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Leading article: Child poverty needs more creative thinking

There is an alternative to throwing cash at the problem: affordable childcare

Admirable as the sentiment may be, the target to all but eliminate child poverty by 2020 was never likely to be conclusively met. Now, after the worst financial crisis since the 1930s and with the lingering threat of worse to come, even a statistical triumph is looking firmly out of reach.

Doing nothing is certainly not an option. According to the latest research from Unicef, children were largely shielded from the immediate effects of the financial crisis, but as spending cuts start to bite the number of youngsters living in poverty will be back on the rise. Given the constraints on the public finances, the verdict is – superficially at least – a bleak one. But there is an alternative to throwing money at the problem. And that means addressing the vexed question of childcare.

In fact, as Unicef acknowledges, it is difficult to measure child poverty at all. Supporters of Gordon Brown, for example, point to statistics showing that the number of children below the poverty line was the lowest for 25 years by Labour's final year in government. His critics, however, argue that any poverty line is both arbitrary and relative, and that a benefit tweak can lift a family income above it without any discernible impact on their standard of living.

The implicit assumption in all this is that the best way to address child poverty is via parental income. But while it may be obvious that a child will be disadvantaged if their family is less well off, it does not follow that giving the parents more money – through either benefits payments or tax credits – will necessarily help the child. Indeed, evidence from elsewhere in Europe suggests there is more bang for the state's buck if funding goes into providing services directly to children themselves.

The need for a different approach is gaining ground. No less a figure than Alan Milburn – the former Labour Health Secretary who is now advising the Government on social mobility – suggested in The Independent this month that the Coalition should make further cuts in child benefit to fund better services for children. He is right. And it is in the provision of universal, affordable care for pre-school-age children that the Government can make the biggest difference of all: for the individual child, their family, and the wider economy.

As things now stand, childcare is far from affordable. It costs an average of £200 per week (and much more in pricier areas) and swallows more than a quarter of the average family income. No wonder, then, that so many women simply cannot afford to return to work. Indeed, the Resolution Foundation estimates as many as a million people are "missing" from the labour market, in part because of the cost of childcare.

The situation is bad for all concerned. Bad for the children missing out on vital early education; bad for the households going without an extra wage; bad for the women losing a slug of their earning potential for every year out of the workforce; and bad for the economy in wasted potential and a lower tax take.

It is also costing the state £7bn every year. And with childcare costs ever rising, even that is not enough. In fairness, Nick Clegg will today announce plans to extend free childcare and make the system more flexible. But while his measures are, of course, welcome, they are but tinkering around the edges. In the current climate, it is not realistic to expect the state to pick up the tab, as in oft-quoted Scandinavian examples. But what money there is must be more cleverly spent, and there is no shortage of ideas, such as the Social Market Foundation proposal for working parents to pay the Government back over time directly from their pay cheques.

The economic circumstances may be tricky, but the political wind is a fair one: all three parties agree childcare must be a priority. All that remains is to be a bit creative.