Deregulate childcare to make it affordable

Britain has the highest childcare costs in the developed world. A two-earner family will spend over a third of their after-tax income on nurseries and childminders. It's three times as high as in Germany, even though our Government actually spends more on early years education. In fact, the UK government spends a bigger share of GDP on childcare than the EU average.

We've argued before that the solution here isn't to focus on the demand side with ever-greater subsidies, but to look at the supply-side factors that make childcare so darn expensive in the first place. Britain has some of the most restrictive childcare regulations in the world. Currently in the UK one adult is required for every three babies, four toddlers, or eight children over the age of three. Our staff-to-child ratios are some of the strictest in Europe, as the table below shows.

A 2015 study by Dianne Thomas and Devon Gorry for the Mercatus Center at George Mason University reveals the harm of mandating high staff-to-child ratios. Here are the four big takeaways from their study:

  1. Relaxing the staff-to-child by just just one infant reduces the cost of child care by between 9 and 20 per cent across all US states. Applying those findings to the UK suggest that simply by relaxing child-staff ratios to Norwegian levels we could cut childcare costs in half.
  2. Mandating quantity doesn't lead to better quality. When researchers control for confounding variables (e.g. mother's education levels, socio-economic status and income) staff to child ratios only have modest effects on the quality of childcare received. 
  3. High staff to child ratios aren't just ineffective and expensive, they're actively harmful to quality once you consider their knock-on effects. High staff to child ratios incentivise daycare centres to hire less-qualified staff in order to keep staff costs at manageable levels. If caregivers can provide care to twice as many people at a time then it makes sense to pay a bit extra for a more qualified staff member. Indeed, the evidence suggests that the biggest determinant of care quality is the level of training of the care giver.

We should follow Denmark, Spain, and Sweden's lead and scrap child-staff ratio mandates altogether. It would leave more money in the pocket of parents without undermining quality of care.