Dáil Éireann Debate, Thursday - 6 October 2022
300. Deputy Réada Cronin asked the Minister for Children, Equality, Disability, Integration and Youth the progress made to date in establishing a definition for reasonable profit within the meaning of the Crowe Report; and if he will make a statement on the matter. [49246/22]
Amharc ar fhreagraThe term ‘reasonable profit’ within the Crowe report had a particular meaning within European legislation on State Aid.
Consideration of profit rates in the Early Learning and Care (ELC) and School Age Childcare (SAC) sector requires further detailed analysis. I am pleased that with the enhanced financial transparency and public management underpinning the new funding model, we are now in a better position than ever before to make progress on this front.
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 into sector level data.
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%.
This analysis was useful for the development of the new funding model, undertaken by an Expert Group and outlined in their report, 'Partnership for the Public Good: A New Funding Model For Early Learning and Care and School-Age Childcare' , published in December 2021. The Expert Group stated that the reports provide a good argument for increased financial transparency to be assured of the position on surplus/profits in the sector.
The Expert Group noted that in designing the funding model, it is important to consider the impact of public funding on a privately delivered sector. They further noted that while it is entirely appropriate that providers earn a fair and reasonable income, it is important to ensure that profit is not the primary motive for providers in this sector. This is particularly important given the scale of public funding in the sector, which will exceed €1 billion in 2023 as recently announced in the budget.
One of the key arguments outlined in the Expert Group report is that, in essence, the State has a right and a duty to ensure that the market serves the public good. For this, my Department will be monitoring emerging trends in the model of delivery, identifying any threats to the public interest, such as profiteering or financialisation, or sustainability issues, in order to take appropriate mitigation measures.
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. As recommended by the Expert Group, there needs to be full visibility and understanding of financial information in the sector in order to better understand the impact and interaction of income, costs, surplus and profit in the sector.
I am pleased therefore that the recent data collection for the 2021/2022 Annual Sector Profile, including questions on income and costs, has been completed by 93% of services. This new and emerging data will allow the Department to rerun income and cost analysis and ascertain the latest available financial position to inform the next policy developments.
Together for Better, the new funding model for Early Learning and Childcare, was launched in September. Over 90%, more than 4,000 providers, have become Partner Services under Core Funding, committing to working in partnership with the State for the public good. The response from providers to become Partner Services in delivering Core Funding has been hugely encouraging and positive.
The investment requires providers to freeze their fees at last year's rates; it requires new pay rates to be in force; and it requires a significant degree of operational and financial transparency over how services operate. This assures Government and the public that public money is being used for its intended purpose - high quality, affordable, and accessible Early Learning and Childcare. It also puts in place a solid foundation and brings further confidence to the system to allow for additional increases in investment. This is already happening, with a landmark investment of €1.025 billion in the ELC and SAC sector in 2023.
Further interrogation of the new Core Funding application and income and cost data is required in order to most effectively design developments in Year 2 of Core Funding. Developments may focus on promoting further capacity expansion, investing more in the base rate, or to taking more targeted initiatives to invest in specific parts of the sector.
