View from the Street: Back to school for UK productivity

@Hello_Sabina

View from the Street: Back to school for UK productivity

Shiny shoes, nervous smiles, new haircuts and some shade of either red, blue or green. These are just a few of the things that may have infiltrated your social media feeds this week as millions of children started or returned to school and their parents shared their snaps. 

As a mum to a four-year-old in Scotland I experienced the highs and lows of back to school for the first time a little earlier at the end of last month, as Scotland’s schools returned from the Summer break.

The lows are self-explanatory, but let’s not dwell on those for too long - lest I shed another tear. No, let's focus on the overwhelming highs, namely, the monthly saving* I am making in nursery fees (more on that later).

It’s a well-known fact that childcare costs have soared across the UK in the last decade, by over 50% in some areas. The OECD points to the fact that UK families are spending almost three times the average for childcare. That’s the highest cost in the Western world as a proportion of income.

The average cost of 25 hours of childcare a week per child now works out at just over £6,000 a year for under twos, and only slightly less for those aged two and over. Aside from the fact that most families have more than one child, 25 hours of childcare is not enough for most working parents. It seems to me that there is a stark disconnect between provision and reality and as a result we are falling at the first hurdle of the education journey and contributing to the country's serious productivity problem.

It’s a problem that governments have identified north and south of the border. They’ve tried to find solutions but have so far failed.

This week marks the first year of Westminster’s scheme which offers working parents of three and four-year-olds in England, 30 hours’ free childcare a week (actually, the government has been cowed into clarifying the facts about its ‘free’ childcare offer after a father complained to the advertising watchdog that the claim of 30 hours was misleading).

The scheme has been plagued with problems and heavily criticised, with nurseries claiming the government’s contribution for the scheme doesn’t cover the delivery costs. Unbelievably, the government has powered on despite four in ten nurseries, pre-schools and childminders fearing they may have to close within the next year as a result of the policy. Inevitably, costs have been passed on to parents, with a study showing that just under half (45%) of parents accessing 30-hours places in England have been asked to pay additional fees for non-funded hours because of a lack of funding. Nicola Sturgeon should take note as the Scottish Government prepares to introduce a similar scheme in 2020.

It beggar’s belief that the world’s sixth largest economy has failed to get childcare right. As the OECD points out, it’s not only families who suffer, but society more broadly – and women especially: “Such high costs are a strong deterrent to employment,” they say. “It may not be financially worthwhile for both partners to work…it is usually the mother who stays at home.”

Compare this to countries such as Austria, Hungary, Portugal and Sweden, where families spend less than 5% of their income on childcare, and it’s clear that we have a long way to go in addressing the socio-economic problems created by the childcare crisis.

Sweden is often perceived as some sort of ‘childcare utopia’. The country actually spends more money on its pre-school budget than it does on its defence budget – this could all change though come Sunday’s election.  But for now at least, in Sweden each child is guaranteed a place at a public pre-school and no parent is charged more than three per cent of their salary, with fees capped at just over £100 a month. No surprise then that Sweden consistently ranks highly in both happiness and financial wellbeing lists.

But back to my little cherub standing nervously in the playground waiting to be taken home right in the middle of my working day. It turns out that there’s a shortage of before and after school care provision in Scotland too. In England, before the start of the summer holidays, parents formed queues and camped out overnight in the playground in order to secure their children's wraparound care.

I despair.

 *Dear reader, in the absence of a before and after school place for my child, the childcare savings are, of course, being spent on a childminder.

Sabina Kadic-Mackenzie is an associate partner at Charlotte Street Partners