SpAd: How about subsidised childcare for hard-working families?
GM: Great! But we have to look tough at the same time.
SpAd: We'll introduce tough new regulations to stop paedophiles from becoming childminders, because as we all know, there are zillions of paedophiles out there. It will support our "tough on crime" image, as well.
GM: What a winner!
Mark Wadsworth has blogged previously about how this is a sham, but today Timmy's onto an unexpected belter here:
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.
Still think those tax credits are definitely a good idea?
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