What’s missing from Jeremy Hunt’s childcare budget

Expanding a broken model is not ‘reform’ – but it is a very important first step

It is often argued that high-quality childcare is the foundation of educational attainment. Yesterday, for the first time, we also saw it recognised as the foundation of a strong economy.

If you don’t have children or you’ve long since raised yours, you might be wondering what all the fuss is about and why pre-school children in all of their brilliant, joyful messiness are at the heart of a major fiscal event.

Childcare support for parents isn’t new. We invest in it because it underpins our labour market and means parents can go out to work and provide the services and goods we all need. Simply put, even if you don’t have children, you benefit from a well-functioning early years sector, and when it fails, it impacts you too. Its that failure that has made childcare the centrepiece of Jeremy Hunt’s Budget.

The average cost of a full-time place for a child under the age of two in England is now £15,000 per year, brought on by years of underfunding of the existing 15 and 30-hour “free hour” schemes. To compare that to other forms of infrastructure, itis four times more expensive than the average rail season ticket, and one-and-a-half times more than the average annual mortgage payment. In England, it now costs parents more to go out to work, than it costs to go to university. That’s a big problem for an economy that is suffering from reduced workforce participation and poor growth.

Jeremy Hunt set about changing that with a set of measures that he promised would transform the lives of working parents, boost workforce participation and, in turn, grow the economy.

In particular, the decision to pay childcare costs upfront to parents on Universal Credit is transformative. As is currently stands, Universal Credit claimants have to pay their childcare fees upfront and claim the cost in arrears. The upfront cost for a full-time place is often in excess of £1,000 a month and has prevented many parents from taking up work.

Citizens Advice estimates that this arrears mechanism has prevented more than 300,000 parents from taking up employment. Removing this barrier to work will help some of the most disadvantaged families in the country to improve their finances and, importantly, create access to vital early education for the children in those households.

But it didn’t stop there. In an attempt to win over some of the 96 per cent of parents who said they would vote for the party with the best childcare offering, he went further than any previous government has by announcing an expansion of the existing 30 hours to all one and two-year-olds.

The OBR has said the “policy has by far the largest impact on potential output in this Budget”. We already know childcare is an enabler of employment – when its funded correctly. We know it improves educational attainment for children, particularly the most disadvantaged – when they can access it. But right now, there are questions about whether the chancellor can deliver on that promise.

The £204m additional funding announced for the existing schemes falls way short of the £1.82bn increase in funding that was needed to properly fund the 15 and 30 free hours. But instead of focusing on stabilising the sector with the correct funding levels, the chancellor has promised to expand the current model, essentially creating a contagion of underfunding in the sector.

Alongside this, there has been no mention of who is going to provide these additional hours. The sector is suffering from an acute recruitment and retention crisis, with early years staff leaving in droves for better pay in retail and hospitality. This will only be made worse by the highly-unpopular relaxation of ratios.

Without a realistic investment in funding and a robust workforce strategy, the chancellor’s plans for the sector, however well-intentioned, may fail to deliver on the OBR’s predictions of impact.

Where the chancellor is perhaps most mistaken is in calling these measures “reforms”. Expanding a broken model is not reform. It is, however, a very important first step in rescuing the sector from collapse and alleviating financial pressure on parents.

Jeremy Hunt has, like Labour, agreed that childcare provision must be available from the end of maternity leave and that we must have an expansion of wraparound care. He now needs to go one step further and commit to a bold and ambitious programme of reform for how early years is funded and delivered.

The sustainability of the sector is now an economic priority, and we have the Budget to thank for that.

Sarah Ronan is the early education and childcare lead at the UK Women’s Budget Group