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The following OECD assessment and recommendations summarise Chapter 5 of the Economic Survey of the United Kingdom 2005 published on 12 October 2005.
What is the economic rationale for public support for childcare?
Changes in family structures and attitudes with more women wanting to pursue a career make availability of flexible and affordable childcare essential for reconciling work and family life. Male and female employment rates have reached 79% and 70% respectively, but many women work part time. At the same time, a more polarised family structure has emerged with many jobless households, which reinforces the risk of social deprivation being passed on from one generation to the next. Only a third of lone mothers with children under 5 are employed. Access to childcare is an important element in any package of measures to address this problem, in particular for lone parents. Raising public subsidies for childcare and out of school hours care is warranted because earnings potential often declines when having been out of work for a while, so that low cost child care can be crucial for making work pay. Universal free pre school also helps children by stimulating their emotional, social and cognitive development. On this basis the government’s ambitions as laid down in a “ten year strategy” are laudable. However, as witnessed in Scandinavian countries, leave and childcare can become a heavy burden on public finances making it important to encourage cost conscious behaviour.
Public spending, enrolment and staff ratios in childcare
and pre-primary education
By age of children
1. The number of children per staff is for New York.
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Developing support for childcare and nursery education should have priority over extending paid maternity leave. Policies can help to promote family friendly work place practices and already today mothers have a right to 12 months job protected leave with 6 months being paid, rising to 9 months in 2007. Spending time at home is already favoured by the fact that income from work and consumption is taxed, while for natural reasons leisure is not. Prolonged absence from work leads to lower lifetime earnings for mothers and hence foregone tax revenue; the precise implications of slightly longer paid maternity leave are however not clear and there is a pay-off resulting from close contact between the mother and the young child. A prudent approach would be to focus on increasing the choice for parents on how leave is taken including on a part time and perhaps shared basis, and to evaluate the effects of the 9 months paid leave before committing to the extension of paid leave to a full year.
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The quality and flexibility of the supply of childcare services should be developed including by allowing innovation and seamless integration of public and private services. Strengthen the administrative systems underpinning the childcare element of the working tax credit, and consider alternative formulas. For example, shifting from reimbursement of 80% of costs to a combination of a fixed value voucher and a 60% coverage of costs above the voucher value would give parents incentives to buy quality care but ensure cost consciousness about spending going beyond the voucher value. The government’s intention to extend free pre school provision is welcome. In doing so, it will be important to integrate it with other care provisions so as to avoid complex logistical problems for families and to maintain a level playing field for public and private providers so that contestability drives innovation in how childcare is provided.
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Return to the Economic Survey of the United Kingdom 2005
A printer-friendly Policy Brief (pdf format) can also be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.
To access the full version of the OECD Economic Survey of the United Kingdom:
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Government officials can go to OLISnet's Publication Locator.
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For further information please contact the United Kingdom Desk at the OECD Economics Department at webmaster@oecd.org. The OECD Secretariat's report was prepared by David Turner and Jens Lundsgaard under the supervision of Peter Hoeller.
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