Britain’s broken childcare system is letting down parents who wish to work more, as well as those who would wish to spend more time with their children, a leading think tank has warned. A new report from Policy Exchange, “A Matter of Choice: Giving Parents Back Control Over Childcare”, argues that our current system of childcare support is inflexible and expensive.

Data taken from the Department for Education’s survey of parents showed that 69% of working mothers of children aged 0-4 said they would work fewer hours if they could afford it. Of non-working mothers of children aged 0-4, 54% agreed that they would prefer to go out to work if they found affordable childcare. The system is working for neither those who wish to work more, nor those who wish to work less, the report said.

Backed by a cross-party group of MPs and Peers and leading practitioners in childcare, the report called for reforms that would provide greater choice, freedom and responsibility to families, supporting the full diversity of families, lifestyle choices and working patterns, while providing more support for the most disadvantaged, who receive little from the current system.

In a foreword to the report, former Labour Education Secretary Ruth Kelly said: “If we want to strengthen support for families when costs are highest and incomes are most stretched, the early years are the obvious place to begin – and this proposal does so in a way that recognises that different families will have different preferences in terms of how, and when, they return to work, and that the state should not take sides in what should be deeply personal decisions.

“Children are the future of our society and Policy Exchange’s report highlights the fact that our family policy still leaves much to be desired. I hope that greater awareness of the challenges that so many parents and young children face will strengthen the determination of our politicians to take action.”

Endorsing the report, Liberal Democrat Education Spokesperson Munira Wilson said: “The affordability and availability of childcare remains a challenge for too many families across the country. The current system penalises disadvantaged families, and those in irregular work, above all. This Policy Exchange report is a welcome to contribution to the policy development that urgently needs to be done to make childcare more suitable to today’s diversity of family structure, life choices and working patterns.”

Conservative Education Minister Baroness Barran said: “This Policy Exchange report highlights the complexity, inflexibility and risk inherent in the current childcare system. It tests new approaches which address these points and give more choice back to a broader range of parents about how to raise their children. Of course, more work is needed to understand the full impacts, but I hope it acts as a catalyst for this very important conversation.”

The report finds that the current childcare market acts in a dysfunctional way in which the government centrally and prescriptively sets annual rates for up to 80% of the hours provided in the sector – while tightly controlling ratios. Higher payments for under-2s are used by providers to cross-subsidise below-market payments for 3 and 4 year olds. Many providers also rely on voluntary top-ups, or are forced to charge more for blocks of time outside government-funded hours, to help their businesses break even.

The reforms set out in the report directly address key weaknesses in England’s current arrangements by attaching funding to the child and giving families a flexible, portable budget to spend across a wider range of provision.

For the under 2s, it would provide parents more choice over how and whether to go back to work, and open up a wider range of opportunities, including for families who rely on support from grandparents and other relatives. For those aged 3 or above, where the educational benefits of formal childcare are stronger, it would allow childcare providers to operate more flexibly, charging different rates for different hours or flexing their ratios to bring down their rate, while allowing parents to choose the type and price point of provision that suited them.

The report also proposes a number of regulatory reforms that would help bring down the cost of childcare and make it easier for new childminders and other providers to enter the market, increasing the availability and flexibility of childcare for parents, including Ofsted inspections of childminders to be limited to safeguarding and fraud.