Tuesday, 15 April 2014

Kindergarten Logic 5

How much does Alex Salmond actually know about his own flagship childcare policy?
The answer, obviously, should be "Everything. Inside-out".
But I pose the question because the First Minister keeps making a basic error in his defence of it.
He did it again at the weekend when he was interviewed in the wake of the SNP conference.
Let me explain.

Regular readers (who can skip the next bit) will know I've blogged ad nauseam on the "transformational" childcare pledge in the Scottish Government's White Paper on independence.
I pointed out the Government hasn't actually modelled its own policy, which is to nearly double free nursery hours for three- and four-year-olds in the first parliament after a Yes vote.
The initial cost for this is estimated at £700m, rising to perhaps c.£1.2bn in the following parliament, as one- and two-year-olds become entitled to their 1140 hours a year.
The aim is to allow more women to enter employment, which, inter alia, would help raise more taxes to pay for the policy.
Although the Scottish Government published research on the impact of a 6% rise in female workforce participation - it would handily raise the £700m price of phase one of the policy - this is only an "illustrative" figure.
There is nothing to show that the SNP's childcare policy would actually deliver that 6% rise.
It might deliver it, but there is nothing from the Government demonstrating it, or saying how long it would take to achieve.
So the net cost of this policy remains a mystery. Hundreds of millions? Billions? We don't know.
A pity considering how much a billion pounds costs these days.
Perhaps it's not surprising the Scottish Government says the policy remains "in development".
Earlier this month, the Scottish Parliament's Information Centre (Spice) produced its own independent analysis on childcare, which pointed out even more holes in the policy.
This suggested that 6% target may be impossible to hit, as are not enough economically inactive women with children under five in Scotland to benefit from the childcare policy.
The 6% rise implied another 104,000 women in work, but Spice found that in 2011 there were only 64,000 economically inactive with nursery age children, and only 14,000 of them wanted to work.
So Scotland seems at least 40,000 mums short of the number needed to pay even for phase one of the policy.
And as for phase two of the policy, well the Scottish Government hasn't even bothered to cost that.
Spice estimates £900m to £1.5bn in revenue a year, or £1.2bn if you take the midpoint.
And that's before a pound of capital spending has gone on new nursery facilities.

It's an accumulation of awkward data that seemed to get the FM rather miffed when he apppeared on the most recent BBC Scotland's Sunday Politics show.
He kept calling presenter Gary Robertson "Larry" for instance.

The childcare section starts c.8'50"
Asked whether that 104,000 figure is attainable given the Spice report, Salmond says: "As for whether we can find jobs for 100,000 women, can I just point out that in the last year there's 65,000 - in one year - 65,000 more women have become employed, mostly in full-time jobs, in Scotland (my emphasis)."

It sounds a fair argument, and it's one Salmond has made before.
For example, at the start of this clip from Sunday Politics Scotland of 12 January 2014.
Back then, he was asked how the arithmetic would stack up when the average female wage was just £17,000 (given large numbers of female workers are part-time), but the SNP seemed to be basing its calculations on an average salary of £26,000.
Salmond said: "The other point I am making to you is equally important, with evidence from the last year not a crystal ball or equilibrium model but what’s actually happened in the Scottish economy where 60,000 more women are working, incidentally full time, because the vast overwhelming majority of these extra jobs are full time, which show that these changes can take place a in a relatively short period of time and of course as soon as people are working, as everybody watching this programme knows, they start paying tax, everybody knows that (my emphasis)."

The First Minister also said it in the Holyrood Chamber on 23 January 2014, in the context of being asked by Scottish Tory leader Ruth Davidson about female college students.
He said: "We are talking not just about what we will do in the future—which will produce an even greater rise—but about what has happened in the past year. I heard Iain Gray say that many of the jobs are part time, but we know from the statistics that the positions are full time. The figure is 62,000—a 3 per cent rise in the number of women in the workforce (my emphasis)."
But it's not true. Most of the new jobs women are finding in Scotland are part-time, not full-time.
And the ratio of part- to full-time jobs is roughly 2:1.
That means the wages are not yielding much  - if anything  - in income tax or employee NICs, raising more questions about how to pay for the £700m first phase of the childcare policy.

And how do we know this? John Swinney revealed the truth in an overlooked parliamentary answer.
PQ from Labour Education spokeswoman Kezia Dugdale on F/T and P/T new jobs for women
So rather than the "vast overwhelming majority" of the new jobs being found by women in Scotland being full-time, two-thirds of them are part-time.
It's hardly the death knell for the SNP's childcare policy, but it is another troubling sign that behind the frantic spin and the hard sell for the referendum, the basic arithmetic is being neglected. 

Thursday, 3 April 2014

Kindergarten Logic 4

In recent weeks I've written about the childcare proposals at the heart of the SNP's independence White Paper, pointing out various holes in the maths.

For instance, drew attention to a disclaimer buried in a Scottish Government paper analysing increased female participation in the workforce that showed the Scottish Government had based its calculations on wishful thinking.

Although, the White Paper seems to suggest that raising free nursery provision from 600 to 1140 hours a year would deliver a 6% rise in women in work to Swedish levels, raising £700m more in taxes, in fact the figures are just "illustrative". 

There's no evidence the specific childcare policy proposed would lead to a 6% rise in the workforce or generate the £700m pricetag of that policy.

Last month,  published a response to a freedom of information request showing the government hadn't even done any modelling on the impact of its own flagship policy. 

Today brings another development.

The Scottish Parliament's independent information centre (Spice) has just issued a paper on childcare covering the White Paper policy.

It's more subtle than this blog, but its conclusions are worse for the Government.

Not only does it say, like me, that the SNP haven't modelled their own policy, it shows there aren't enough economically inactive women with children in Scotland to hit that magic 6% target.

Reaching Swedish levels of participation implies an extra 104,000 women in work.

But in 2011, there were only 64,000 economically inactive women with dependent children under primary school age, of whom only 14,000 said they would like to work.

So Scotland seems at least 40,000 mums short of the number needed to pay for the policy.

That's not fatal - money can be taken from other areas to pay for childcare. 

But the government hasn't said who the losers would be.

The SNP could also argue that economically inactive women with no children or older children could take up new jobs as childcare workers to lift participation rates.

But you can see the numbers are looking tight.

Even if every single out-of-work mother in Scotland with children under 5 suddenly got a job, you'd still need two-thirds as many women again to decide upon - and qualify for - a career in childcare in order to make the policy self-funding. 

From the executive summary of the Spice analysis
In addition, the long term policy goal of childcare for all 1 to 5 year olds could cost £1.5bn - and that's before a single pound of capital costs to build new nurseries.

Spice is also unable to say how long it would be before extra taxes were generated to pay for this.

However, one clue in the Scottish Government literature suggests it could be more than 20 years.

"This may have implications for the funding of the policy, particularly over the short-term," it says with marked under-statement. 

The Scottish Government's work "does not provide a detailed assessment of the change in employment or wages or any indication of the composition of additional tax revenues," it adds.

For instance,  a rise in the labour supply could end up depressing wages, making it harder for women to enter the workforce.

As Spice says: "For example, given the increased supply of labour, the modelled results would be expected to show downward pressure on real average wages. This could have wider implications for the labour market and on incentives for women to enter the workforce." 

All in all, the "transformational change" touted in the White Paper is astonishingly evidence-lite.