Childcare Services

65. Deputy Edward Timmins asked the Minister for Children, Disability and Equality in the targeted plans to reduce childcare costs for parents, whether there are plans in place to review the Core funding programme to ensure that funding reflects the increasing costs faced by childcare providers and if consideration will be given to increasing funding and, where necessary, allowing providers greater flexibility to adjust fees to ensure the continued financial viability and sustainability of services. [65960/26]

I wish to raise the concerns of some service providers as to whether there are plans to review the core funding programme to ensure that funding reflects the increasing costs faced by childcare providers and if consideration will be given to increasing funding and, where necessary, allowing providers greater flexibility to adjust fees to ensure the continued financial viability and sustainability of services.

I thank the Deputy for the question on this important matter. Since core funding was introduced in 2022, it has been incrementally increased year on year through funding secured in the annual budget cycle. When first introduced in 2022, core funding had an annual allocation of €259 million, of which €210.8 million was entirely new funding for the sector. That annual allocation has increased each year and now, in the scheme's fifth year, is worth over €482 million. That is an increase of over 86% in core funding over four years, bringing the total to €1.7 billion since the scheme began - an investment by the State of €1.7 billion. This unprecedented increase in year 5 of the scheme includes €21 million in funding dedicated to support partner services in adhering to the core funding fee management conditions from September 2026. The annual budgetary increases to core funding have ensured that the scheme remains responsive, balancing the needs of providers while seeking to meet a range of other objectives. Core funding has been developed using the various components associated with the cost of delivery of service provision, such as staff pay and conditions, administrative staff and time, and non-staff overhead costs. The base rate calculation also accounts for the increases to the cost of delivering services encountered by providers. These components have been factored into the calculation of the budget for core funding since the scheme began in 2022. The core funding base rate has increased year on year since the inception of core funding, with a 20% increase in hourly rates between years 1 and 5 of the scheme. Accordingly, this has ensured that the scheme has kept pace with inflation and, thus, has reflected the dynamic costs profile inherent to the sector over that period. In particular, the base rate was enhanced this month to support all providers to keep their fees more affordable for families, through the core funding fee freeze and maximum fee caps, in the face of rising cost pressures. The Department will explore further developments to the allocation model as part of the 2027 budgetary process.

I thank the Minister but I want to raise the concern among providers about the fee arrangements under the core funding programme and the disparity between long-established childcare providers and numerous service providers entering the scheme. I welcome what the Minister has outlined - the continuous improvement in funding from €259 million when the programme started in 2022 to an increase of over €480 million from September 2026 - but the current fee arrangements have created unintended inequality between service providers. Service providers that have been involved in the core funding programme since its introduction have had their fees tied to a rate being charged in September 2021, while new service providers are able to establish their fees based on current operating conditions, subject to applicable fee caps, which puts established childcare providers at a disadvantage.

I want to be clear that I am absolutely committed to continuing to engage with the sector and all concerned to continue to develop the scheme in order that it can support providers to deliver high-quality early learning and childcare to children that is sustainable. I think that is the rub of the Deputy's question - sustainability. To address concerns surrounding service sustainability, targeted measures including a flat rate for sessional-only services and a minimum core funding allocation were introduced in year 2 of the scheme. These were enhanced in year 4. The Department also ran a fee increase assessment process during programme year 3 of core funding, whereby partner services charging fees below the county average were eligible to apply to be assessed for a fee increase. I have made the decision to launch a revised version of this process for the upcoming programme year, the sustainability review process. That is exactly what the Deputy has asked, in terms of those who are having challenges around sustainability. I have made the decision to launch that sustainability review process. The eligibility criteria for the review process have been refined to target vulnerable services where fees have been frozen at low levels since at least 2021. Without such a review, there is a risk that these providers will be unable to continue operating, which would reduce the number of places for children available in the sector. That review is exactly as the Deputy asked, namely to support providers.

I am happy to see this is progressing. Several providers involved in core funding since 2021 have contacted me and they have experienced a considerable increase in their overheads. I would also like to point out the fee payment thresholds table. Can I ask that County Wicklow be aligned with Dublin? At the moment it is in a mid-east bracket, and strangely for some of the mid-east brackets the upper limit on the threshold is lower than for some of the midlands. There seems to be an anomaly there. Another anomaly, which is slightly related, is that if a child moves from senior infants into first class they end up using a facility one hour less per day. That parent contacted me to say they are being charged €93 extra per month. That is because the childcare provider no longer receives the subsidy for that one hour per day. Yet the parent, who is now putting their child in for one hour less per day, ends up being charged the higher fee. These kinds of anomalies need to be looked at.

I reiterate that there is unprecedented investment by the State in this sector. I think €1.7 billion speaks to the determination of the State to support early learning and childcare provision. That is in terms of supporting providers, the workforce and parents. We are moving into budget 2027 where there are negotiations, which I imagine will be ongoing to the eleventh hour, to see how we can advance in each of those areas. It is unprecedented in terms of this sector to speak even at this point in terms of €1.7 billion. On the issues the Deputy raised around sustainability, that sustainability review is now open to providers to engage. In terms of the specific issues he raised, there are differences between early learning and childcare provision and school age childcare provision. Notwithstanding that, the State is committed to continue investing in the early learning and childcare sector.