The childcare system is broken: It can be fixed by empowering parents
Few dispute the fact that the UK system of childcare is broken. Although around £5.4 billion on childcare, and £3.8 billion on childcare places, is being spent every year on supporting the sector, it remains financially crippling for parents, inflexible, difficult to navigate and there are insufficient places available for those who could benefit. To give a sense of the scale of the problem, a middle-income household will spend nearly 30% of their after-tax income on childcare but only about 5% of their income on energy after housing costs. 
The government has touted changing the ratio of workers required to look after young children. Others have suggested watering down or scrapping the Early Years Foundation Stage, which sets the educational standards for the under-fives. While a reconsideration of ratios is important, this is a marginal change and more ‘sticking plaster’ than permanent fix.
At Policy Exchange we have embarked on a study of these key issues, as they sit at the nexus of government funding, public sector reform and regulation. Childcare is key to the cost-of-living, developing stronger places and nurturing a healthy society.
First let’s take a look at the figures.
A weekly payment of £21.80 for the first child and £14.45 for any additional child is available to parents to support the cost a child until the child is 16 years old. This represents a total of £18,138 per first child over the course of the first 16 years, payable in equal weekly or monthly instalments despite childcare costs being disproportionately weighted towards the early years. The total average cost to raise a child in the first 3 years of their life is £44,097 compared to £24,656 when the child is 12-14.
Next, what do parents actually want? As Education Secretary, I recognised that parents wanted to be more involved in the schooling of the children, and that parent-led schools should be supported. This is even more strongly the case for parents with young children. Many parents want to stay at home and look after their own children, many would like grandparents or other relatives to be involved, others still, would be interested in sharing care of young children with other mums or dads as they return part-time or full-time to the workforce. Yet the current system discentivises such arrangements
The Government should support these preferences. The evidence suggests that informal care in the early years may be even better for educational outcomes for some children.
Despite being rare in the UK, nurseries co-led by parents and childcare professionals are common in continental Europe and Canada. Parent co-ops care makes up 12 percent of provision in New Zealand. It would be useful to pump-prime many more such nurseries, helping them to cut through red tape and develop a viable business model.
The use of childminders should also be facilitated, yet the current regulatory regime makes it hard to be a childminder. Childminders provide a cheaper and more flexible form of childcare. The barrier to entry is much lower, but still the system involves significant red tape that could be simplified.
For example, currently Ofsted regulates many childminders directly, and a few through agencies. These agencies need to be incentivised to scale up, as registering agencies significantly reduces the overall burden on the sector.
Another reform would be to allow council-house and housing association tenants to use their home to offer a childminder service, which is still prohibited by some councils and housing associations, even if your community wants to have a childminder onsite. This kind of community care should be the model, like parental co-ops, and Government should look at ways to make it easier and ease regulatory burdens for parents to work with professionals to set up their own centres.
Lastly, and perhaps most radically, the government needs to recognise that parents themselves know how they should best look after their own children, and to support them in the choices they make. The Government could start by simplifying the current subsidy regimes, which are complex to administer and hard to access, and then look at ways to allow parents to front-load child benefit, so that the annual amount can be greater in the early years, and taper through a child’s life.
The key is that parents should have choice. Rather than scrapping Early Years Foundation Stage or watering down some of the safety rules, more should be done to expand the range of provision available, and give parents more say in raising the next generation.
Frontloaded child benefit, parental co-ops and an expansion of childminder provision could provide the flexibility and diversity that parents want.
Rt Hon Ruth Kelly is Senior Fellow, Economics and Social Policy at Policy Exchange. She is a former Secretary of State for Transport, Secretary of State for Communities and Local Government, Secretary of State for Education and Skills and Minister for Women and Equalities. She also held ministerial roles in HM Treasury.
 Early education and childcare spending, 8 November 2019
 2021 annual report on education spending in England – Early Year, 2021. https://ifs.org.uk/publications/15858