Social Market Foundation calls for affordable childcare amid declining birth rates

Kathy Oxtoby
Monday, September 20, 2021

A ‘baby shortage’ could spell economic stagnation for the UK, but increasing the availability and affordability of childcare could help to address this trend, new think-tank report suggests.

A new report from think-tank the Social Market Foundation (SMF), has warned that the long-term trend towards people having fewer children could leave the UK with fewer workers, a weaker economy and unsustainable public finances.

The SMF report, Baby bust and baby boom: examining the liberal case for pronatalism, published today (20th September), argues that increasing the availability and affordability of childcare, alongside other measures such as more generous parental leave, could help to tackle this trend.

The SMF said the demographic outlook for Britain should ‘spark public and political debate about the scope for government policies to help people who want to have more children to do so’.


Effective interventions

Effective interventions could include payments to parents, greater parental leave entitlement and, especially, cheaper childcare, the think-tank said. However, the report also cautioned that such policies can be very costly, while only delivering modest increases in the birth-rate.

The report highlighted that birth rates in Britain are on the decline. In 2020, the total fertility rate (TFR) – the number of children per woman – stood at 1.58 in England and Wales, almost half the post-World War Two peak of 2.93. The recent decline in fertility is even more pronounced in Scotland, where the TFR is 1.29.

Since the early 1970s, the TFR has been ‘below the critical replacement rate of 2.1 children’ the SMF said. Depending on the scale of immigration and trends in life expectancy, the UK could see its population shrinking in the 21st century, the report suggested.

Britain could also face long-term shortages of working-age adults, the report warned. At present there are just under three over 65s for every ten workers, but by the middle of the next decade that ratio will rise to 3.5. By the 2060s the number will be closing to four.

Meanwhile, by 2050 a quarter of Britons will be over 65, up from a fifth today.

‘This combination of a lower share of the population in work and a higher share in need of economic support clearly has a negative effect on the productive capacity of the economy,’ the SMF said.

The paper’s authors, Scott Corfe and Aveek Bhattacharya, senior members of the think-tank’s staff, argued that this long-term outlook means that UK policymakers should consider the merits of ‘liberal pronatalism’, where people who want to have children, or have more children, are given more support to do so.

More than one quarter (28 per cent) of countries have adopted explicitly pronatalist measures, the report said. The UK is not yet among them, though the Scottish Government has a ‘population taskforce’ that examines such issues.

Having examined the evidence on population, economics and wellbeing, the SMF concluded that ‘the case for explicitly encouraging a higher birth-rate is not fully proven, but deserves more investigation by politicians and others’.

A cross-government taskforce should consider the issue, and a parliamentary inquiry into birth-rates should be established, the paper said. It also suggested the possibility of Whitehall officials adopting a ‘Population Test’ where every policy is scrutinised to estimate its likely effect on the birth rate.

The strongest argument for ‘liberal pronatalism’ is economic, the authors concluded. ‘Under plausible assumptions, low fertility rates are set to shrink the workforce, stifle demand and slow innovation, suppressing GDP growth and stretching the public finances.’

Several governments around the world including France and Poland have explored policies that can make it easier and more attractive to have children. The SMF suggested that better childcare provision could be ‘a promising intervention for Britain to focus on’.

The OECD estimates that typical British working parents spend 22 per cent of their income on full-time childcare, more than double the average rate for Western economies. ‘That might mean that there is more scope for the Government to influence birth rates through childcare policy in the UK than in other parts of the world starting from a better position on childcare costs,’ the paper said.

In other papers, the SMF has supported liberal immigration policies and continues to do so. But the authors warned that immigration alone will not be enough to address a falling birth rate in the long run because many other countries face similar challenges. ‘Liberal immigration policies may not help if population is declining elsewhere in the world,’ the authors said.


‘Alarming’ fall in fertility rates

Aveek Bhattacharya, chief economist at the SMF said: ‘The question of whether the Government should intervene to try and increase the birth rate is clearly a sensitive topic that must be delicately handled. However, given the alarming fall in fertility rates, and the risks that population ageing poses to our social and economic wellbeing, it is a discussion we should not duck.

‘Many other liberal democracies are exploring the use of policies like cash payments to parents, more generous parental leave and cheaper childcare to make it easier for those that want children to have them. Here in the UK we should consider the merit of these policies– not least because they would bring many other benefits to parents, children and wider society.’


‘Unaffordable’ childcare costs

Neil Leitch, chief executive of the Early Years Alliance, said: ‘It is utterly shameful that so many parents are having to choose to have less children – or none at all – because childcare costs in this country are so unaffordable. Worse still, the situation is now so bad that we’re seeing a worrying decline in birth rates as a result.

‘There should be no doubt that this is the consequence of a complete failure of Government policy. Nurseries, pre-schools and childminders have been grossly underfunded for years, leaving them with no choice but to increase fees for parents, or be forced out of business.  

‘With the Spending Review just weeks away and a new team in place at the Department for Education, it's not too late for the Government to reverse the concerning trends that the SMF has identified, and recognise that adequately funding our childcare and early education system is one of the wisest investments it can make.’


The report is available here

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