Budget 2014: a boost for childcare is a bonus for the whole economy

Jacqueline Gold, the boss of Ann Summers sex shops, says she has a pretty good idea of what women want. As George Osborne puts the finishing touches to his budget, he would do well to listen to her – specifically, to her call for more help with childcare costs.

Polls show a bigger lead for Labour among female voters than male. Time and again, the coalition has been attacked for an austerity drive seen to have disproportionately hurt women.

The cost of living debate has died down somewhat given the recent fall in inflation. But with just over 400 days until a general election, Labour has wisely steered the discussion towards the cost of childcare, which for years has outstripped wider inflation. The party has vowed to expand free childcare for working parents of three- and four-year-olds and raised the prospect of free childcare for all pre-school children.

Gold’s call for childcare costs to be deductible from personal tax bills is being seen as a way to get more mothers of pre-school children into work, or on to more hours of work – something surveys suggest many women want but struggle to make pay.

Britain needs to boost productivity, and given that several studies have linked higher maternal employment rates to higher productivity, such a move could be attractive economically for the chancellor.

Granted, the UK already has a relatively high headline maternal employment rate: the latest full report from the Office for National Statistics showed the gap in employment rates for women with and without children narrowed over the 15 years to 2010 from 5.8 percentage points to just 0.8 percentage points. But those figures cover all mothers with dependent children, and where the UK really has a problem is in helping mothers with children under five. And although that 15-year period saw a rise in the percentage of mothers working full-time to 29%, there were still far more doing part-time work, at 37.4%.

There are many factors at play in people doing part-time work; some are related to choice, some not. But again, surveys suggest many women would work more hours if childcare were easier to arrange and more affordable.

With the debate heating up and Osborne under pressure to back up his promise to “help hard-working families“, budget-watchers say some proposal on childcare is likely.

We might see an “Ann Summers cut”, says Alan Clarke, an economist in London at Canada’s Scotiabank. He sees a Canadian connection: “The UK has cherrypicked various things from Canada: a central bank governor, austerity focused on spending cuts rather than tax hikes… Indeed, Canada already allows the cost of childcare to be deducted from personal tax bills.”

But Osborne should consider another precedent. In Australia, a move to reduce childcare costs by offering tax refunds saw many providers simply raise their prices, points out Dalia Ben-Galim at the Institute for Public Policy Research (IPPR). Without a market intervention, such as a cap on childcare prices, the UK risks the same effect.

That is something parents can ill afford, given childcare costs have already soared 27% over the last five years, according to the Family and Childcare Trust’s annual childcare costs report this month.

The trust highlighted the high proportion of earnings that British parents spend on childcare, compared with most advanced economies. Only Swiss parents spent more, according to a 2012 report from the Organisation for Economic Co-operation and Development (OECD). British parents paid out 26.6% of net income, more than double the OECD average of 11.8%.

The Family and Childcare Trust wants an overhaul of the system and, in the short term, free early education extended to all two-year-olds.

That kind of change is unlikely this week. But one demand that has caught policymakers’ attention and may make a more affordable vote-winner is a change to the planned universal credit.

As things stand, the welfare reform will mean parents earning enough to pay income tax will be able to claim 85% of childcare costs of their childcare. However, parents who earn too little to pay income tax will only be able to claim 70%. Gingerbread, which campaigns for single parents, wants Osborne to invest an extra £200m so all parents on universal credit can claim back 85%.

Taxpayers without children may question why they should foot the bill for mothers to have an easier path back to work. But – aside from the economic perils of a falling birthrate – hindering women who do have children from getting back into the labour market is a waste of talent and a loss to businesses. There are also big costs in terms of welfare spending and lost income tax.

That brings us back to Osborne. Giveaways seem to run counter to the austerity drive, which we are told has some way to go yet. But putting more into the childcare pot, if done in the right way, should reap big rewards for the public coffers – as much as £1.5bn in a single year, according to the IPPR.

The thinktank has tallied up the effects of extra tax revenue and lower public spending when maternal employment is boosted and £1.5bn is a best-case scenario of the rate rising 10 percentage points. Boosting it by five percentage points could generate £750m.

Don’t expect any such brave moves this week. But do bank on Osborne at least asking himself what employers like Gold want; and, secondly, what women want.

Source Article from http://feeds.theguardian.com/c/34708/f/663865/s/383a429e/sc/7/l/0L0Stheguardian0N0Cuk0Enews0C20A140Cmar0C160Cchildcare0Ebudget0E20A140Eboost0Ebonus0Eeconomy/story01.htm
Budget 2014: a boost for childcare is a bonus for the whole economy
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childcare – Yahoo News Search Results

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