Tuesday, 26 November 2013

Scottish Government's White Paper childcare pledge

The White Paper pledge to significantly increase childcare provision is a good thing.  Critics have suggested that there is nothing to stop a Scottish Government implementing such a policy now, under existing powers, and that is true.

It is however also true that if under existing powers the Scottish Government currently wished to raise taxes in order to significantly lower the cost of childcare for parents, there would be something of a negative incentive.

Basically, cost of provision is 100% borne by Scottish taxpayer.  Increased labour market participation would generally benefit Scottish economy but some of the specific advantages  (fewer benefit payments more and increased tax take) would accrue to the Westminster and only a proportion of this would end up back in Scottish Government coffers.  The greater the level of fiscal autonomy the smaller the disincentive.

But this would chiefly be the case in circumstances where Scottish taxes were raised above the UK average in order to fund the policy.  And that's not what we heard form the Scottish Government today.  To genuinely aspire to the Nordic model of childcare cost/labour market participation, tax as a share of GDP would have to rise.  Here are a couple of graphs, indicative rather than exactly comparative, to make this point.

Dave Moxham


  1. Let me try and get this straight [ even if only for myself if not others ].
    Premature to introduce childcare [ and increase female labour market participation ] because costs will be born here and benefits [Tax , NI etc ] will accrue to WM.
    So does this logic apply to any programmes to increase labour market participation here....? What advantage in Scot govt support for inward investment, employment programmes of any kind etc

  2. Different pro Labour Market interventions will have different fiscal effects. Whilst tax and spend is similar across the UK the pros and cons of one programme over another are marginal. But if a Govt wanted to tax more in Scotland to (e.g.) create a Future Jobs Fund there would be clear disincentives to do so. Even under existing arrangements it could be argued that providing (e.g.) free bus passes is a better way for Scotland to 'hold on' to Barnett money than (eg) government paying a Living Wage with a particularly high level of advantage to DWP.

  3. Hey! This is my first visit to your blog! We are a collection of volunteers and starting a new initiative in a community in the
    same niche. Your blog provided us useful information to work on.
    You have done an outstanding job! Franchise opportunities

  4. I am very much pleased with the contents you have mentioned. I wanted to thank you for this great article. I enjoyed every little bit part of it and I will be waiting for the new updates.
    Only Child Syndrome