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The Childcare Announcement That Never Was

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Uncertainty continues to cloud the government's plans on childcare. Latest rumours suggest they may now delay any big announcement until after the budget. If government sources are to be believed, the most recent plans have been scuppered by a tag team of HMT officials and senior Lib Dems. The Treasury is reportedly worried that childcare costs could soar if the government went ahead with its plan for £2,000 childcare tax breaks - pumping new money into the system without getting a grip on prices - making a bad situation worse. Meanwhile, Nick Clegg and his allies are known to fear that an approach based on tax relief would funnel support to high income families. That would send a very odd message about priorities when low and middle income households have already suffered badly from childcare cuts.

If this is all true, then the only announcement we can now expect this week is about new plans to relax childcare ratios. Aside from being a valuable lesson in how not to do government comms, this would all leave us in a pretty depressing place: despite childcare moving up the political agenda, and after many weeks of warm words about ambitions from all three parties, we'd still be no closer to hearing bold and substantive plans to reduce childcare costs. This is a tragicomedy of some significance. Few areas of public policy are as economically and socially important as childcare and the last thing parents need when making major decisions about their families and careers is chronic uncertainty. It's also an area in which we know without doubt that public investment yields big returns - every year of delay means another wasted opportunity.

So why is this all proving so difficult? The obvious answer is that there's no money. As the government is finding, childcare is not an area of policy where easy improvements can be made at no extra cost; hence the possible need for a post-budget announcement. But the problem lies not only in the challenge of policy development in a time of limited cash, but also in party politics. For both the coalition and Labour, old policy loyalties are making it hard to find an answer that would really speak to parents' concerns.

In the coalition's case, the obstacle is the Conservatives' instinctive desire to provide new support in the form of tax relief. Once ministers have freed themselves from their current communications shambles, they'll need to seriously rethink this basic approach. So far, by chasing down the attractive politics of childcare tax relief, they've ended up tying themselves in knots. As I've written on these pages, there are three main ways of doing tax relief and all three suffer from very serious design flaws. By starting with a regressive policy and then trying to make it progressive, officials have ended up creating a series of monsters that have had to be put down. Nor is it clear that tax relief is the right political answer in the long run. By deciding not to extend and improve today's existing childcare offer for preschool children, the coalition - and the Conservatives in particular - are passing up the chance to create a lasting public service institution with a genuine Tory heritage, a not insignificant strategic opportunity.

As for Labour, right now, they should be breathing a sigh of relief. Despite knowing since December that the government was planning a big new year childcare move, they still haven't left the starting blocks. The coalition's muddles have let them off lightly, keeping this important ground unoccupied for now. So why can't Labour give a clearer sense of their thinking? Like the Tories, their struggle also owes something to old policy loyalties. While their natural instinct would be to simply increase the number of free hours for two, three and four year olds, any simple move on this front also needs to be backed by reform. First, there is growing evidence that today's offer is underfunded, undermining the trust of parents, some of whom report having to pay top-up fees for hours that are supposedly free. This suggests that the system might well require extra cash just to keep things afloat - not the kind of money any politician likes to spend. Second, there are genuine problems of flexibility, particularly for parents working atypical hours or requiring small periods of childcare at a time.

For now, let's hope the government has learned the art of expectations management and is preparing a major new childcare announcement for next week. If not, 2013 has started just as 2012 ended, with the valuable political territory of childcare costs still eerily unclaimed.