Background
This briefing considers the case for providing universal and free childcare services in the UK to promote better child outcomes, foster gender equality and stimulate high-quality employment. It simulates different childcare staff pay and coverage scenarios and analyses their employment and fiscal effects.
Key findings include:
- Public investment in a system of free universal early education and childcare of high quality provided to all children in the UK between the age of 6 months and primary school by qualified staff has long-term benefits for children and their parents, as well as for the economy
- Our modelling (using 2014 as reference) shows that if childcare workers are paid a salary equivalent to primary school teachers and all 3.2m children are offered up to 40 hours a week for 48 weeks a year, the annual gross cost would be £55bn (3% of GDP); if pay rates are based on current wage levels by qualification, the investment is £33bn (1.8% of GDP).
- Employment creation in childcare services and elsewhere in the economy through multiplier effects would add up to 1.7m full-time equivalent jobs under such a scenario, raising the overall employment rate by up to 4.3 percentage points and the female employment rate by 6.4 percentage points.
- Increased tax revenue from additional earnings (including indirect taxation from increased consumption) and reduced spending on social security benefits, has the potential to recoup between 95% and 89% of this annual investment , leaving £1.7bn and £6.1bn net funding need (at current and higher pay rates respectively).
- The net funding need compares with a cumulative annual net give away of £5.4bn through raising income tax thresholds above inflation through the 2015-20 parliament (71% of which will go to men).