PPIW Report Publication: Childcare Policy Options for Wales

The First Minister asked the Public Policy Institute for Wales (PPIW) for independent advice on the development of options for extending support for childcare in Wales; and, in particular, the potential impact of extending the Welsh Government’s provision of free childcare for three to four year olds.

The PPIW worked with Dr Gillian Paull (Frontier Economics) to model the impact of offering 20 hours of free childcare to three to four year olds, in addition to the existing provision for pre-school children; considering two variants:

  • A universal offer to parents of all three to four year olds; and
  • An offer with a ‘work requirement’ equivalent to that proposed in England (i.e. that the lone parent or both parents in a couple must earn the equivalent of at least 16 hours a week at the new National Living Wage (£7.20 an hour)).

The modelling seeks to estimate the effect that these options would have on:

  • Maternal employment;
  • Changes to family income and consequent impacts on poverty levels; and
  • UK and Welsh Government expenditure.

This work suggests the impacts on employment and income are very small – leading to a less than 1 percentage point change in maternal employment among target families; and, at most, a 2 percentage point reduction in poverty levels among target families.

It also highlights that Welsh Government spending would lead to a reduction in the benefits which families receive (from the childcare element of Universal Credit and Tax Free Childcare), saving the UK Government £20m a year

The impact on child development was not considered as part of this work.

Table 1: The estimated impacts of the options modelled

Welsh Government costs

(assuming 100% take up)

Benefits to UK Government budget

(reduced expenditure on benefit payments)

Impact on poverty levels net of childcare costs

(proportion of target families in poverty)

Impact on maternal employment

(proportion of mothers in target families in work)

Universal £144m £20m 2 percentage point reduction 0.2 percentage point reduction
Work requirement £61m £20m 1 percentage point reduction 0.1 percentage point increase
  1. i) Costs are annual figures and based on provision for 38 weeks a year.
  2. ii) The estimated impact on poverty levels is based on measuring income net of childcare costs. Using the usual measure of poverty (i.e. just looking at income rather than income net of childcare costs), there would be no impact on poverty levels.