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Ibec concerned as inflationary pressures hit childcare providers

While core funding from Government has allowed childcare providers to cap costs to parents, increasing inflationary pressures may cause some to go fully private so they can increase their fees

Years of state underinvestment in childcare are finally being addressed but parents still face issues with accessibility while the sector struggles with rising costs. “Childcare forms the bedrock of society as it allows parents to undertake working responsibilities and provides for better learning outcomes for children,” says Darragh Whelan, director of Childhood Services Ireland, the Ibec trade association representing childcare providers across the country.

“The quality of childcare in Ireland is excellent if you can get it,” he adds. “It is second to none.”

Affordability has been a problem for many years, however. Whelan points out that open market providers traditionally charged what they wanted, and parents paid what they could afford. “Credit where it’s due. The Government has been doing a lot but there is more to do.”

Significant progress was made in last year’s budget when a package worth €403 million almost doubled the State’s investment in childcare. This was aimed at reducing the cost of childcare by about 25 per cent for parents as well as bringing much needed stability to fees.


According to Whelan, the Government has been clever in the way it has used this money. “They have increased core funding to childcare providers in return for them capping their fees. Core funding contributes to costs including staff wages, administrative costs, operational costs and other non-staff overheads. The universal subsidy was also increased significantly. It was 50 cent per hour up to a maximum of 45 hours per child per week. That was almost tripled to €1.40 in January. The Government pays the money direct to the providers to reduce the cost burden on parents.”

So far, so good, but problems are looming. “The system will only work if childcare providers can afford to remain in core funding in the current inflationary environment,” Whelan points out. “Core funding is fixed at the moment as are fees. If the costs continue to increase many providers will have to make tough decisions on whether core funding is right for them or if they should go fully private if it means they can pass on higher costs to parents. That would be catastrophic for many parents.”

Pay rates present a significant issue. A joint labour committee was established last year to set pay rates for the sector. It made two employment regulation orders which saw significant pay rises for workers in the sector and negotiations are currently under way for another pay round. However, any significant increase would put further pressure on providers who are considering going fully private.

There are a number of solutions to the issue. The first and most straightforward is a substantial increase in core funding to cover rising wage and other costs. The second would be a lower increase in core funding but a mechanism to allow at least some of the additional costs to be passed on.

Whelan notes that with fees fixed at 2021 levels existing childcare providers are left in a situation where a new provider opening next door can set their fees at a far higher level and use that additional financial muscle to poach their staff.

Meanwhile, there is an accessibility crisis to be dealt with. “Lots of towns and villages have waiting lists of 24 months for childcare and it’s even longer in Dublin and Cork. Even if you call a childcare provider on the day you become pregnant you will be waiting until the child is well over a year old before you get a place. The only logical solution is to put the child on the list long before it’s conceived.”

It is therefore crucial that existing providers be incentivised and supported to remain open at the same time as new operators are encouraged to come into the system.

There are also issues in the planning system where new childcare facilities are not being provided where they are required. “Developers often provide a space for a facility that is too small to be viable and later seek change of use to residential for it. Joined-up thinking is needed to provide services of the correct scale and government must clamp down on the redesignation of childcare services units.”

Retention of staff is another pressing issue. “Wage increases are not the only answer,” Whelan points out. “The requirement to have a level-five qualification was a good thing but it closed the sector to a lot of people. The sector is relying on overseas talent and childcare needs to be taken off the ineligible list for work permits. There is also a need to invest in training and development and to give people an opportunity to work during the day and study at night or at weekends to provide an attractive route into the sector. We need to improve wages as well, of course.”