Will new €221m childcare scheme bring down costs for parents?

The Government is preparing to push ahead with a €221 million plan to shake-up childcare amid warnings that it will close creches and put providers under pressure. Ministers have put improvements in childcare at the top of their list of political priorities — but how will it work, and what chances of success has it got?

What’s all this about €221 million?

The money was allocated in last year’s budget as part of a new funding stream called “core funding”. Nothing has actually been paid out yet — the sector is currently being supported through subsidies paid out through the National Childcare Scheme (NCS) and Early Childhood Care and Education (ECCE), as well as transition payments designed to bridge the gap between the new core funding and the weighty Covid-era payments to keep creches open during the pandemic.

So is this going to bring down fees for parents?

In a roundabout way, yes. Or at least that is the aim. In order to prevent higher fees swallowing up higher subsidies, and to improve pay and conditions (which are low) among workers in the sector, it came up with core funding. This will be paid in order to increase wages, but it can only be accessed by childcare operators who agree to cap their fees at the level of September 2021. Fees will be frozen for a year under the new contract, with the expectation that they will be frozen again in subsequent annual core funding contracts.

Is it a done deal?

Almost, but not quite. Negotiations between employers’ groups and trade unions on a new pay framework are nearly complete, and that will need to be done before the new scheme is rolled out. Nobody has actually signed up for it yet — contracts will only be issued from August. About 94 per cent of operators have signed up to an interim freeze to access bridging funding, and more than 80 per cent are engaged in arrangements to increase financial transparency, which leads the department to believe demand will be high.

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How does this get us to cheaper childcare?

The aim is that once labour arrangements are improved through an Employment Regulation Order, which is being thrashed out by a Joint Labour Committee, and fees are effectively capped via large numbers signing up for core funding — and all the conditions it comes with — the way will be clear to increase subsidies in the budget on the basis that this will then drive down fees for parents.

How much fees are going to come down remains to be seen. That will be a function of two things: firstly, if this system works, and secondly what the Government allots to childcare in the upcoming budget. All the indications are that this will be substantial, but there is very little detail on precisely how much and there is unlikely to be until much closer to budget day itself. However, given the amount of political capital invested in this issue already, the Coalition has to deliver or it will disappoint.

What are the risks?

Some in the childcare lobby say the new approach will lead to hundreds of providers closing their doors. The Federation of Early Childhood Providers has been particularly vocal on this, saying that 264 will not be able to open next year. They say this will be particularly acute for services that only offer care under the ECCE scheme. A protest is planned for Wednesday outside the Dáil. They want increases to ECCE payments and for more discussions on the fee freeze, due to inflation, and are threatening a three-day closure of their members’ services in protest in September and October.

Does this mean the scheme won’t go ahead?

There is no indication that the Government will be swayed on this. The department believes there is no evidence that core funding will make preschool services unsustainable, and has been unmoved after analysing more data provided by representative organisations. It has put in place a sustainability fund to help any providers who run into difficulties, but it believes an overwhelming majority will see substantial increases in funding, and that less than 1 per cent will see no change in the level of State funding given to them. They believe many services have a significant financial cushion available to them from the extensive Covid-related funding made available. Its view is that despite closures of many services in recent years, capacity is increasing annually.

So, notwithstanding warnings and planned protests, it looks like full steam ahead.