‘Labour’s childcare review is overdue. Here’s three ways to fix a broken system’

Last week in Liverpool, Shadow Education Secretary Bridget Phillipson announced in her party conference speech that Sir David Bell, former Ofsted Chief Inspector, would lead a “major” new review to help shape Labour’s vision for a “modern childcare system” if the party takes power at the next general election.

A comprehensive review of childcare and early years education is long overdue – the sector is in serious need of support. From early years workers to parents to trade unions to policy wonks, nearly everyone agrees that the childcare system in this country is in need of total overhaul.

The question that remains is whether Labour is prepared to do what is needed to fix an essential service that doesn’t work for either its users or its providers. Childcare in England is in urgent need of market reform, a better deal for families and workers – and significant investment.

Investment, because increasing public funding for childcare and early years is not simply an expenditure – at the Labour Campaign for Childcare Reform, we believe it is an urgently needed investment in delivering employment and economic growth.

Universal, affordable support could boost parental earnings by £13bn a year

In its recent report, Delivering a Childcare Guarantee, the Institute for Public Policy Research found that introducing universally accessible, affordable childcare from the end of parental leave to the end of primary school in England would increase parental employment by lowering barriers to work, which has the potential to increase total parent earnings by over £13 billion each year. The IPPR report also found that gains would disproportionately benefit households at the lower end of the income distribution.

Moreover, the potential impacts of increased employment rates and hours of paid work for parents of young children could also deliver annual returns to the exchequer of £7.9 billion, boost post-tax family incomes by over £7 billion, and narrow the gender pay gap.

This needs to be the fulcrum of any programme of childcare reform undertaken by a Labour government – Labour’s central mission to achieve the fastest growth in the G7 is far more likely to be achieved if we unlock the benefits of a childcare system that works for parents, children and early years workers.

While work on delivering this new system should begin immediately, getting it right will be challenging and it will take time to implement.

What, then, could a Labour government do immediately to ease the burden on parents and the early years workforce? Aside from a much-needed injection of investment and the promised review, there are several steps to improve childcare provision that could be implemented in the first year of a Labour government. While far from comprehensive, this list includes:

1. Exempt early years providers from business rates

Many sector experts, including the Early Years Alliance, have called for all early years providers in England to be exempt from business rates, as providers in Scotland and Wales have been since 2018 and 2019 respectively.

The Early Years Alliance also explains in their recently published Manifesto for Government that while maintained nursery schools are already zero-rated for VAT and can claim it back through their local authority, private, voluntary and independent (PVI) settings are required to pay VAT, which creates an unfair additional cost burden.

As the journalist Hannah Fearn noted in the i paper this week, exempting all early years providers from business rates could save the average nursery more than £80,000 a year, according to childcare consultant Tricia Wellings. Wellings also estimates that zero-rating nurseries for VAT would save most tens of thousands of pounds per annum.

The money saved by childcare and early years education providers could be spent on higher pay for workers, to help address the long-running workforce retention crisis in the sector. It could also go towards fee reductions for parents struggling to make ends meet during the cost-of-living crisis.

2. Simplify the government’s many byzantine, costly childcare support schemes

Today Gingerbread are at #LabConf23 listening to @bphillipsonMP on Labour’s plans for childcare. She tells conference that ‘the role of Government is to extend opportunity’, revealing plans for a review into early years led by Sir David Bell. pic.twitter.com/JJplzuWzZc

— Gingerbread (@Gingerbread) October 11, 2023

Despite the huge challenge the cost of childcare poses to the average family budget, lots of working parents still do not realize that they are able to access tax-free childcare support from the state. Researchers broadly agree that this is because the system for accessing support is far too complex – and this complexity creates unnecessary costs.

2022 research by the centre-right think tank Onward highlighted the byzantine and costly use of at least eight different schemes across different government departments to subsidise childcare costs. Organisations such as The National Day Nurseries Association have supported the idea of ‘streamlining’ all forms of childcare support into one account for years now.

While ultimately system-wide reform is needed to deliver a better offer for parents and childcare workers, given the years of systemic underfunding of childcare and early years, a Labour government would need to work with and support the sector to develop the infrastructure it needs to support a major expansion in provision before it could deliver its vision for a better system.

Streamlining existing mechanisms for accessing state support is something that can be done in the interim, in preparation for delivering at best universal and at minimum far more comprehensive support under a reformed system.

Currently, thousands are still missing out on support because accessing it is too complicated – this is a problem that can and should be eradicated quickly.

3. Agree a sectoral minimum wage with unions

A better deal for the childcare and early years workforce is central to any effective, large-scale sector reform. The full scope of what this needs to include in terms of pay and progression is unlikely to be deliverable within the first year of a Labour government.

However, what can be done immediately is entering into negotiations with unions in the sector to agree a sectoral minimum wage for the childcare workforce. This is an important first step to delivering better pay and conditions for early years workers, and needs to be part of Labour’s discussions on long-term investment into the sector from the beginning.

We need:

✔️ Universal, high-quality childcare for all from the point paid maternity/parental leave ends.
✔️ A new deal for the childcare workforce, with a new sectoral min wage.
✔️ A new social partnership forum in childcare bringing together unions, government + employers.

— Trades Union Congress (@The_TUC) December 14, 2022

In its 2022 report A new deal for the childcare sector, the Trades Union Congress recognised that the childcare workforce is underpaid and undervalued, with poorer terms and conditions than other parts of the education sector.

To ensure parity with other parts of the education sector from the outset, a Labour government should in its first year commit to ensuring that early years education is included in all education policy announcements and, where relevant, initiatives being rolled out to the schools and further education sectors.

This should always extend to consulting with the early years sector in the same way as schools and FE providers are consulted on major policy developments.