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Type: Observations
Gordon Brown's speech to the Labour party conference gave more detail about an existing ambition of this government to provide free early education and childcare places for 2 year old children in England. The Prime Minister has now promised that this would be provided to young children in "modest and middle income" families by 2015, and would be paid for by "reforming tax relief" on childcare. This is widely reported as meaning that the Government intends to scrap the existing tax break on employer-provided childcare vouchers, something which it introduced in April 2005. If it is scrapped outright, the losers will be relatively well-off families in work and using formal childcare: low- to middle-income working families using childcare will continue to be able to get help with childcare costs from the tax credit system. However, there is, we presume, more to this reform than just redistributing income by removing state support for well-off families with children and increasing it for the poorest, because the two policies also have different objectives. The tax break on employer-provided childcare vouchers is mainly intended to reduce the cost of childcare for working parents, and so encourage them to work. The vouchers are flexible, in that they can be used to buy any form of childcare provided it is registered with Ofsted or otherwise approved, including day nurseries, playgroups, out-of-school clubs, childminders or nannies. On the other hand, if the free places for two year olds are like the existing entitlement for three and four year-olds in England, then they will be limited to centre-based care, such as state-run Children's Centres, and private or voluntary sector nurseries or playgroups. These free places will, presumably, make it a little easier for the parents of these two year-olds to work if they want, but the Government may also be hoping that this policy might improve developmental outcomes for the children from low-income families. Recent work based on the Millenium Cohort Study, and currently the subject of further research at the IFS and the CMPO, has shown that children aged three from families in poverty have lower cognitive skills, lower achievement scores and more behavioural problems than those that do not, and it is argued by some that education and child care for such children can help to reduce these differences, especially if it is of sufficiently high quality.
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Recent Observations
Cutting the deficit: three years down, five to go?
The UK is in the fourth year of a planned eight-year fiscal tightening. Following further announcements made in Budget 2013, this fiscal consolidation is now forecast to total £143 billion by 2017–18. The UK is intending the fourth largest fiscal consolidation among the 29 advanced economies for which comparable data are available. By the end of this financial year, half of the total consolidation is expected to have been implemented. However, within this tax increases and cuts to investment spending have been relatively front-loaded, while cuts to welfare spending and other non-investment spending have been relatively back-loaded.
Deficit unchanged
The March Budget forecast that borrowing would fall by £0.1 billion from £121.0 billion in 2011–12 to £120.9 billion in 2012–13. On Tuesday, the Office for National Statistics is due to release its first estimate of public sector net borrowing in March 2013 and, therefore, for the whole of 2012–13. Borrowing could easily end up being higher or lower than it was in the previous year, either due to backwards revisions, the uncertainty inherent in forecasting borrowing even a month in advance, or both. However, whether borrowing is slightly up or down in cash terms is economically irrelevant. Either way, the bigger picture is that having fallen by roughly a quarter between 2009–10 and 2011–12, borrowing is forecast to be broadly constant through to 2013–14.
Women working in their sixties: why have employment rates been rising?
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