Budget 2027 and childcare: here's which families benefit most and who is losing out

LAST UPDATE | 1 hr ago

“THIS WILL SAVE parents €2,220 euro per year,” Jack Chambers, the public expenditure minister, claimed this afternoon, as he announced a new lower cap on childcare costs “for children up to senior infants”.

Will it really?

Chambers was outlining the annualised saving from a new €550 per month cap on childcare fees, down 25% from a current monthly cap of €735.

The idea that there is a monthly cap on childcare fees of €735 per child will have come as a surprise to many parents who are seeing quite a bit more than that leave their bank account every month.

In fact, the figure Chambers was citing was based on a 45-hour week. So families paying for childcare from 8am to 6pm are currently paying more, and will continue to pay more than €550 when the new cap kicks in, in almost a year’s time.

As for “children up to senior infants”, kids who are already in primary school are obviously not in childcare for 45 hours a week. As such those families will not be saving over €2,000 per year per child.

A quick calculation this afternoon indicates that the saving for a child in junior or senior infants who attends after-school care for 10 months of the year is more likely to be about €300 per year.

So the big winners are parents with babies or toddlers currently in crèche (we’ll come on to those hunting for a crèche place).

At the time of the last census in 2022, 56% of children aged between 0 and 4 were cared for in a crèche, while a third of children aged 5-12 attended a crèche, Montessori or after-school. 

The cohort who might feel like the biggest losers are parents of children currently in senior infants: by the time these changes take effect next September, their children will have aged out of the new higher universal hourly subsidy.

This rate, under the National Childcare Scheme, will go from €2.14 to €2.50 (but only for children up to senior infants).

It’s understood the government considered spreading the available budget for increased childcare subventions to a wider cohort including older children, who may attend after-school services. However, it ultimately decided to focus higher subsidies on younger children as their parents are currently paying the most for childcare.

Trajectory

The new measures – many of which were widely reported in advance of this afternoon’s announcement – are intended as a step towards the government’s commitment to progressively reduce childcare costs to €200 per month per child over the course of its term.

However, this budget – the government’s second – leaves plenty of ground still to cover to get there, with the €550 cap that will kick in next year still 175% higher than the promised level.

Foley, the children’s minister, was asked this afternoon about where the government is going next on the pathway to €200 childcare. Will it reduce costs further for families of younger children before it addresses costs for older children? Or will it bring the subsidies for older children up to the new levels for younger children next year?

No clear answers were forthcoming.

Foley said there are three budgets still to go in the lifetime of this government – and emphasised that the commitment in the programme for government “very explicitly said over the lifetime”.

“If I could have done it yesterday I would have done it yesterday. I have to take every budget as it goes. If it takes three budgets, it will take three budgets,” Foley said.

Elsewhere, the government has increased the income thresholds to qualify for the maximum childcare subsidies from €34,000 to €38,500. This won’t kick in until September 2027.

The discount for families with two children will go from €5,500 to €6,000, while for families with three children the discount will also increase by €1,500 to €12,500.

Availability

So it’s likely to take a while to get to €200-per-month childcare.

It has also been argued today that the budget does not offer much to people currently looking for a childcare place.

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Both Sinn Féin and Early Childhood Ireland (ECI), which represents the early years and childcare sectors, criticised the lack of provisions in the budget to boost the availability of childcare.

Frances Byrne, director of policy at ECI, warned that reducing fees does not expand places or improve wages. Staff turnover in the sector is high and even staff with degrees are earning as little as €15 per hour, and this is contributing to the sector’s inability to meet demand.

Waiting lists for children under 3 have reached 46,000 nationwide and the budget has not put in place any real measures to address this, ECI warned.

Sinn Féin spokesperson on children Claire Kerrane said: “Cost is completely irrelevant when you cannot find a childcare place. Cost is completely irrelevant when rooms are closed because the workforce is not there.”

Pre-schools under pressure

In the run-up to the budget, preschools and small childcare providers warned that they are under financial strain and called on the government to ensure any fee cuts are funded by the state rather than being pushed back onto the sector.

The Federation of Early Childhood Providers (FECP), a coalition of independent childcare and early years education providers such as small local preschools, called for more support.

The FECP urged the government to provide a 10-20% increase in the rate paid by the government to fund free pre-school under the Early Childhood Care and Education (ECCE) scheme.

The state fully funds two years of ECCE for 3 to 5-year-olds, for three hours a day, five days a week.

However, the rate per child that government pays to providers of ECCE has been effectively frozen since 2018, putting many independent preschools and Montessori schools under severe pressure. This rate will remain frozen in Budget 2027.

Foley said this afternoon that ECCE services that are part of the government’s core funding scheme will see an increase in funding.

The Journal understand that a meeting will take place tomorrow between senior officials from Foley’s department and organisations representing the childcare sector, where more detail on how funding for the sector will be allocated is likely to be set out.

Foley said that €50 million has been ringfenced for higher wages in the early years sector but what this will mean in practice will depend on negotiations at the Joint Labour Committee.

Many childcare providers will want to know how the government is bridging the gap between the new capped fees and their costs. 

Asked this afternoon whether there was a risk that childcare services would leave the core funding system, which caps fees, if they are not provided with enough funding to cover energy bills, insurance costs and other overheads, Foley indicated she was confident that a 35% increase in core funding in this budget would be enough.

“It’s not just a compensation for the reductions [in fees] that we’re bringing, but also for the running costs,” Foley said. “Sincerely, I do think 35% is quite significant.”

Childminders

More than one in seven children is cared for by a childminder in their home.

Foley indicated today that she will allow more time before mandatory registration of childminders under the National Childcare Scheme is required.

The government also announced measures in relation to this form of childcare, aimed at encouraging more people into the sector.

Minister for Finance Simon Harris announced an increase in the tax exemption for childminders from €15,000 to €20,000. The government will also remove the limit on the number of children that can be cared for by childminders availing of this tax relief.

Harris suggested this would “increase supply” of childminders and “provide greater flexibility to childminders to support the needs of parents”.

The Tánaiste acknowledged that the cost of childcare is “still too high for many families”.

With reporting by Christina Finn.