Simulating employment and fiscal effects of public investment in high-quality universal childcare in the UK

International Journal of Child Care and Education Policy

Table 5 Fiscal effects of different scenarios of universal childcare provision (2018)

	Scenario 1	Scenario 2	Scenario 3	Scenario 4
Parameters
Average take-up rate	71%	71%	85%	85%
Pay level	Current	Teacher	Current	Teacher
Costing (£ million)
Gross annual cost	26,574	40,222	32,555	49,375
(in % of GDP)	1.2%	1.9%	1.5%	2.3%
Direct tax revenue	7911	10,506	9819	13,916
Indirect tax revenue	2677	3518	3518	4998
Other tax revenue	651	1770	797	2172
Lower spending on cash benefits	3536	4222	4646	5899
Current ECEC subsidies	4461	4461	4461	4461
Net funding gap	7339	15,745	9314	17,929
(in % of GDP)	0.3%	0.7%	0.4%	0.8%
% self-funding	72%	61%	71%	64%

Source: own calculations using UKMOD microsimulation tool, ONS (2020) and OECD (2020). ‘Teacher’ pay levels signifies the pay scale of primary school teachers of equivalent qualification. ‘Current’ pay levels reflect wage rates in current commercial facilities for equivalent qualification. Current ECEC subsidies include free childcare entitlement for eligible 2-to-4 year-olds and tax relief on childcare expenses but excludes spending on tax credits as part of the means-tested benefits since these are simulated in UKMOD (part of ‘lower spending on cash benefits’)