The Government will hope to get to the general election – probably in November – without too many controversies hitting. But one is brewing and it is in childcare. The shortage of places, a growing issue over recent years, is becoming chronic, and the freeze on fees since before Covid is now cracking, as some childcare providers pull out of a State scheme that provides cash in return for not pushing up costs to parents. When businesses are turning down free money and costs rise for parents you know something is wrong.
Government intervention in the marketplace is never easy and the law of unintended consequences often applies. A new funding programme introduced in 2022 – so-called core funding paid to childcare providers – came with terms and conditions. One was that fees could not be increased (except in limited exceptional cases). But in the meantime costs have soared for providers, and some, including some bigger players, are now leaving the scheme while others close altogether.
In some cases, fees had not increased since 2016 or 2017, they argue, while costs have shot up in the meantime. There is a scramble to hold on to generally low-paid staff many of whom are tempted into higher-paid areas, typically primary education.
This is all bad news for parents. One mother who wrote to The Irish Times was told her creche was withdrawing from the core funding scheme – due to the freeze on fees – and so her costs per child would increase by nearly a quarter, from €1,250 to €1,550.
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The net cost to parents is lower due to a Government subsidy under the National Childcare Scheme, which pays a subsidy per child to lower bills. This means that bills in this case will rise from €998 now to €1,165 per month. In fact the impact is a bit more because the parents are to receive increased payments under the National Childcare Scheme this autumn; had things not changed, the monthly bill would have fallen to €864 per child.
Without subsidies, the affordability problem would be even worse. But the freeze on fees and a blizzard of new regulations and paperwork mean the childcare sector looks a bit like the rental sector
These stories are being repeated in many areas, with increases in some cases of up to 40 per cent in monthly fees. The sector says that 40 per cent or more of providers may consider withdrawing from the core funding scheme. And the squeeze on availability – a feature of recent years, with women often booking in during pregnancy – threatens to get worse.
This is having an impact economically as well as socially. The Labour Force Survey from the Central Statistics Office suggests that childcare is a big barrier for people, especially women, wanting to return to work. Results from the Labour Force Survey indicate that, of those who would like to work but cannot currently seek employment, some 30 per cent quote caring responsibilities as the reason.
Different families are affected in varying ways. Many lower-income areas lack any childcare provision. Meanwhile the lower subsidies paid under the National Childcare Scheme to those with earnings above €60,000 a year means the squeezed middle is hit, with childcare costs often rivalling, or exceeding, the mortgage. The net result, as pointed out in the ICTU pre-budget submission, is that 19 per cent of children aged less than three took part in formal early-years services in 2022, just above half the European Union average of 36 per cent.
It would be churlish not to acknowledge the big increase in Government investment in childcare in recent years. Without subsidies, the affordability problem would be even worse. But the freeze on fees and a blizzard of new regulations and paperwork mean the childcare sector looks a bit like the rental sector, with small players drifting away and the sector increasingly dominated by larger chains. Many of these have made decent profits over the years – notably during Covid. However, the recent exits from the market, the problems with the core funding scheme and the small number of new entrants suggests that for many operators margins are now very tight, or in some cases non-existent.
History is littered with examples of why partnerships between the public and private sectors are difficult. There is a natural suspicion between public servants, who do not want to be accused of wasting public money, and businesspeople, who complain that real business needs are not understood, nor in some cases the huge financial investment they have made over the years. But the problems in childcare are clearly getting worse despite the extra State cash going in. Meanwhile, a wedge is being driven between parents, who feel providers are profiteering, and providers, some of whom are struggling to make ends meet.
There is no free lunch here for the Government – or for parents
A relatively small amount of cash in terms of the overall budget could probably go a long way towards patching this up. And while this cash would be additional permanent spending, it is a better way to use money than throwing it away on another round of universal subsidies to households. It would also lead to a payback by helping parents, particularly women, return to work and pay income tax.
Part of the solution needs to be a recognition that costs for childcare providers are rising – in other words they need to get some of the extra cash to compensate. Consumer prices in Ireland on have gone up by 20 per cent on average since 2019 and it is not realistic to expect a service like childcare to be provided for the same price. If this is not recognised, childcare supply is only going to fall further.
There is no free lunch here for the Government – or for parents. But a little imagination and a bit of cash could stop a growing childcare problem from turning into a worsening crisis over the autumn and winter. The problems will get acute from next month on in particular as the summer holidays end.
Lurking behind this are bigger questions about the sector in the long term: who runs it, what staff earn and who pays the bills. This is part of a wider issue of what social services the State should provide to society and who should pay – the person benefiting, or the taxpayer? Do we, for example, want the kind of childcare model that operates in many northern European countries and if so who would pick up the bill? As the population rises and – most likely – our buoyant tax revenues subside, these questions are among the big political issues for the next few years.