You Don\’t Say!

More than 8,000 people have given up offering child care in England in just four years, more than a tenth of the total, figures from the education watchdog Ofsted show.

Many blamed increased regulation and paperwork, relatively low pay and changing lifestyles for the drop.

They might also have mentioned the rise in the cost to beome registered. Yes, I know, one anecdote does not national data make, but my stepdaughter certainly gave up on it because of the increase in costs, both of time and money, required to be on the register.

An entirely personal position is as follows: So someone decided that subsidising childcare would be a good idea. Perhaps it is and perhaps it isn\’t, but if subsidy there is going to be then there has to be (in that bureaucratic mindset) a system for checking that taxpayers\’ money is only going to those who "ought" to be childminders.

Thus we need a system of registration, regulation and inspection. This of course all costs money, the largest chunk of it falling (perhaps in time more than anything else) upon those being inspected. The cost of the provision of the service thus rises (or, if you prefer, the price received for providing it falls) and we all know that supply curves trend upwards with price.

So at the same time as we\’re subsidising demand for places, we\’re reducing supply of them. But then the subsidy means that parents can and will pay more for places, thus raising the supply again.

Quite how the balance works out isn\’t really known: it\’s possible that the higher costs in the system, in time and regulation, will be greater than the cash subsidy poured in to pay childminders more. We could therefore end up with a new equilibrium whereby we have more expensive childcare but less of it.

New Ofsted figures show that the number of registered childminders in England fell from 72,700 in June 2004 to 64,300 in the same month this year – a drop of 11.5 per cent.

When other forms of child care such as creches and nurseries are included, the figure fell by just over 7,000.

Not conclusive, but at least at pointer. One the one hand the extra money available to pay for it should drive up the number willing to offer the service. On the other, the increase in the cost of providing it (that regulation) will reduce the price received and thus the supply. And, as appears to be the case, the nett effect is a reduction in the availability of child care.

Not what you expect from something you\’re subsidising.

Perhaps just a minor case of something that wise businesses have known for a long time. Never even apply for a govt. subsidy for the rules and regs they will impose upon you as the quid pro quo will cost you more than you\’ll ever actually receive from them.

Also perhaps an interesting message to the bureaucrats. Regulation and inspection are not free: they do cost, the major costs falling upon those who are regulated and inspected, in their time. Just because there\’s no cash changing hands doesn\’t mean it\’s not a cost.


9 thoughts on “You Don\’t Say!”

  1. This might just be corporatism at its worst:

    1. Regulations protect incumbents (out of interest, her indoors and I once looked into opening a nursery – it is nigh impossible, as you need to have all the staff and fire exits and everything in place before you even get pre-approval).

    2. Regulations thus reduce the amount of ‘approved’ supply (most of those missing childminders just work unregistered, of course).

    3. Therefore, on the face of it we move to Ronald Reagan’s Stage Three and subsidize it to increase supply again (despite it not actually having fallen).

    4. Those subsidies are then shared between a smaller group of incumbents.

    The point is, nursery care (and to a lesser extent childminders) are subsidised via vouchers.

    Assuming inelastic demand and elastic supply, the value of the subsidies would actually benefit those it is intended to benefit – i.e. working parents. By making supply more inelastic, more of the value of the vouchers accrues to the nurseries/childminders.

  2. We had our demon spawn looked after by our neighbour for an embarrasingly small amount of cash, no public servant was involved…

    I wonder how many of your 8,000 now do the same…

  3. ” it is nigh impossible, as you need to have all the staff and fire exits and everything in place before you even get pre-approval”

    If true, it means it is an arm of Corporatism, whereby only existing companies have any real chance of entering the market.

    By all means have a certification process, but to OUTLAW people from running a nursery is just insane.

  4. Rog, we were sent about four forms and a hundred pages of guidance – you need the nod from ILEA, DfES, OFSTED, Elfin Safety, Fire brigade and a couple of other quangos (whose names escape me) all of whom have their own visits and procedures.

    And yes, you have to have suitable CRB-checked and ‘qualified’ staff on the payroll before you can ask for a preliminary inspection. By their own admission they said the procedure might take 6 months (i.e. in practice, years).

  5. Regulations protect incumbents (out of interest, her indoors and I once looked into opening a nursery – it is nigh impossible, as you need to have all the staff and fire exits and everything in place before you even get pre-approval).

    This is how it works in Russia. If you want to do anything, you have to have all staff on the payroll before you get approval to operate, meaning at least 3 months of expenditure before you can start bringing in revenue. In theory.

    In practice, people just pay a backhander to circumvent the process and buy the necessary approval. I wonder how long it will be before Britain’s over-regulation gives birth to new levels of corruption?

  6. Tim N, sure, but to open a nursery, you’d have to pay backhanders to at least five different quangista, and it would only take one honest one in the chain to refuse (or to dob you in) and you’ve got nowhere.

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