Iain Mansfield is a former senior civil servant and winner of the Institute of Economic Affairs Brexit prize. He writes in a personal capacity.
There is a profound unfairness in the way the state supports families with pre-school children. Whilst significant support is rightly offered, in the form of tax-free childcare and 30 hours of free childcare a week, to couples in which both parents work, nothing is offered to families in which one parent chooses to remain at home, caring full time for their children. This is not only deeply unjust, but it utterly undervalues the important work done by those – often, but by no means exclusively, women – who make this choice.
Many people argue that the Government should not impose one form of lifestyle upon families. But the status quo, by embedding such a large disparity in support, does precisely this: it strongly encourages a family in which both parents work and discourages the equally valid choice in which one parent chooses to look after their own children. All subsidies distort choices, and at over £5,500 a year – about a fifth of the median household income – the level of disparity is of a scale to fundamentally distort the choices and options available to most families.
In reality, every family is different. In some families, it is absolutely right for them that both parents go back to work. In others it may be better, both for the parents and for the well-being of the children, if one parent – whether they are a man or a woman – stays at home to look after those children. It all depends on both the talents and inclination of the parents and the nature and needs of the children concerned. In an ideal society, each family would be able to make that choice depending on what was best for them and their children; however, under our current system, only the former is given support. This means that many parents are forced back to work as the only affordable option, even if when that is neither economically efficient nor what they wish to do. Increasingly, caring for one’s own children is becoming a luxury available only to those that have at least one high-earning parent.
There is a simple policy solution that would restore balance. The Government should enable all married couples with children between three years old and school age to fully transfer their personal tax allowances to each other – but link the ability to do so with whether or not they took up the 30 hours a week of free childcare. It goes without saying that this policy should be offered on a fully equal opportunities basis, available whichever parent stayed home, and to those in both opposite-sex and same-sex marriages and civil partnerships.
For a family which took up the whole of the 30 hours of free childcare, no personal allowance transfer would be permitted. For a family which took up no free childcare, one parent could transfer the entirety of their personal allowance to their spouse or civil partner. In between, it would be calculated on a pro-rata basis: a family which used 15 hours a week of free childcare would be able to transfer half of their personal allowance. If more than one child was eligible at the same time for free care, the calculation would be based upon the proportion of the total available free childcare that was used.
This would be worth £2,370 a year for a typical basic rate taxpayer. Whilst less than the value of free childcare, it would go a long way towards leveling the playing field. It would make it significantly easier for a family to rely on one salary, allowing the other parent to remain as a full-time carer – and would be paid for by the reduced level of free childcare taken up. By reducing the distortion created by the current imbalance in subsidies, it would allow parents to choose what is genuinely best for their children, rather than being forced to return to work as the only affordable option. And, importantly, it would be highly flexible, allowing parents to choose the balance between work and caring that is right for their family.
Such a policy would have many benefits. It would be a strong affirmation of the Conservative Party’s support for marriage – both traditional and same-sex – and be a great support to a large number of families. It would end the situation in which parents are only considered deserving of support if they return to work and remove a major inequity in the welfare system. And, most importantly, it would support the well-being of ordinary parents and children, by allowing each family to choose what was better for them.