The high cost of childcare

As the economic gloom lifts and jobs begin to flow, a critical examination of factors that prevent parents from taking up work, or locks them into long-term unemployment, is urgently needed. Ireland’s record, in terms of consistent long-term unemployment, has been particularly poor and measures to address that situation would benefit all of society. A major inhibiting factor has been the high cost of childcare.

Minister for Children Frances Fitzgerald has agreed to examine recommendations for a restructuring of childcare subsidies prepared for the Donegal County Childcare Committee. She should proceed with caution. The stated objective of the consultancy group Indecon, which prepared the report, was to assist low paid or unemployed parents. The measures suggested may, however, impact negatively on existing community and not-for-profit childcare centres and their clients, to the advantage of privately-run services. To avoid that, additional State spending would be required.

Child minding costs have become a nightmare for most young families. During the Celtic Tiger years, the cost of childcare rose more rapidly than house prices, forcing many parents to stay at home. A free childcare year, crèche subsidies and tax incentives were introduced in response to a worsening situation. But while costs fell back, they remain today – after Switzerland – the highest in the developed world when tax breaks and childcare benefits are taken into account.

The report produced for the Donegal committee set limited objectives because of cost considerations. It suggested that the present Child Care Services scheme, which is confined to community and not-for-profit centres, should be extended to private companies. That would allow for greater parental choice. But it would also result in a reduction of benefits for existing users. In addition, a tax incentive scheme for low-income families was advocated, as was a direct payment related to childcare costs.

Such changes would provide assistance for some low-income families and for single, unemployed parents. By concentrating limited Exchequer funding on households with the greatest need, a long-established cycle of unemployment and deprivation could be broken. That would represent a major social achievement.

But there may be unintended consequences. The cost of childcare, already high, could increase still further, while the State may find itself effectively subsidising low-paid jobs. It is a complex issue. Persistent problems within the private childcare system in terms of cost, quality of service, tax compliance and professional oversight cannot be ignored. Resolving those issues would allow the introduction of a second free childcare year and dramatically reduce costs for all parents.