Why Political Decision-Making Around Childcare Funding Has A Direct Impact On Economics

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Written By Mahmoud Sarvari

Politics often leads to controversy, but disagreements about how governments should support families and provide access to affordable childcare are topics that refuse to go away.

In early July 2023, the UK government announced a series of changes, stating investment into childcare for early years would double to £8 billion a year. From September 2025 onward, working parents can claim up to 30 hours of free childcare a week when the child reaches nine months old.

How much will this help families now, why is it taking two years to introduce, and what facts support the concept that better, cheaper childcare directly impacts the country’s economic health?

The Politics Of Early Years Childcare Support

A UNICEF report analysing childcare provision in the most affluent international countries found that many governments still needed comprehensive solutions before the pandemic and the implications for families with children at or below school age.

UNICEF says that free or low-cost childcare is important for parents to access paid leave from work and use high-quality childcare. It created a league table based on the paid leave mothers and fathers receive after having a child, access to care of at least one hour for children under three, and affordability for two parents earning an average wage.

Findings show that Scandinavian countries, including Luxembourg, Sweden and Iceland, rank the highest, with generous leave policies and well-organised and affordable childcare services.

The United States is the only wealthy country without statutory paid parental leave. However, some states offer contrasting policies; even in these areas, only 60 per cent of parents in work are eligible, and in the private sector, one in five receives paid leave.

Coming 35th out of 41 countries, the UK performed poorly, among the five most expensive countries for childcare services, even after accounting for reforms. Childcare costs for a couple earning an average wage accounted for 30 per cent of their income, reduced from 44 per cent in 2015.

Researchers and critics indicate that these costs, and the lack of access, have severe ramifications for socioeconomic growth. Parents with structured, paid leave, accessible local childcare at a reasonable price, and support with early years development are more likely to remain in the workforce, return to work after parental leave, and rely less on benefits income to meet everyday financial needs.

Changes To Childcare Funding Availability In The UK

The newest changes to UK childcare policy follow pressure from several groups, including Pregnant Then Screwed, which have campaigned for better provision, broader access to affordable childcare, and other reforms around flexible working rights and the ability of mothers to remain engaged in their careers, without the ‘motherhood penalty’.

Policies are being introduced in a staggered transition, as follows:

  • Eligible working parents with children aged three to four currently have access to 30 hours weekly of free childcare – although availability depends on the nurseries in the local area and the hours they are prepared to offer within the 30-hour entitlement.
  • From April 2024, parents with children aged two will be able to access 15 hours a week of free childcare, with the caveats mentioned above.
  • In September 2024, the government starts rolling out the 15 free hours to children from nine months upwards. The following year, the 15-hour provision increases to 30 hours a week.

Parents can use free hours, where they have a nursery place and their working hours correspond with the allocated time, covering the school terms over 38 weeks of the year. Some parents may be able to use the free hours across the full 52 weeks of the year if they use less than the maximum free hours.

Delays in rolling out extended free childcare

The reasons for the delays are complex and include the need for nurseries and childcare settings to have enough time to prepare. Nurseries and childcare providers argue adequate funding must accompany any changes, resulting in fewer spaces as more businesses close.

On average, providers receive government funding with a shortfall of £2.50 a child an hour of free childcare delivered, with 5,000 nurseries having shut in the last 12 months due to financial issues.

Other challenges relate to a lack of staffing, where nurseries may cap admissions at 60 per cent of their total capacity since they need the workforce or rates of pay necessary to attract the number of employees required to meet minimum staff-to-child ratios.

The Chancellor has promised funding of £204 million from September 2023 to finance the increased free hours. Still, a Local Government Association report published in February recognised that ‘systematic underfunding’ and the added pressure of rising living costs and inflation negatively affected the financial viability of childcare providers.

Political Strategies To Attract Family Votes

Of course, behind the policies and debates, politicians disagree about the proper way to grow the economy and attract parents back to work – or prevent parents from leaving the workforce – because these are issues that matter to swathes of voters.

There are 19.4 million families in the UK out of 28.2 million households, 42 per cent of whom have one or more dependent children. A political party with a strong stance on supporting families with childcare costs appeals to 68 per cent of the voting public.

Labour is also targeting female voters in the next general election, based on statistics that show women make up the majority of undecided voters, or ‘floaters’ who may not have a preconceived loyalty to any one party or the other and will vote for the candidates they feel best represent their interests.

The economic impacts of unpaid childcare

A report created in partnership between the Centre of Local Economic Strategies and the Women’s Budget Group found that issues preventing women from taking up paid employment cost the UK economy £88.7 billion annually – no small value at 3 per cent of Britain’s GDP.

Unpaid childcare also presents a problem, with women who rely on other adults to help look after their children to enable them to work often experiencing reduced productivity and a lack of ability to progress through further qualifications or to deploy their complete skill set. This issue may be due to limited available hours, reliance on family members and friends for free childcare, or a need to find lower-paying jobs compatible with their time.

Conventional economics disregards unpaid care and domestic work, which are fundamental for a society and economy. Women typically carry out ten additional weeks of work within the home every year, limiting their ability to contribute to the local and national workforce.

Two million nonworking women below retirement age, from 50 to 64, are categorised as economically inactive. However, most cannot work due to illness or disability or because they cannot financially afford to return to the workforce due to responsibilities at home.

Tapping into this potential and investing in social infrastructure ensures that women are more likely to work, reduces the volume of unpaid work they need to undertake, cuts unemployment figures, injects talent and knowledge into the workforce, and ultimately results in a healthier, more robust economy.

Childcare And Economics FAQ

How can governments improve access to low-cost and accessible childcare?

Governments use fiscal policies to decide how they allocate public finances and impose taxation. To expand access to free early years childcare, they must implement changes to budgetary rules that support investment into childcare provision.

Why is free childcare a positive for the economy?

Free childcare means more people – primarily women – can afford to return to work without allocating much of their incomes to nursery fees. An average household with two working parents earning the UK average salary must spend a third of their earnings on childcare.

When will the changes to free nursery spots for parents happen in the UK?

The first changes to childcare policies begin in April 2024, when parents with children from age two and upward will be entitled to claim 15 hours per week of free childcare from local nurseries.

What is the debate about the funding of free childcare spaces?

Nurseries report that they receive a minimal financial contribution with a shortfall of £2.50 an hour for each child receiving free hours – a significant deviation when factoring in the total cost of staffing, utilities, equipment, and food.

What is the Labour policy about free childcare for preschool children?

Labour has stated that it will not introduce universally free childcare for children from nine months upwards, citing this as a fiscally irresponsible solution. Instead, the party indicates that if it came to power in the next general election, it would make an offer based on means testing.


  1. UNICEF’s Global Report on Childcare: This would be an excellent source for a deep dive into the data about childcare provision across affluent countries.
  2. Local Government Association Reports: This organization would have comprehensive reports and information about the financial viability of childcare providers in the UK and more.
  3. Centre of Local Economic Strategies and the Women’s Budget Group Report: This report highlights the economic impact of unpaid childcare and the barriers women face in employment.
  4. Office for National Statistics (ONS): This UK government department is a reliable source for statistics, including the number of families, households, and economic activity, which can validate or provide further data on the numbers mentioned in the article.
  5. Labour Party’s Official Statements and Policies: To get the Labour Party’s stance on various issues mentioned in the article directly, their official platform or policy documents would be the most authentic source.