Dáil Éireann Debate, Wednesday - 18 May 2022
151. Deputy Holly Cairns asked the Minister for Children, Equality, Disability, Integration and Youth the definition of reasonable profit as outlined in the Independent Review of the Cost of Providing Quality Childcare Services in Ireland. [25319/22]
Amharc ar fhreagraThe term ‘reasonable profit’ has a particular meaning within European legislation on State Aid, and particularly the conditions under which State Aid rules do not apply whereby investment in considered to be a Service of General Economic Interest. Advice received on this issue points to reasonable profit consisting of the level of return from risk-free investment (swap rates) plus a modest premium. The historically low swap rates that have been in place for many years in the Euro zone suggest that the reasonable profit rate that should apply in order for the Services of General Economic Interest (SGEI) exemption to be effective would therefore also be quite low.
The consideration of a sector-wide reasonable profit rate in the Early Learning and Care (ELC) and School Age Childcare (SAC) sector requires further detailed analysis, including in relation to the structure of the sector and the level of risk attaching to investment, which will vary by service location and service type. An estimation of reasonable profit for ELC/SAC provision in Ireland would be required to consider what the profit might be required to cover; the timeframes required for obtain a return; the drivers of risk; and the costs of capital.
It may also be of interest to the Deputy to be aware that the 'Independent Review of the Cost of Providing Quality Childcare Services in Ireland', published in October 2020 and the 'Analysis of the Rate of Surplus for Early Learning and Care and School-Age Childcare Services in Ireland', published in October 2021, provide relevant information and insight.
The sectoral information on rate of surplus in ELC and SAC in Ireland suggests that, on the whole, there are not excessive profits in the sector. However, there are significant variations across different types of provision. For example, the evidence suggests that ECCE-only services see the highest levels of income in excess of costs compared to other types of provision. The sector average rate of surplus is 4% whereas the characteristics associated with ECCE provision indicate surplus rates of between 14% and 23%.
The collection of information on income and costs is essential for the full understanding of this complex and diverse sector in order to inform the development of policy. This is recommended by an Expert Group in their report, 'Partnership for the Public Good: A New Funding Model For Early Learning and Care and School-Age Childcare'.
This income and cost information and analysis was important in securing significant additional public investment in Budget 2022, specifically the new Core Funding package which amounts to €221 million in full year costs (€173 million of which is new investment).
I am pleased to report that the recent data collection for the Annual Sector Profile, including questions on income and costs, has already been completed by 83% of services and I understand that a further cohort of providers have sought an option to return a completed survey at a later point.
I am encouraged that providers have shown a willingness and openness to work in partnership with the State towards the shared goal of delivering high quality and affordable ELC and SAC for families, for the public good. The high level of participation in the Sector Profile survey bodes well for the future of the sector as we move towards greater public investment and public management.
