The provision of universal affordable childcare could save the taxpayer up to £1.5bn a year by allowing more mothers to go back to work, a report has claimed.
Some three-quarters of women with a youngest child aged three or four want to work, but with only 15 hours a week of free childcare available, many of them are unable to, found the report for the left-of-centre think tank the Institute for Public Policy Research.
The report cited reforms in the Canadian province of Quebec, where the introduction in 1997 of universal childcare at the cut-price rate of $5 (around £2.80) a day was credited with driving an eight percentage point increase in maternal employment.
The IPPR calculated that increasing the employment of mothers of pre-school children by 10 percentage points could generate £1.45bn for the Treasury – £500m from extra tax revenues and £950m in lower spending on tax credits and benefits.
A rise of five percentage points would generate £750m and just one percentage point £200m, the report found.
A similar level of “cashback” for the Treasury could be generated from mothers currently working part-time taking advantage of affordable childcare to switch to full-time work, said the report.
The think-tank argues that a key Government priority should be universal flexible and affordable childcare, made available through community institutions such as children’s centres, rather than through cash benefits or tax free vouchers.
Dalia Ben-Galim, associate director at the IPPR, said: “The largest savings as a result of higher maternal employment comes from benefits savings – reduced spending on housing benefit and reduced spending on income support and contributory jobseekers allowance.
“The other economic benefits come from increased revenue through income tax and national insurance contributions.
“This all amounts to a substantial return to the public purse when maternal employment increases.
“Although any initiative to tackle the high costs of childcare for parents is welcome, there are real concerns that the Government’s current proposals – a £750m annual package for extending tax-free childcare – may not lead to more affordable childcare.
“Analysis shows that the scheme is skewed towards benefiting higher-income families, and that childcare costs will probably continue to outpace the Government’s tax relief proposals in the coming years.
“We know that 43 per cent of parents with children aged three to four who want to work or work longer hours find affordability of childcare a barrier, rising to half among parents with a youngest child between 0-2 years old.
“Universal childcare is the solution that will make Britain better off and help families deal with the squeeze on incomes and rising care needs as a result of the ageing population that means both parents and grandparents are increasingly called upon to provide care rather than remain in employment.”
The report says Britain has some of the highest childcare costs in the world, so that it often doesn’t make sense financially for both parents to work. In a wide-ranging study of social policy, the report calls for a wider change in state support for families with less emphasis on redistributing income through cash benefits.