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Universal childcare guarantee could boost UK economy by £13bn

childcare  Chancellor of the Exchequer Jeremy Hunt meets pupils at St Judes Church of England Primary School in south London after delivering his autumn statement to Parliament earlier today. Picture date: Thursday November 17, 2022. (Photo by Stefan Rousseau/PA Images via Getty Images)
Chancellor Jeremy Hunt meets pupils at St Judes Church of England Primary School in London in November 2022. A 'universal childcare guarantee' would would close the gender pay gap, according to new research. Photo: Stefan Rousseau/PA via Getty (Stefan Rousseau - PA Images via Getty Images)

The UK economy would receive a £13bn boost with a “universal childcare guarantee” for children up to 11, a report has found.

According to the Institute for Public Policy Research (IPPR) and Save the Children, universally accessible and affordable childcare would create a double dividend for Britain.

It would increase parents’ earnings by £13bn a year as they return to work or extend their hours, while generating £8bn per year for the Treasury from increased tax and national insurance revenues and from lower social security payments.

The data found that the move for all children from the end of parental leave until they leave primary school, would close the gender pay gap by helping more women to progress at work.

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It would also replace the current incomplete patchwork of childcare entitlements, benefits and allowances for working parents.

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Families on lowest incomes would also gain the most and 1.6 million children, or 700,000 households, would benefit financially, the research found. Single-parents and the parents of younger children would also stand to gain significantly.

At the same time families would save between £620 and £6,175 a year on the current cost of childcare, depending on their circumstances.

“This would mean an overall boost to the productivity of the UK workforce at a time when there is a shortage of workers across the economy,” the report said.

Investing in more childcare provision in England would also create an estimated 130,000 additional jobs in early years education and care.

Members of Save the Children’s Parent Campaigner Network described to researchers how the current system creates obstacles to their returning to work.

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“If I can’t afford the childcare, I just can’t go to work ⁠— there's no choice,” one respondent said, while another commented: “You kind of feel like you can’t reach your potential.”

Tasha, 39, from Wiltshire, said: “I used to work full time but after my fourth child, I was advised it was better financially not to be working because the cost of childcare meant there was more outgoing than coming in.

"And now I am stuck. The people at universal credit told me I have to go back to work, but how can I when that means I can’t afford childcare? What I would earn on minimum wage full time is what I would need to pay for childcare. All our money goes on childcare, what are we left with for bills?"

The report sets out detailed changes that would be needed to deliver the promise of universally affordable and accessible childcare that millions of parents badly want, spanning 10-plus years from the end of parental leave.

These would range from expanding free childcare hours for the under-twos to introducing wraparound care from 8am to 6pm for school age children, including outside term time, and should be introduced in stages.

Costs are likely to fall over the next decade as primary school pupil numbers are expected to decline.

Read more: UK in recession until end of 2023, CBI warns

Rachel Statham, IPPR associate director and lead author of the report, said: “A universal and affordable childcare guarantee from ages 0 to 11 would deliver a step change for millions of young children and their families, giving more children access to high quality early years education, while helping to grow the economy, and grow families’ incomes.

“The double dividend it would bring to the UK economy through higher wages, stronger tax revenues and greater productivity would itself be a significant return on the investment, and comes alongside the financial boost to young families from falling childcare costs, giving more parents the option to return to work sooner or increase their hours.

“A universal childcare guarantee would begin to level the playing field for women at work and close the gender pay gap, while levelling up on critical early childhood development by offering every child access to more, high quality early education.”

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