Dáil Éireann Debate, Thursday - 29 February 2024
122. Deputy Brendan Griffin asked the Minister for Children, Equality, Disability, Integration and Youth what discussions he has had with the Department of Finance regarding how changes to taxation could reduce the cost of childcare for families; and if he will make a statement on the matter. [9729/24]
View answerTax credits/ deductions have previously been considered in the context of work by my Department to reduce the cost of early learning and childcare to parents.
Research by an Inter-Departmental Group back in 2016 showed that supply-side measures (such as subsidies paid directly to providers to reduce fees to parents), rather than demand-side measures (such as tax credits to parents), represented the most effective use of Exchequer investment. This conclusion was based on international experience and on the ability to leverage quality and control fees for parents through supply-side measures.
“Demand side measures” (i.e. funding directly to parents to reduce their fees, potentially including taxation based measures such as tax credits/deductions) and “supply side measures” (i.e. funding directly to providers to assist in the meeting the cost of provision and/or to reduce parents fees) were also explored in the context of the development of National Childcare Scheme (NCS).
The 2016 policy paper, which informed the subsequent development of the NCS, concluded that supply-side measures offer the State greater “steering capacity? in terms of ensuring equity of access and driving quality in early learning and childcare service. This is because a well-designed supply-side measures offers the State several policy levers (e.g. subsidy levels linked to quality, conditions for provider participation, regulation of co-payments etc.) through which policy objectives can be pursued.
More recently, the independent Expert Group convened to develop a new funding model for early learning and childcare considered tax deductions/credits as part of their work. In their 2021 report, ‘Partnership for the Public Good’, the Expert Group concluded that ‘there are downsides to channelling any of the promised additional investment into tax deductions/credits as a purely demand-side subsidy. They cannot be used to leverage quality in the same way that payments directly to providers can. It is clear from our Terms of Reference that the new funding model should operate with the NCS and the ECCE programme. To recommend further demand-led funding, like tax credits, would increase the scale of demand-side funding of the sector and would not help to guide the sector towards a more publicly managed service, where policy levers can be used to support quality, affordability, availability, access, and sustainability. Additionally, lower-income families would not benefit as much from tax deductions/credits as those with higher incomes. When considered against our Guiding Principles, we conclude that the development and implementation of a new supply-side funding stream is needed to complement the NCS and the ECCE programme”.
Together for Better, the new funding model for early learning and childcare was launched in September 2022. This funding model, brings together the Early Childhood Care and Education (ECCE programme), including the Access and Inclusion Model (AIM), the NCS, the new supply-side funding stream - Core Funding - and the Equal Participation Model, the latter of which will roll out later this year.
