maternity Sure Start for the next three years that was Grant provides an extra £119 million, taking announced in August 2007 will probably be the total to just over £1.5 billion. The PCA required to make good the shortcomings in would cost the Government more than par- outreach to the most disadvantaged. The ents are currently claiming for childcare challenging target numbers set for new cen- because it is likely to be a successful and pop- tres suggest that any proposal to reduce its ular policy. Less money would be spent on budget will fall on deaf ears. But the lack of bureaucracy and administration and more data and breakdowns of expenditure, cou- on the real target: very young children. We pled with the results of our informal survey make some brief suggestions for further that showed just how confused staff are over analysis which could determine sources of their funding and their governance, prompts funding for the PCA. us to suggest a closer look at the finances, 15 See Office for National particularly related to Sure Start childcare Statistics projected populations at www.gad.gov.uk/Demography. provision. Data/Population/2006/england/w Suggestions for additional funding to eng065y.xls support the PCA 3. Child Benefit for over 16s 16 In 2006 the average UK household income was £32,342; 1. Child Tax Credit for Higher Income We have identified that £1.4 billion is cur- www.denbighshire.gov.uk/EN/En Families rently spent on Child Benefit for young vDirec.nsf/0fe70aef12d2674a802 20 56763004d8527/ab69c47e8ab43 Because of the way it is calculated, the Child adults aged 16 and over. Although we have 46980256d2000313627/$FILE/A Tax Credit is available to families earning up not conducted any analysis on the impact of verage%20Household% 20Income%202006.pdf to about £58,000 or £66,000 in the year of Child Benefit to families with children over 17 Annual Survey of Hours and a child’s birth, for 2008/9, significantly high- 16 years, we suggest that it would be useful Earnings (ASHE), first release, 7 Nov 2007 er than average annual household income of to do so. In Finland the equivalent payment 16 18 Figures supplied by the £32,342. In addition, although we could is paid up to each child’s 17th birthday. The Institute for Fiscal Studies not find income statistics for average families Government’s plans for increasing the nor- 19 Figures supplied by the with pre-school children, the average male mal school leaving age from 16 to 18 may be Institute for Fiscal Studies earnings per week of £49817 and the average a significant factor affecting Child Benefit 20 See Child Benefit Quarterly Statistics on the HM Revenue & weekly earnings of a mother of pre-school for this age group and the impact of lower- Customs website at 18 www.hmrc.gov.uk/stats children at £173 per week suggest an aver- ing the age limit for this payment requires /child_benefit/quarterly.htm age annual income for a family with pre- detailed analysis.

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Appendix A

Between 1997 an 2006 the Government Sure Start, has received £4.8 billion in has spent £17 billion on childcare and funding since 1997 (see Table 1). The early years services, including pre-school Sure Start Grant, paid by the Department education, parenting help and support, for Children, Schools and Families childcare workforce investment, tax credits (DCSF) to local authorities or other lead and employer-administered electronic agencies, was estimated to be over £1.5 bil- vouchers (Figure 1). For the year 2007-08 lion for the year 2006-07.1 In August spending is predicted to be £5.5 billion 2007, it was announced that the budget (Stanley, Bellamy and Cooke 2006). for the Sure Start grant from 2009 to 2011

Figure 1: Government Expenditure on Early Years Services 1997 - 2005

6000 Sure Start and other DfEs Tax credits childcare element 5000 Local government

4000

3000

2000 £ million (2005 - 2006 prices) 1000

0 1997- 1998 - 1999 - 2000 - 2001 - 2002 - 2003 - 2004 - 1998 1999 2000 2001 2002 2003 2004 2005

Source: DfEs, HM Treasury and HM Revenue and Customs

Table 1: Sure Start expenditure for the period from 1997-98 to 2005-06

97-98 98-99 99-2000 2000-01 01-02 02-03 03-04 04-05 05-06 Total

Total Sure Start 4* 179 213 367 467 680 720 928 1,240 4,798 current and capital expenditure (£ millions)

Of which: SSLPs/ 00 7 56 134 216 365 568 746** 2,092 Children’s Centres (£ millions)

*1997-98 saw the withdrawal of the nursery education voucher and a move towards universal nursery education funding for all four year 1 Correspondence with the olds. Free early education provision for all three year olds came in from 2004. Department for Education and **Provisional figure. Skills (DfES), now the Source: House of Commons Committee of Public Accounts, 2007 Department for Children, Schools and Families (DCSF)

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Financing childcare choice

2 See reports at http://society. guardian.co.uk/children/story/0,,214 0325,00.html would be £4 billion, providing an average the number of families claiming it in April 2 3 Correspondence with the of £1.3 billion per year. 2006 shows that £972 million was being Department for Education and Skills (DfES), now the Department The Early Years Education Entitlement distributed over the course of a year; in for Children, Schools and Families (EYE) began in 2004 and in 2005-06 the total December 2007 it was £1.4 billion.6 (DCSF). The exact stated expendi- 3 ture was £2,886 million spending on it was £2.9 billion. Currently Electronic vouchers allow parents to save

4 Public Expenditure Statistical EYE provides 3-4 year olds with 12-and-a-half tax and National Insurance contributions Analyses (2005 and 2007). hours a week of nursery time. If, as stated as a on childcare payments through a salary www.hm-treasury.gov.uk/econ omic_data_and_tools/finance_spen goal in the Ten-Year Strategy, it is increased to sacrifice scheme. They began in 2005, and ding_statistics/pes_publications/pe 20 hours a week, it would be equal to a part- £20 million was set aside for the scheme by spub_pesa05.cfm. Note that tax credits include Working Tax Credits, time childcare place (if we consider part-time HM Revenue & Customs in 2005-06 ris- Stakeholder Pension Credits, and work to at least match the 16 hours per week ing to £25 million in 2006-07.7 At first from 2003-4 Child Tax Credits previously included as child of work required to qualify for the childcare vouchers were worth £50 a week in return allowances in Income Support and Jobseekers’ Allowance element of the working tax credit) and would for a salary sacrifice of the same amount; in

5 HMRC Child and Working Tax be of more value to working parents. April 2006 this was increased to £55 a Credit Statistics – Finalised Awards Tax credits attempt to make childcare week. – 2005-06 Table 2.3; www.hmrc.gov.uk/stats/personal- more affordable for low-income working The flow of the various funding streams tax-credits/cwtc-quarterly-stats.htm parents. The underlying policy goals are to is displayed in Figure 2.8 6 HMRC Child and Working Tax encourage women, particularly single Credit Statistics – Provisional Awards at snapshot dates. mothers, back into the workplace and to www.hmrc.gov.uk/stats/personal- Comparisons with other countries tax-credits/cwtc-quarterly-stats.htm make work pay, that is, to ease the shift

7 HM Treasury “Financial Statement from unemployment benefits into work. The UK currently spends around 0.5 per and Budget Report, Budget 2004” Since 1997, almost £80 billion has been cent of its GDP on education and care for Table A2; www.hm-treasury.gov.uk 4 /budget/budget_04/budget_report/ spent on tax credits. In 2005-06, £858 0-6 year olds, much less than Denmark, bud_bud04_repindex.cfm million was distributed through the child- Sweden and Norway (see Figure 3). A 8 Both Sure Start Grant and care element of the WTC.5 A snapshot of report published by the Daycare Trust, Dedicated Schools Grant figures came from correspondence with the Department for Education and Skills (DfES), now the Department Figure 2: Childcare Funding Streams for Children, Schools and Families (DCSF). For the Sure Start Grant there was no breakdown provided for 2005-06, the allocation for 2004- 06 was £1.172 billion. Voucher spending came from State Provided and Subsidised Childcare in England www.hmrc.gov.uk/ria/emp-supp- childcare.pdf .The childcare element of the WTC came from HMRC Child and Working Tax HM Treasury Credit Statistics – Finalised Awards – 2005-06 Table 2.3; www.hmrc.g ov.uk/stats/personal-tax-cred- Department for Department for its/cwtc-quarterly-stats.htm. Tax Children, Schools and HM Revenue Work and credits are operated by HMRC but families (DCFS) and Customs Pensions (DWP) are the responsibility of the Department for Work and Pensions. The money itself is not part of the Sure Start Grant Dedicated Schools Departmental Expenditure Limits £1.505 billion Grant (then the FSS) (DEL) in the public accounts and (2006/7) £2,886 million (2005/06) does not go through either department. It comes direct from the Childcare Other lead agencies (e.g. Treasury as part of Annual Local Authorities Childcare Element of the Primary Care Trusts) Managed Expenditure (AME). We Vouchers £20 Working understand that HMRC makes the million Tax Credit £858 actual payments so the funding Early Years’ Education (2005/06) million stream is effectively funnelled Sure Start (2005/06) Private Voluntary Maintained through HMRC despite being the responsibility of DWP.We therefore show lines from both HMRC and DWP to the childcare element of the WTC box on our diagram

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Appendix A

Figure 3: Public expenditure on early childhood education and care services (0-6 years) in selected OECD countries (%)

Denmark Sweden Norway Poland France Hungary Austria United Kingdom United States Netherlands Germany Italy Australia Canada 0 0.5 1.0 1.5 2.0

Note: This graph is comprised of expenditure estimates, based on replies provided by country authorities to an OECD survey in 2004. The figures suggest that Denmark spends 2 per cent of GDP on early childhood services for 0-6 year olds, and Sweden 1.7 per cent. These countries – and Finland – also allocate an additional 0.3 per cent to pre-school classes for children aged 6 to 7 years.

Source: OECD (2001-2006) Starting Strong: Early Childhood Education and Care, Vols 1-2, Paris: OECD

the Social Market Foundation and as either extended paid maternity leave Pricewaterhouse Coopers costed an exten- (for 18 months) or an allowance paid to sive package of care at about 2.6 per cent parents who stay at home when their of GDP,and that assumed a parental con- child is aged 12 to 24 months, plus 9 Daycare Trust, Social Market Foundation and 9 tribution of about 30 per cent. The pack- income-related subsidies to pay for educa- PricewaterhouseCoopers (224), age for all two, three and four year olds, tion and care. This package required more Universal Early Education and Care in 2020: Costs, benefits comprised 20 hours a week of free early than four times the 0.5 per cent of GDP and funding options, (2004) years education and “wrap-around” edu- that existing government spending consti- www.daycaretrust.org.uk/mod/fil eman/files/costs_benefits_and_f cation and care from 8am to 6pm, as well tutes. unding_options_final.pdf

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Appendix B

Calculating Tax Credits example, an individual may be eligible for There are currently two types of tax credit: tax credits throughout the tax year, and Child Tax Credit (CTC) and Working Tax hence the tax year (6 April to the following Credit (WTC). 5 April) is the award period, but in that tax CTC is available to low and middle- year the individual’s income may change or income families with children. WTC is a they may have a child who turns 16 dur- payment to “top up the earnings of low paid ing, thus altering the tax credits for which working people (whether employed or self- they are eligible. employed, including those who do not have children)”.1 WTC also has a childcare ele- Stage 2 – calculate the maximum tax credit ment that is paid directly to the main carer entitlement for the entitlement period(s) to support the payment of childcare costs at This is done in two steps: first the non- a registered provider for pre-school children. childcare elements of WTC and CTC and then the childcare element. For each entitlement period within the Calculating Tax Credits award period, a calculation is performed to Stage 1 – establish the award period and the determine the maximum tax credits, entitlement period(s) excluding the childcare element, to which The award period runs from the “effective the claimant is entitled before considering date” of the claim to the end of the tax year in any taper or reduction for income above which the claim is made or the date on which the maximum level. This is the maximum tax credit eligibility ceases if that is earlier. entitlement excluding the childcare ele- Renewal claims run for the whole of the tax ment. Once calculated, this maximum is year, assuming, again, that the claimant con- divided by the number of days in the tinues to be eligible throughout the tax year. award period, rounded up to the nearest The “effective date” of the claim is not penny and then multiplied by the number necessarily the date that the claim form is of days in the entitlement period(s). Due completed or when it is received by the tax to the rounding up of the daily rate, where credits department. The HMRC Manual a claim is for a full year, the maximum on Tax Credits gives the following example entitlement will be higher than the annual of when the effective date might begin: rates of tax credits published by HM Revenue & Customs. “For example, in the three months prior The maximum childcare element for the to receipt of the claim the claimant entitlement period is calculated by taking started a new job (or changed their the weekly rate of childcare costs, multi- hours of work) and ceased claiming a plying that by 52 to give an annual rate benefit. In this case the effective date of and then dividing that number by the the WTC claim will be the date the number of days in the award period to give claimant first started qualifying remu- a daily rate which is multiplied by the nerative work, or first satisfied the enti- number of days in the entitlement period. tlement criteria for WTC, within the This is then compared to the maximum 1 HM Revenue & Customs three month period.” 2 childcare costs of £175 and £300 per week, booklet, WTC2 – Child Tax Credit and Working Tax Credit – by dividing these weekly amounts by A Guide The entitlement period (or periods) is the seven, rounding that up to the nearest 2 Tax Credits Manual at www.hmrc.gov.uk/manuals/ntcma period within the award period when dif- penny and then multiplying by the num- nual/glossary/effectivedate.htm ferent tax credit eligibility applies. For ber of days in the entitlement period.

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Appendix B

Where the actual costs, prorata, are higher year income less the IIA (currently set at than the weekly limits, the weekly limits £25,000). are used, otherwise the actual costs are Annual income is then calculated for taken. Once these calculations have been each entitlement period. This is done by performed, all possible elements are added dividing annual income by the number of up to arrive at a maximum possible entitle- days in the tax year, rounding down to the ment. nearest penny and then multiplying by the number of days in the entitlement period. Stage 3 – income adjustments (tapering) The initial taper start point is also divid- The first step in this stage is to determine ed by the number of days in the tax year, the need for any tapering. Claimants who rounded up to the nearest penny and then are also entitled to Income Support, multiplied by the number of days in the Jobseekers’ Allowance (Income Based) or entitlement period. Pro-rata annual Pension Credit do not have to taper their income is compared to the pro-rata initial income and can move straight on to Stage 4. taper start point for the relevant type of tax Where the claimant is not entitled to credit and a taper is applied to the maxi- any of the above, total family income is mum tax credit entitlement for the entitle- compared to the “initial taper start point”, ment period for every £1 that pro-rata which is currently set at £5,220 for WTC annual income exceeds the pro-rata initial and £14,495 for CTC, and broadly the taper start point. The taper is, as stated WTC and CTC individual elements are above, 37p for WTC and the individual reduced by 37p for every £1 that total fam- elements of CTC and 6.67p for the family ily income is over and above the initial element of CTC. So, for example, if the taper start point. The taper rate for the entitlement period were a full year and the family element of CTC is 6.67 per cent. claimant had annual income of £10,000 Tax credits are based on total family after dividing, rounding and multiplying income in the current year. However, that and were entitled to WTC, the WTC enti- can be difficult to calculate when making a tlement would be reduced by, roughly, claim, so initial awards are based on the £1,769, or 37 per cent of £10,000 less the total family income in the prior year. Tax initial taper start point of £5,220.3 Where credit awards are only finalised after the income is less than the initial taper start end of the year when current year income point, no tapering is required and the is finally known. claimant will receive his or her full entitle- Where current year income is less than ment of tax credits. prior year income, current year income is Each element of the entitlement is used in the final calculation as this results tapered in turn, starting with the non in a higher claim for tax credits. Where childcare elements of WTC, then the however, current year income exceeds prior childcare element, followed by the individ- year income, a further figure, called the ual elements of CTC and finally the fami- Income Increase Allowance (IIA) is used to ly element of CTC. determine whether current year or prior year income should be used in the final cal- Stage 4 – calculate the total of each tax cred- culation. If current year income is within it award the range of prior year income plus the The final stage is to add up all tax credits 3 This is not an exact calculation IIA, Then prior year income is used, where awarded to calculate the total award for the as no rounding has been applied it is higher, the figure to be used is current period. to the figures

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Appendix C

The Institute for Fiscal Studies (IFS) cost- We assumed that children who would ed the proposal for a Parental Care be entitled to this policy can be represent- Allowance (PCA), analysed some proper- ed by children aged 12-36 months, and ties of the existing childcare element of the then scaled the numbers up so that Working Tax Credit (WTC) and estimated 1,902,000 children benefited. The results current spending on childcare by families shown in Table 1. Treating the payment as with pre-school children at Policy the mother’s taxable income would reduce Exchange’s request.1 This analysis appears the cost by about 10 per cent; treating it as throughout the report. The methodology income for child tax credit, working tax employed is set out below. credit and housing benefit/council tax benefit would reduce the cost by about 15 per cent; and treating the payment as both the 1. Parental Care Allowance for mother’s taxable income and as income for families with pre-school children child tax credit, working tax credit and This is worth £55 per week for a child aged housing benefit/council tax benefit would 9-39 months, or from birth to 39 months reduce the cost by about 25 per cent. if the mother is not entitled to Maternity Pay or Sure Start Maternity Allowance. A direct estimate from the FRS suggests Table 1 that there were about 1,383,000 children between 12 to 36 months in the UK in Gross cost £5.4bn 2005/6.2 Of these, 49,875 live in a family where there is at least one other child aged Cost if treated as the between 12 and 36 months. A simple mother’s taxable income £4.9bn extrapolation indicates that there were about Cost if treated as income 1,729,000 children aged 9-39 months. If a for CTC, WTC, HB/CTB £4.6bn third of children aged 0-9 months have Cost if treated as the mothers who are not entitled to Maternity mother’s taxable income and as income for CTC, Pay or Sure Start Maternity Allowance, the WTC, HB/CTB £4.1bn 1 All calculations and estimates total number of children who benefit from used the Family Resources Number of beneficiaries Survey, 2005-6. The FRS is the PCA could be about 1,902,000. (children) 1,902,000 Crown Copyright and was pro- A universal payment of £55 a week vided to IFS by the Department for Work and Pensions. It is also payable in respect of all these children available from the UK Data would have a gross cost about £5.4bn a Archive. Some calculations make use of TAXBEN, the IFS year, assuming full take-up (£55 x The impact of two variants of the pol- Tax and Benefit microsimulation model 1,902,000 x 52). The sum of £55 is close icy on the distribution of income is

2 We use this phrase as a short- to a third of the median earnings of work- shown in Table 2. This also shows the hand for children who are at ing women with pre-school children (£173 estimated impact if the childcare element least 12 months old but not yet 36 months old a week in 2005-6). Using the IFS tax and of the Working Tax Credit were abolished 3 3 Box 9.4 in http://www.ifs.org.uk benefit simulation model (TAXBEN), we at the same time. The gains are shown /budgets/gb2005/05chap9.pdf have estimated the net cost if this payment averaged over all families with children explains how the estimates are made of the impact of abolishing were a) treated as the mother’s taxable (i.e. not over all families with eligible the childcare element of the income; b) treated as income for child tax children). The beneficiaries of the child- WTC, given the discrepancy between childcare use recorded credit, working tax credit and housing care element of WTC tend to be located in the FRS and HMRC’s data on beneficiaries of the childcare benefit/council tax benefit; c) treated as in the middle to top of the income distri- element of the WTC both of these. bution, and so abolishing it does not

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Appendix C

Table 2

Mean gain to Payment not Payment not Payment taxable, Payment taxable families with taxable, does not taxable does not does count as does count as children, £/wk count as income count as income income for income for for CTC, WTC, for CTC, WTC, CTC, WTC, CTC, WTC, HB/CTB HB/CTB HB/CTB HB/CTB

Income decile Childcare element Childcare element Childcare element Childcare element of WTC not of WTC of WTC not of WTC abolished abolished abolished abolished

1 15.13 15.13 14.81 14.81 2 13.56 13.56 9.82 9.82 3 16.58 16.27 11.39 11.08 4 14.53 12.30 10.01 7.78 5 11.52 7.67 8.24 4.39 6 13.56 7.47 10.17 4.08 7 13.33 5.39 10.83 2.89 8 14.32 3.63 11.08 0.39 9 15.16 12.46 12.20 9.50 10 17.28 17.28 13.62 13.62 All 14.36 10.88 10.81 7.33 Total cost £5.4bn/yr £4.1bn/yr £4.1bn/yr £2.8bn/yr

Table 3

Gain as % net Payment not Payment not Payment taxable, Payment taxable income taxable, does not taxable does not does count as does count as amongst count as income count as income income for income for families with for CTC, WTC, for CTC, WTC, CTC, WTC, CTC, WTC, children, £/wk HB/CTB HB/CTB HB/CTB HB/CTB

Income decile Childcare element Childcare element Childcare element Childcare element of WTC not of WTC of WTC not of WTC abolished abolished abolished abolished

1 10.1 10.1 9.8 9.8 2 5.1 5.1 3.6 3.6 3 5.1 5.0 3.5 3.5 4 3.9 3.3 2.7 2.1 5 2.6 1.8 1.9 1.0 6 2.6 1.5 2.0 0.8

7 2.2 0.9 1.7 0.4 8 2.0 0.5 1.5 0.0 9 1.6 1.3 1.3 1.0 10 1.0 1.0 0.8 0.9

affect the average gain for families at the –nor does it affect the average gain for bottom of the income distribution (such families at the top of the income distribu- families probably do not meet the work tion very much (most will be too rich to test for the childcare element of WTC) be entitled to it) – see Table 3.

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Table 4

Full subsidy Subsidy of between No subsidy (i.e. 80% up to the ceiling) 0% and 80% of eligible spending (up to the ceiling)

1 child families Family income below Family income Family income about £20,920 between £20,920 above £39,57 and £39,576

2 child families Family income below Family income Family income about £26,266 between £26,266 above £58,266 and £58,266

3 child families Family income below Family income Family income about £31,612 between £31,612 above £63,612 and £63,612

2. The operation of the childcare ele- tapered away). Table 4 estimates some of ment of the WTC the key income cut-offs for the childcare The operation of the childcare element of element of the WTC from April 2008.5 the WTC is analysed in a chapter in the 2005 IFS Green Budget. In particular, 3. Parents’ spending on childcare Table 9.1 and Figure 9.3 show how the Previous work from IFS researchers has 4 See: www.ifs.org.uk/budgets/gb2005/ subsidy varies with income, spending on compared estimates of parents’ spending on 05chap9.pdf childcare and the number of children. Its childcare derived from large-scale house- 5 The calculations assume that 6 the family is not eligible for the distributional impact is shown in Figure hold surveys. An updated analysis of the 30-hour premium in WTC and 9.2 of the same chapter.4 Family Resources Survey in 2005-6 shows that it is not receiving any extra tax credits that are conditional In principle, families who spend money that 1.4 million families with children in on disability; if either of these on registered childcare and who are eligible the UK pay pay a median of £31.46 a week were the case, then all of the income cut-offs below would be to the working tax credit are entitled to an and a mean of £53.14 towards childcare; higher. Note that families with an 80 per cent subsidy on their spending, sub- 644,000 families with children under 3 pay income just below the second cut-off (say, about £39,000 for a ject to ceilings (£300 a week if they have spend a mean of £70.24 a week; 965,000 one-child family) would only receive a very small subsidy and two or more children, £175 a week for families with children under 5 spend a only if they were spending at or families with one child). This basic entitle- mean of £66.60 a week. These figures are close to the ceiling of £175 a week or £300 a week) ment is then means-tested against family the total family spending on childcare

6 Brewer M and Shaw J, (2004) income, but the size of the subsidy received across all their children, not just the spend- Childcare use and mothers' depends upon the number of children in ing on the young children. employment: a review of British data sources, DWP Working the family (because the childcare subsidy is Paper 14; in effect not tapered away until the per- Mike Brewer www.dwp.gov.uk/asd/asd5/wpa per16.asp child elements of the CTC have been Institute for Fiscal Studies

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Glossary

10 Year Childcare Strategy Introduced by DfES Department for Education and the Labour Party in December 2004 Skills, now the DCSF. following the Every Child Matters DHSS Department for Health and Social Green Paper. Among other things, this Security. In 1988 this was split into two outlined target of 3,500 Sure Start departments – the Department for Children’s Centres by 2010 and an Health and the Department for Social extension of free early years education Security (DSS). In 2001 the DSS from 33 to 38 weeks per year. became the Department for Work and Birth to Three Matters A framework Pensions (DWP). designed to provide support, informa- DSG Dedicated Schools Grant which is tion and guidance for those with provided to local authorities by the responsibility for the care and educa- government to support the free early tion of babies and children aged from years entitlement for all 3 and 4 year birth up to three years old. olds. Introduced in 2006/07, the DSG CAP Childcare Affordability Programme. replaced the Nursery Education Grant A London Development Agency (NEG) which had been consolidated scheme introduced in 2005 to support within the general Education Formula low income families with childcare Spending arrangements and is based costs in the capital. largely on an authority’s previous Childcare Grant The Childcare Grant spending, covering only the schools helps full-time students with the cost of block, not LEA central functions. childcare during term times and holi- EYE - Early Years Entitlement Twelve and days. As it is a grant any money given a half hours of free early years educa- does not have to be paid back. The tion each week, for 38 weeks a year, for amount awarded depends on income all three and four year olds. The and the income of dependants (i.e. Government aims to extend the entitle- spouse or partner) and the costs of the ment over the next few years with a tar- childcare used. The maximum available get of fifteen hours by 2010. A wide amount for one child is £148.75 per range of providers in the maintained, week and for two or more children it is private and voluntary sectors are regis- £255 per week (85% of actual costs up tered to deliver free early education in to £175 a week). each area. While some children attend CWDC Childcare Workforce Development a setting only for the funded hours, Council. others will attend for longer sessions, or Daycare Trust A national childcare charity more weeks per year, with parents pay- established in the 1980s to promote ing for any non-funded hours. high quality, affordable childcare for Every Child Matters 2003 Green Paper all. Their campaigning work focuses on that informed the 2004 10 Year childcare affordability, listening to par- Childcare Strategy. ents and focusing on children them- EYDCPs Early Years Development and selves. Childcare Partnerships. The 1998 DCSF Department for Children Schools Green paper, Meeting the Childcare and Families, formerly the DfES. Challenge, proposed that the National Demand side funding Financial support Childcare Strategy should be planned available from the Government for and delivered in each local authority families. area by expanded local partnerships

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made up of relevant early years and enhance the development and educa- childcare interests. The statutory basis tion of children in their early years, for these partnerships is contained in through the provision of support serv- the School Standards and Framework ices to its members. It is dedicated to Act 1998. the provision, support and promotion FCCC Families, Children and Childcare of high-quality care and education for study. This is a longitudinal study of the benefit of children, families and 1,200 children and their families led by communities. Prof. Kathy Sylva, Prof. Alan Stein and NEG Nursery Education Grant. The NEG Dr Penelope Leach. It was funded by scheme ended in March 2003. With the Tedworth Charitable Trust and the effect from April 2003, all funding for Glass-House Trust. free early education places, including Formal Childcare Usually refers to a child- those delivered by private providers, care setting that has been registered or was consolidated within the general approved by Ofsted, including nurs- Education Formula Spending arrange- eries, childminders and nannies. ments. Foundation Stage The first phase of the NESS National Evaluation of Sure Start. National Curriculum, covering chil- The national evaluation of the Sure dren from age 3 to 5. (From 2008, this Start programme is a long-term, wide will be replaced by a new single inte- ranging study designed to evaluate the grated Early Years Foundation Stage efficacy and cost-effectiveness of Sure that brings together the current Birth Start. The first phase of the national to Three Matters and Foundation Stage evaluation runs from 2001 to 2008 and frameworks.) is being undertaken by a consortium of Informal Childcare Usually refers to a academics and practitioners, led by childcare setting that is not registered Professor Edward Melhuish of or approved by Ofsted, such as child- Birkbeck College, University of care provided by neighbours, friends London. and family members. NNI Neighbourhood Nurseries Initiative. National Childcare Strategy The National A government funded initiative that Childcare Strategy was launched by the aimed to create 45,000 new childcare government in 1998 with the Green places by 2004 to provide high quality Paper, Meeting the Childcare childcare services in disadvantaged Challenge (Department for Education areas. This target was reached in August and Employment). Its aim was to 2004. The programme had £246 mil- ensure that affordable, accessible, qual- lion revenue funding from DfES and ity childcare for children aged 0 to14 £100 million capital funding from the (16 for those with disabilities or special New Opportunities Fund (now the Big needs) was available in every neigh- Lottery Fund), through local authori- bourhood. ties. NCMA National Childminding Associ- NOF New Opportunities Fund. Funding ation. A charity and professional associ- generated by the sale of National ation that promotes quality, home- Lottery tickets with a number of fund- based care, play and learning for the ing streams including childcare and benefit of children, families and com- out of school provision. On June 1 munities. 2004, NOF merged with the NDNA National Day Nurseries Associa- Community Fund to create the Big tion is a national charity which aims to Lottery Fund.

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Glossary

Nursery places Full-time place: a childcare the regulation, registration and inspec- place that covers the maximum amount tion of early years childcare and educa- of hours that a nursery is open – for tion settings, including childminders. example, five days a week, 7.30am – Pre-School Learning Alliance is an edu- 6.00pm. Part-time place: a place that is cational charity specialising in the early not full-time but may vary. For exam- years. It provides practical support to ple, a part-time place could mean two over 15,000 early years settings and and a half days, one full day, or three contributes to the care and education full days. of over 800,000 young children and Sessional place Use of this term varies by their families each year. nursery. Some nurseries divide the day Supply side funding Financial support into early, morning, afternoon, and late available from the government for sessions; others into morning and after- childcare providers. noon sessions. Parents may use these Sure Start Maternity Grant A Sure Start sessions to cover a particular shift or Maternity Grant is intended to help working pattern. Some nurseries may low income parents pay for the imme- use this term to mean sessional care diate needs of a new baby. It is paid covering the core early education place from the Social Fund as a lump sum, (two and a half hours, five times a and as a grant it does not need to be week, in term-time only). Other nurs- repaid. The grant is £500 for each eries use it as a ‘billing term’: for exam- baby. ple, a child may be charged per session Transformation Fund The Transformation if use varies week to week. Fund provides additional money for Nursery sector Refers to the sector that is workforce development to non-main- responsible for the day-to-day running tained places in the nursery sector and and management of the nursery. A pri- is distributed by local authorities. The vate sector nursery is one run by private aim of this fund is to significantly individuals or private sector companies; increase the qualification levels, skills, a voluntary nursery is managed by a quality of provision and outcomes for voluntary organisation; a maintained children. The fund provides £250m for nursery is run by the public sector and the period from April 2006 until managed by the education arm of the August 2008. local authority; and a joint sector nurs- Wraparound care Care that is ‘wrapped ery is the result of close cooperation around’ other provision, for example, between two or more sectors. early education sessions, or care provid- Ofsted Office for Standards in Education. ed before or after the normal school In 2001 Ofsted became responsible for day.

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Ronsen M (2001), Market Work, www.ippr.org/publicationsandreports/ Childcare and the Division of Labour: publication.asp?id=468 adaptations of Norwegian mothers before Sylva K, Melhuish E, Sammons P and and after the cash-for-care reform, Siraj-Blatchford I (2004), Effective Report 2001-03, Statistics Norway; Provision of Pre-school Education, www.ssb.no University of London Institute of /emner/03/04/30/rapp_200103/rapp_ Education 200103.pdf Sylva K, Melhuish E, Sammons P,Siraj- Russek L and Schwartz G (1997), Blatchford and Taggart B (2006), “Feelings of parental caring predict Effective Pre-School Education, health status in midlife: a 35-year fol- University of London Institute of low-up of the Harvard Mastery of Education Stress Study”, Journal of Behavioural Sylva K, Stein A, Leach P, Barnes J, Medicine, 20: 1-13 Malmberg L-E & the FCCC team Scott J, Braun M and Alwin D (1993), (2007), “Family and Child Factors “The Family Way”, pp 23-47 in Jowell Related to the Use of Infant Care: an R et al (eds), International Social English study, Early Childhood Attitudes: the 10th BSA Report, Research Quarterly, 22, 118-136 Dartmouth Tanaka S (2005), “Parental Leave and Scott J, Braun M and Alwin D (1998), Child Health across OECD Countries”, “Partner, Parent, Worker: family and Economic Journal, 115: F7-F28 gender roles”, pp 19-37 in Jowell R et The Guardian “Is your baby playing with al (eds), British and European Social its toes yet? If not the government Attitudes – the 15th report: How wants to know why”, 14 March 2004; Britain Differs, Ashgate http://education.guardian.co.uk/earlyy Jowell R et al (eds), British and European ears/story/0,,2033356,00.html Social Attitudes – the 15th Report: How The Guardian “Nine-to-Five in decline as Britain Differs, Ashgate UK embraces flexi-time”, 5 July 2005; Skinner C (2006), How Can Childcare www.guardian.co.uk/uk_news/story/0,, Help to End Child Poverty?, Joseph 1521317,00.html Rowntree Foundation The Guardian, “Case of the disappearing Smith M, Carroll M and Oliver G, carers”, 16 October 2007; (2004)Recruitment and Retention in http://education.guardian.co.uk/egwee Front-line Services: the case of child- kly/story/0,,2191540,00.html care, The University of Manchester The Guardian, “Doing a grown-up job – www.mbs.ac.uk/research/europeanemp study reveals the problems behind loyment/conference recruiting childminders”, 2 May 2001; seminars/documents/smithetal.ppt www.guardian.co.uk/society/2001/may Smith T, Lee C, Sylva K and Dearden L /02/socialcare (2001), Wrap Around Care Pilots – the The Guardian, “Q and A, flexible working creation of an evaluative framework, hours”, 7 September 2007; www. final report for the Department for guardian.co.uk/money/2007/nov/07/w Education and Skills, www.surestart. orklifebalance gov.uk/_doc/0-7745F4.doc The Low Pay Commission, National Stanley K, Bellamy K and Cooke G Minimum Wage, Low Pay Commission (2006), Equal Access? Appropriate and Report, 2007, Chapter 3: “The Effects affordable childcare for every child, of the National Minimum Wage on Institute of Public Policy Research; Specific Sectors and on Small Firms”;

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