State support for early childhood
education and care in England
Sarah Cattan
© Institute for Fiscal Studies
Background
• Large increase in state support for education and care for the
under fives in England over the past 20 years
– Current government spending between 0.5 and 0.9% of GDP
© Institute for Fiscal Studies
Background
• Large increase in state support for education and care for the
under fives in England over the past 20 years
– Current government spending between 0.5 and 0.9% of GDP
• Cross-party support for further spending
– Reforms announced at Budget 2013
– Proposals from Labour and the SNP
© Institute for Fiscal Studies
Background
• Large increase in state support for education and care for the
under fives in England over the past 20 years
– Current government spending between 0.5 and 0.9% of GDP
• Cross-party support for further spending
– Reforms announced at Budget 2013
– Proposals from Labour and the SNP
• Will describe the policy environment due to be in place in Autumn
2015 before looking at key concerns in the childcare debate
© Institute for Fiscal Studies
ECEC support from Autumn 2015
1. Entitlement to a free, part-time nursery place
– Open to all 3- and 4-year olds and 40% most deprived 2 year-olds
– Expected to benefit 1.2m children
© Institute for Fiscal Studies
ECEC support from Autumn 2015
1. Entitlement to a free, part-time nursery place
– Open to all 3- and 4-year olds and 40% most deprived 2 year-olds
– Expected to benefit 1.2m children
2. Tax-free childcare system
– “Top up” payments of 20p for every 80p, up to £1,200/child/year
– Open to all working families except those on additional tax rate
– Expected to benefit 2.5m working families
© Institute for Fiscal Studies
ECEC support from Autumn 2015
1. Entitlement to a free, part-time nursery place
– Open to all 3- and 4-year olds and 40% most deprived 2 year-olds
– Expected to benefit 1.2m children
2. Tax-free childcare system
– “Top up” payments of 20p for every 80p, up to £1,200/child/year
– Open to all working families except those on additional tax rate
– Expected to benefit 2.5m working families
3. Subsidies to low- and middle-income families through UC
– 70% subsidy (85% for families where both parents pay income tax)
– Up to a maximum of £175/wk (for one child), £300/wk (for 2 or more
children)
© Institute for Fiscal Studies
Key concerns
1. The new system will create three regimes of subsidy, which is
hard to justify and could be confusing
© Institute for Fiscal Studies
The new system will create 3 regimes of subsidy...
Government contribution (£/week)
Government contribution to childcare costs in a couple family with two pre-school children
£120
Childcare support
£100
£80
£60
£40
£20
£0
£0
£100
£200
£300
£400
Gross income of second earner (£/week)
© Institute for Fiscal Studies
£500
The new system will create 3 regimes of subsidy...
Government contribution (£/week)
Government contribution to childcare costs in a couple family with two pre-school children
£120
Childcare support
UC
70%
£100
£80
£60
£40
£20
£0
£0
£100
£200
£300
£400
Gross income of second earner (£/week)
© Institute for Fiscal Studies
£500
The new system will create 3 regimes of subsidy...
Government contribution (£/week)
Government contribution to childcare costs in a couple family with two pre-school children
UC
85%
£120
UC
70%
£100
Childcare support
£80
£60
£40
£20
£0
£0
£100
£200
£300
£400
Gross income of second earner (£/week)
© Institute for Fiscal Studies
£500
The new system will create 3 regimes of subsidy...
Government contribution (£/week)
Government contribution to childcare costs in a couple family with two pre-school children
UC
85%
£120
UC
70%
£100
Childcare support
UC
taper
£80
£60
£40
£20
£0
£0
£100
£200
£300
£400
Gross income of second earner (£/week)
© Institute for Fiscal Studies
£500
The new system will create 3 regimes of subsidy...
Government contribution (£/week)
Government contribution to childcare costs in a couple family with two pre-school children
UC
85%
£120
UC
70%
£100
Childcare support
UC
taper
£80
£60
Tax free childcare
20%
£40
£20
£0
£0
£100
£200
£300
£400
Gross income of second earner (£/week)
© Institute for Fiscal Studies
£500
…which is far from ideal
•
Size of the subsidy rises and then falls as family income rises
•
Each regime is aimed at different sorts of families, but family
circumstances change frequently
•
System could be simplified with a single scheme open to all
parents with top-up payments varying with family circumstances
© Institute for Fiscal Studies
Key concerns
1.
2. Lack of clarity over the policy objectives
© Institute for Fiscal Studies
What is the government trying to achieve?
• Recent announcements indicate the government hopes to:
– Improve long-term outcomes of children
– Decrease socio-economic inequalities
– Increase labour supply of parents of young children
• But unclear what specific policies are trying to achieve
• What is the case for government intervention?
– Help credit constrained parents or promote social equality (could
justify targeted interventions)
– Promote gender equality (could justify universal interventions)
© Institute for Fiscal Studies
Key concerns
1.
2.
3. Lack of clarity about the evidence base for intervention
© Institute for Fiscal Studies
Evidence on ECEC and children’s outcomes
• Evidence that intensive, high-quality ECEC interventions targeted
at disadvantaged children are highly effective
– Not necessarily a good guide for UK policies
• No direct evidence on the impact of current policies on child
development
– Ongoing work at ISER and University of Surrey
• International evidence that large-scale interventions have fairly
small benefits, concentrated among disadvantaged children
© Institute for Fiscal Studies
Maternal employment and age of youngest child
Percentage of mothers
90%
80%
70%
60%
50%
40%
30%
0
1
2
3
4
5
6
7
8
9
10
Age of youngest dependent child
© Institute for Fiscal Studies
11
12
13
Evidence on ECEC and parental labour supply
• No consistent evidence that childcare has large effects on
mothers’ labour supply
• There are reasons why we might not detect an effect
– Subsidies usually only apply to formal childcare
– Policies might be inflexible
– Out-of-work women might be those further away from labour market
• We know little about the impact of UK policies
– Ongoing work in this area at IFS and ISER
– IFS study shows very small impact on out-of-work lone-mothers
© Institute for Fiscal Studies
Conclusions
• State support for ECEC in England has grown over past 20 years
– Likely to continue, given strong cross-party support
© Institute for Fiscal Studies
Conclusions
• State support for ECEC in England has grown over past 20 years
– Likely to continue, given strong cross-party support
• Planned reforms create a complex and confusing system of subsidy
– Could be simplified
© Institute for Fiscal Studies
Conclusions
• State support for ECEC in England has grown over past 20 years
– Likely to continue, given strong cross-party support
• Planned reforms create a complex and confusing system of subsidy
– Could be simplified
• There seems to be a mismatch between what the government
hopes to achieve and the evidence base for intervention
© Institute for Fiscal Studies
Conclusions
• State support for ECEC in England has grown over past 20 years
– Likely to continue, given strong cross-party support
• Planned reforms create a complex and confusing system of subsidy
– Could be simplified
• There seems to be a mismatch between what the government
hopes to achieve and the evidence base for intervention
• The case for targeted interventions is easier to make than the one
for extending universal provision of nursery education
© Institute for Fiscal Studies