Childcare and the cost of living crisis | NEB Digest

Childcare and the cost of living crisis | NEB Digest

Childcare and the cost of living crisis
In Focus
Deregulating childcare to ease family budgets. The government has hinted at plans to deregulate the childcare sector by raising the cap on the maximum number of children a childminder can look after , in an attempt to lower the cost of childcare and ease the cost of living for working families. 
Fiscal rules continue to narrow the government’s policy options. The move comes after Cabinet ministers were tasked with coming up with ‘non-fiscal’ solutions as the Chancellor continues to limit departmental spending budgets outlined in the Autumn Spending Review.

It’s important to address the high costs of childcare… Childcare is an under analysed driver of the cost of living crisis. A couple with median incomes and two young children pay more than 50% of the mother’s net income in childcare costs, more than double OECD average and worse than any other OECD country . In a survey of mothers by the campaign group Pregnant then Screwed, almost half of respondents had considered quitting their jobs because of childcare issues and a quarter of respondents skip meals or heating to pay for it . (Read the Women’s Budget Group’s recent briefing on the costs of childcare and the impact of the pandemic .)
…but this proposal will reduce care quality and working conditions. Regulatory limits on ratios between childminders and children exist to preserve the quality of provision and working standards of carers. Pregnant then Screwed polled the government’s proposal and showed that only 15% of parents would be in favour of increasing ratios in childcare settings even if it would lower prices . June O’Sullivan MBE, CEO of London Early Years Foundation, wrote an open letter to the Prime Minister (with over 1000 signatures) explaining why relaxing staff:children ratios would be “catastrophic for children, parents and the sector” as it would reduce the quality of provision and reduce working conditions for staff . The sector is already facing an ‘exodus of low-paid staff’ due to poor working conditions. (Listen to writer Christine Berry, Associate Professor Kate Hardy and Pregnant then Screwed Founder Joeli Brearly discuss the ‘perfect storm’ hitting working conditions in the childcare sector on Ed Miliband’s Reasons to be Cheerful podcast.)

Why does childcare cost so much in the UK? Despite government subsidy worth billions of pounds to provide a certain amount of ‘free’ care, the cost of childcare in the UK still remains among the least affordable in the world. Government-subsidised ‘free’ childcare only applies to children of certain ages, and does not cover the full amount of time necessary, leading to costly gaps to be filled by parents. The cost of plugging these gaps is then exacerbated due to the inadequate funding from the government for the 30 ‘free’ hours which drives up prices elsewhere in the system. In fact, leaked documents show that government ministers knew that this scheme would result in higher prices for parents . Underlying these issues, private sector childcare providers often extract large sums for debt repayment and paying shareholders , rather than being invested back into the frontline service. 
Extractive ownership models. Commenting on the government’s proposals in the Guardian, writer Christine Berry explains how the private-sector model underpinning much of the childcare sector (“often backed by private equity investors and laden with debt”) is the source of high prices , low pay and working standards for childminders and poor quality provision. A UCL Social Research Institute paper explores how private-for-profit and charity (not-for-profit) sectors differed in their use of public money to subsidise childcare provision. (Check out parent-led cooperative childcare company Friendly Families for an example of best practice ).

Free, publicly-provided universal childcare provision.  The Women’s Budget Group is calling for the government to invest in a universal and free system , delivered as a public infrastructure service on an equal footing with school education. (Watch The Social Guarantee’s Maeve Cohen explain “why the decade long attack on public services is driving the cost of living crisis ” and that it can only be addressed by properly funding public services, such as free childcare.)
The case for public investment. Advocates argue that investment in such a system will largely pay for itself due to the big returns on maternal employment. The Women’s Budget Group estimates that 1.7 million women are prevented from taking on more hours of paid work due to childcare issues. Economists Jerome De-Henau and Susan Himmelweit calculated that 30 hours of free childcare for all children aged between 6 months and 4.5 years, with a pay rise for carers, would cost £10.4bn. This investment would create 310,000 new full time jobs and 70% of the spending could be recouped from increased tax receipts as more people are enabled to take on more work. (Jerome has costed various options for investing in a universal system of high-quality childcare, explained the employment multiplier effects, and outlined how to fund the system over time in this peer reviewed paper .)
Weekly Updates
Inflation and monetary policy
Growing political support. Commenting on BP’s massive profits driven by higher oil and gas prices, Economist Irwin Stelzer argues that windfall taxes “are a necessary tool, both for an efficiently functioning capitalist economy and to maintain public support for that system ”. Tax Justice UK’s recent polling shows “ overwhelming public support in the Red Wall ” for a windfall tax on energy company profits. (Tax Justice UK’s Tom Peters explains the case for a windfall tax in a video interview with Julia Hartley-Brewer on TalkTV.)
Neutralising the government’s arguments. Critics of a windfall tax argue that it will hinder future investments in energy supply which could help reduce prices in future, but BP’s Q1 results stated: "For 2022... BP remains committed to using 60% of surplus cash flow for share buybacks and intends to allocate the remaining 40% to further strengthen the balance sheet." Further, the BP’s chief executive said that their planned investments wouldn’t be affected by a windfall tax . Critics also claim that pensioners would suffer, but analysis from Common Wealth’s Chris Hayes has shown that UK pension funds only own a small % of energy firms . 
Funding ‘minimum energy entitlements’. The Guardian’s Polly Toynbee explores the idea of minimum energy entitlements paid for by ending fossil fuel subsidies and levying windfall taxes . Fuel Poverty Action’s petition to provide #EnergyforAll based on this idea has garnered over 400,000 signatures (at the time of writing). 
Business and ownership
Passive investments. A new Common Wealth report explores the rise of passive investment strategies and their increasing ‘dominance within the UK shareholder structure’. It finds that the gap between traditional, active investment management strategies and passive index-tracking funds is closing, particularly in the fossil fuel sector in which active funds are beginning to withdraw investment.  

Stakeholder capitalism and monopoly power. A new report by Denise Hearn and Michelle Meagher analyses monopoly power and the extent to which ‘stakeholder capitalism’ can be a remedy . It argues that the stakeholder capitalist and anti-monopoly movements, whilst both growing, rarely intersect. The Balanced Economy Project’s ‘The Counterbalance’ newsletter has a summary . 

Data ownership. The Open Data Institute (ODI) warns that the UK's government plans to scrap EU data protection laws could backfire, arguing that we need a data economy that is ‘inclusive, sustainable & equitable’ . The ODI also calls for new data institutions such as data unions and data co-ops to level the playing field and improve access (more here on ‘bottom-up’ data institutions ). 

Public ownership of energy distribution. The only way to combat the enormous profit margins of energy distribution networks is to bring them into public ownership , argue Joseph Baines, Sandy Brian Hager and Adam Peggs. The recent focus on the profits of energy companies such as BP and Shell is right, they argue, but allows distribution network operators (DNOs) and gas distribution networks (GDNs) to get away ‘scot-free’. 

Public ownership of nature recovery. The passing of the Environment Act in 2021 could lead to ‘a new era of local, public ownership of nature recovery responsibilities’ argues Flora Parkin. The Act requires local authorities to produce “Local Nature Recovery Strategies” (LNRSs): ‘spatial documents (organised geographic information about a location or area, such as maps) to guide and prioritise local conservation’. Parkin argues that the production of LNRSs must be as participatory as possible and that the issues addressed via LNRSs must be properly addressed via public investment. 
Economic security for all. Common Wealth’s Amelia Horgan and Mathew Lawrence argue that the cost of living crisis is ‘also a crisis of working time’ and have put forward five proposals to ‘guarantee economic security for all’ . Proposals include restoring sectoral collective bargaining, taking back control of time by boosting workers’ rights in the Employment Bill, introducing a Living Income social security system, reforming the rules of the company to give everyone a stake and a say, and organising care as a public good free at the point of use to reduce unpaid work and gender inequalities.
Universal workers’ rights. Many UK workers do not have the ‘basic safety net a system of rights should offer’ , according to a new report by Autonomy. The report suggests enhancing existing rights such as statutory sick pay, redundancy pay, annual leave and parental leave. It also suggests expanding the list of rights that workers have to include the right to a liveable planet, the right to childcare, the right to disconnect, the right to development and the right to a decent workspace. (For more, see Twitter summary and Tribune coverage). 

Pay growth vs dividend growth. Shareholders are the ‘indisputable winners’ of the economy , according to new analysis by Common Wealth. Since 2000, average incomes from work has increased (in nominal terms) by 25% while dividends from UK non-financial corporations have risen by 142%. It also finds that the top 1% own 39% of directly owned shares, more than the poorest 90% combined. 
Britons support CEO pay caps. Six out of ten people believe that CEOs should not be paid more than ten times their typical employee , according to the High Pay Centre. Nearly a third believe that CEO pay should not exceed more than five times the pay of lower- and mid-level employees, despite the fact that in 2020, 21% of companies paid their CEO more than 100 times the amount they paid their median employee. Frances O’Grady, General Secretary of the TUC, argued that there should be a maximum pay ratio between the top and bottom earners in companies. 

Trade unions as green allies. Writing for centre-right think tank Bright Blue, General Secretary of the TUC, Frances O’Grady, argues that progressive conservatives should see Trade Unions as an ally in the fight to ‘deliver green skills and jobs of the future’. 
Climate change
Planning is good policy. Political economist Max Krahé explores the politics of green transition policy and the benefits of good planning. He argues that markets are a ‘risky’ solution as ‘lock-in effects’ push firms towards marginal change. 

Raw materials for a just transition. The Green Alliance has published a report exploring the ways in which the raw minerals needed for energy transition can be sourced sustainably. It argues that mineral mining can be environmentally damaging itself and we must therefore focus on improving efficiency and cutting energy demand. 
Mineral demand shouldn’t stop climate action. The world lacks time, not minerals, in the fight against the climate emergency , argues climate writer Kate Mackenzie. She argues that the ‘rush for minerals to build new energy infrastructure’ is a ‘temporary problem’, with the minerals squeeze estimated to last around a decade, compared to potentially irreversible climate change. Worries over ‘soaring demand’ for such minerals (e.g. cobalt, lithium, nickel and copper) are exaggerated, Mackenzie says. 

Government ‘net-zero’ aviation strategy. The New Economics Foundation’s Alex Chapman summarises why the government’s new aviation strategy will be ‘putting us all at risk' . The Department for Transport aims to increase the UK’s air capacity by 70%, or 200 million passengers above 2018 levels, by 2050 despite visions for a ‘net-zero aviation sector’. 

Macron’s victory a win for the environment? Green Alliance’s Robbie MacPherson says that environmentalists should be ‘satisfied’ with Emmanuel Macron’s recent election victory, arguing that the Overton window has shifted in support of French environmental policy . MacPherson argues that green policies are increasingly winning votes at the ballot box and that this will increasingly be the case not just in France, but also in the UK. 

Health professionals in the climate debate. We must recognise the climate crisis as a health crisis , argues Public Policy Projects’ Francesco Tamilia. Not only will medical professionals be forced to deal with climate-related issues on the frontline, but they will also play a role as trusted community figures in mobilising the fight against climate change. 
A precautionary approach to sustainable financial policy. The Inspire research network has published a paper arguing that climate change and biodiversity risks are seen as ‘market failures’ and are therefore addressed with ‘market-correcting’ financial policy. Policy should instead be preventative, the paper argues. Recommendations include penalising ‘dirty loans’ and forcing central banks to give greater consideration to sustainability in their activities. The key points of the paper are summarised by co-author Frank van Lerven .
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