Childcare and devolution policies show the Conservatives to be down but not out

16 March 2023

By Charlotte Alldritt

5 minute read

It was billed as the budget for “long term, sustainable, healthy growth.” In the end, it felt a pretty laboured exercise; the Chancellor getting bogged down by his four ‘E’s’ – Enterprise, Education, Employment, and Everywhere – and a list of places to be liberated from potholes as long as the M1. At times it was hard to discern how all of this would turn around the UK economy, which the Chancellor admitted was still likely to contract this year. But there were some solid proposals that stand to support women in the labour market and fire up the growth of two of our biggest city regions. It should also rattle Labour to get its own act together on these two policy areas.

Clearest of the Chancellor’s big ticket items was childcare, on which the Centre for Progressive Policy has long campaigned and about which I wrote last week. Whilst we’ll have to wait for many of the measures to kick in, there were some real policy wins in the Chancellor’s announcement: ensuring financial support starts when parental leave ends; increasing the funded hourly rate for providers who are struggling to meet the rising costs of staffing, energy and other overheads; and moving towards universal wraparound care for school-age children. The OBR estimates the extension of the 30 hours entitlement will have the biggest impact on increasing economic output of any policy in this Budget, and supports recent CPP analysis demonstrating that the fiscal and economic return far outweighs the public cost.

While the devil is always in the detail, the scale and ambition signalled by this £4-5bn announcement is huge, piling on pressure for Labour to flesh out its hitherto broadly defined offer by committing serious investment. Labour have talked big until now, but there has been a question mark around what the party deemed to be affordable and therefore what, in practice, it might deliver in government. The Conservatives have essentially blown apart this particular fiscal debate, and – as CPP has long argued for - redefined childcare as a critical piece of economic infrastructure. It stops well short of accounting for such spending in the same way it does capital investment, but childcare is now core economic policy, not a marginal – read inferior ‘women’s issue’ – pseudo public service. Labour might claim that the whole system needs to be redesigned, but Jeremy Hunt’s announcement marks a bold, permanent change in state support for working parents. If only the Conservatives’ timetable could be sped up, so much the better.

The other Budget bonanza came with the announcement of extended devolution of powers and financial flexibility to Greater Manchester and West Midlands combined authorities.

For all the various iterations of city deals, devolution deals, the establishment of metro mayors and the promise of levelling up, the UK has remained the most centralised political economy in the developed world. Local government has been hollowed out by cuts and shackled by a debilitating and degrading ‘begging bowl’ culture of funding. Fragmented, tightly ringfenced funding streams undermine leaders’ ability to invest strategically, and a one-year finance settlement announced just weeks before the start of the financial year makes even short to medium term planning difficult. Hence the longstanding call, including when I led the City Growth Commission in 2014, for multi-year, departmental-style pooled budgets.

Greater Manchester and the West Midlands are now to get this as part of their groundbreaking trailblazer deals. This measure alone, likely to be overlooked by most of the post-Budget commentary, could be the biggest single lever the government has to foster regional growth. Coupled with another overlooked announcement about the establishment of regional select committees, there is now a route to transform the constitutional underpinnings of the English state, to elevate the democratic status of mayors in their areas and in the national policy making arena, and to put the economy on a fairer, more sustainable footing.

Labour has skirted around the question of mayors until recently. The Gordon Brown review seems to have cemented their position more clearly, emboldening Keir Starmer to speak with more enthusiasm for mayors (even Andy Burnham!) and Lisa Nandy to do similarly. Now, in this game of devolution one upmanship, Labour will need to play a stronger hand.

Both parties want to drive growth, the question is how? Labour must present an ambitious, credible and compelling policy package that builds on Keir’s five missions for a better Britain. All within tightening departmental spending limits from 2025. This Conservative government, for all Jeremy Hunt’s lack of rhetorical flourish, haven’t given up yet.