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Thursday, March 13, 2014

SNP Childcare Promises

    My new ThinkScotland article - another in Brian's series on the SNP "White Paper". Please put any comments there:

SNP child care costings shown as pure fantasy

by Neil Craig

THE BIG money promise the SNP made in its White Paper was that if the Scots voted for separation the SNP would immediately provide:
  • Thirty hours of childcare per week in term time for all three and four-year-olds, as well as vulnerable two-year-olds.
As I mentioned in a previous ThinkScotland article  this means 150,000 kids or 200,000 hours so at least another £1 billion in extra taxes. That's 3p on income tax or equivalent the SNP is promising.
This promise was always something like the "bedroom tax"  – which the SNP already had the power legislate over if it thought doing something more desirable than using the issue as a totem, which obviously requires not doing anything because if it fixed the problem it couldn't denounce it).

As a promise it is very carefully targeted. Child carer costs are a dreadful additional expense for parents of young children and a serious disincentive to those who don't yet have them. The promise to wave them away with a little economic magic if only people vote for separation was likely to be greeted with relief by a particularly desperate demographic group. Which is, of course, why the SNP, so cynically, made the promise.

The particular economic magic it promised was that its figures showed that if the state simply took on the job of paying for child carer costs it promised enough mothers would join the workforce to bring in matching extra taxes to pay for it all. But only with independence – because otherwise the extra tax money would go to Westminster, and Westminster, being the wicked uncles the SNP say, would never consent to return any of it (even though under the Barnett formula the wicked uncles have always given Alex more per capita than they reserve for the English).

The logic all depends on the SNP being able to say, with certainty, that the tax rise would match the cost rise. Fortunately for the SNP, as we have repeatedly seen, it has no difficulty saying, with certainty, things which simply aren't true.

Scottishpol, the personal blog of the Sunday Herald political editor Tom Gordon  takes up the story.
"I've received a response to a Freedom of Information request I submitted to the Scottish Government asking for "the full results of any modelling which has been done" on the specific childcare proposals in the White Paper.

It turns out the Scottish Government didn't do ANY modelling of its own flagship policy.

"It modelled the impact of more women in the workforce...  "rather than directly modelling the impact of improved childcare itself".

To be fair, better childcare might bring lots more women into the workforce, and might raise lots more tax, but to advance a totemic policy on the basis of crossed fingers rather than rigorous analysis – and to give the impression it would be self-funding – seems pretty extraordinary to me.

If that's the standard for White Paper policies, folk may wonder what else is wishful thinking."

So the SNP made it up. Its "estimate" of the extra money just came out of thin air.

It is actually worse than that because the current cost of child carers is not something set in stone about which the SNP can do nothing. It is the direct and deliberate cost of government policy.

Here is a list of childcare costs around the OECD countries, calibrated in % terms of average wages which I think is a good comparison because, with little technology required, that really should be what makes up childcare costs.

Switzerland 77.7
UK  40.9
Ireland 45.2
USA 38.1
New Zealand 28.6
Canada 29.5
Japan 28.1
Australia 22.5
Slovenia 19.9
OECD, all 18.
Austria 16.8
Germany 14.1
Israel 18.3
Norway 10.8
France 16.5
Netherlands 13.2
Denmark 11.2
Korea  8.5
Finland 12.2
Czech Republic 10.6
Luxembourg 8.7
Iceland  7.9
Portugal 7.7
Poland 7.1
Spain 8.2
Belgium 5.8
Sweden 7.1
Hungary 6.2
Slovak Republic 7.4
Estonia  6.6
Greece  4.9

That is what I call a wide disparity. Note that Sweden, Belgium, Iceland, Luxembourg and Finland are all countries as wealthy as us or slightly more and all countries with good welfare systems so it is not credible that they are keeping costs down by dropping standards – even if the state were not to notice the parents would.

Note also that all of the least expensive 13 except Iceland are EU members so, for once, the EU regulatory regime cannot be to blame.

The basic rule here is that if something is being done abroad at a certain price it is possible to do it at that price here, and if it isn't being done cheaper here it must, other things being equal, be that our government is more restrictive than abroad's. This applies with costs of nuclear plants, housing, building projects, tunnelling. It must also apply to childcare.

The cost of the last 13 averages 7.7% of average income. With Britain at 40.9%, that must mean the level of state parasitism is 81% of the total cost.

Obviously not only is this cruel to parents it produces a strong discouragement to the birth of children, particularly among the middle class, who are neither rich enough to afford it, nor poor enough to be due it for free. It is difficult to think of something more likely to, over generations, destroy our nation. And  keeping a significant proportion of parents out of the workforce has major economic effects.

Note that Estonia, with virtually the lowest costs (6.6%), is also a deeply libertarian state (largely because after decades of Soviet rule the people are unimpressed with the promises of statists). I do not seek separation from the rest of Britain but if we were to be governed by politicians like Estonia's I would not fear the outcome. Unfortunately it is difficult to conceive of politicians less akin to the entrepreneurial, libertarian free market Estonians than the current Holyrood Numptocracy.

How to solve it:

Rather than spend a lot of time fighting over each regulation and slowly hacking away at the bureaucracy, why not simply introduce a new class of child care? Say that anybody is allowed to set up as a "Childminder" (as opposed to Child carer) so long as all their advertising includes "not government regulated" and that such childminders are allowed to include any sort of liability waiver. I assume liability law is why the US costs are almost as high as Britain's. Any parents are free to choose.

Current law on everybody includes the need for public liability insurance and that would remain and might well become the basis of a free market, just as France avoids most of our housing regulation by requiring builder's insurance on all new housing.

Note also that in Scotland, almost all regulatory powers are held by Holyrood. Thus this reform could be carried out here without any interference from either Westminster or Brussels.

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