It promised much but for many parents the affordable childcare scheme appears to have delivered little. However, there is no doubt that the scheme announced in October's budget is a seismic change in how we pay for the care of children in this State.
If it gets the funding it deserves, it could relieve parents of some of the immense burden childcare costs place on them. It could also encourage parents to stay or get back into the workforce whether it “pays” to do so or not and give others the opportunity to retrain or reskill without spending a fortune in the process.
For now, however, the benefits offered by the affordable childcare scheme remain slim. That being said, as we show below, some families will benefit.
The scheme will start in September 2017. At that stage, a new IT system will allow parents to enter their PPS number and work out what they are eligible for. In the meantime, if you think you will qualify, you should see if your current childcare provider is registered with Tusla, the Child and Family Agency, or find one that is via its website at Tusla.ie.
Parents who will benefit
Lower-income families
Targeted at low-income families, the scheme will offer the best rewards for those families with a net income (ie after tax) of €22,700 a year (about €24,000 gross) or less. These families will be entitled to the full subsidy, which ranges from €5.38 for a baby under one year of age to €3.96 an hour for a child in school.
According to the Department of Children and Youth Affairs, this means that a family with a gross income of €30,000 and two children, aged two and four, one of whom is in creche full-time and the other requiring 25 hours “wraparound” care for the early childhood care and education (ECCE) scheme, would have a shortfall of just €32 a month.
A family with a gross income of €50,000 would have a shortfall of €484, compared to €1,068 at present, while those with a gross income of €70,000 or more would be entitled to a subsidy of just €20 a week, leaving them with a total cost of €988 a month.
As is shown below, however, if you have two or more children below the age of 15, your gross income may be as high as €85,000 and you could still qualify.
Those who want to retrain
For stay-at-home parents, the new scheme, ironically perhaps, has some appeal. While stay-at-home parents have come out strongly against it, arguing that the Government has offered no incentive to parents who wish to keep their children at home, the scheme could in fact be used quite well by them should they wish to retrain or take a tentative step back into the workforce.
With just one income coming into the home, these parents are more likely to meet the income thresholds.
For parents who would like to take the opportunity to upskill or retrain but who haven’t been able to do so thus far for financial reasons, the scheme should have appeal. As the briefing document notes, “where a parent qualifies on income grounds but does not need childcare for work or study reasons, they can avail of a targeted subsidy for up to 15 hours of childcare per week”.
Those whose children are in full-time care
There are two elements to the new scheme: a “universal” subsidy of up to €80 a month (€960 a year) which every parent of a child aged between six and 36 months will be entitled to, and a means-tested payment.
The payment is offered at a rate of €0.50 an hour. So, if you have a child within this age category in full-time care (40 hours a week), you will receive €80 a month regardless of your income, provided that this child is enrolled with a registered childcare provider.
This means that from next September, parents of children in full-time care will get the bones of a month’s free childcare per child – enough perhaps for a week’s holiday in the summer for the family.
Parents who will not benefit
Those who use ECCE
The early years free childcare programme is great for many parents, both those working ones and stay-at-home ones. However, the hours are quite restrictive, at three hours a day over five days. This means that many parents have to top up the State payments to pay for wrap-around care.
Under the new scheme, however, parents will typically not be entitled to any additional benefits unless their income meets the appropriate thresholds. This is because the universal payment is only offered to children up to the age of 36 months.
Returning emigrants
If you and your family have been living abroad and have become accustomed to cheaper childcare, you are going to get a shock when you return to Ireland. And unless your family meets the aforementioned income requirements, the new scheme won’t lighten the burden too much.
Indeed, if you have been living somewhere such as Montreal in Canada, the most you will have had to pay each month was just €287, and depending on your income, your monthly fee for full-time childcare may have been as low as €104.
Indeed, a quick perusal of schemes around the world shows the thinking behind Minister for Children and Youth Affairs Katherine Zappone’s initiative. Most state-sponsored schemes pay different amounts depending on how much the parents earn.
In Paris, France, for example, a family earning €30,000 a year will pay €264 a month, dropping to €176 per child if you have three. The most you will pay is €513 a month, or €342 per child if you have three.
So Paris may be an expensive city but you could still have three children in a creche for the same cost as you would pay for one in Ireland.
In Berlin, Germany, childcare costs are also low, with parents entering the scale at €22,499, paying just €25 a month for full-time childcare. The maximum amount a parent will pay is €405 a month.
On the other hand, if you have been living somewhere such as Seattle in Washington, which has one of the highest average costs of childcare in the US, at a hefty €1,333 a month, you might be thankful to be coming home.
Those who earn too much
As Zappone said when launching it, the scheme is designed to benefit children between six months and 15 years of age “living in consistent poverty or at risk of poverty” and the level of subsidy is dependent on a family’s income. This means that parents with a net income of €22,700 a year will be entitled to a full subsidy, with the amount declining thereafter.
When net income reaches €47,500, no means-tested/income-related subsidy will be payable. According to PwC’s tax calculator, this means a single person, or a couple with two earners, on a gross income of about €70,000 in 2017. A married couple with one earner can earn slightly more to qualify, at about €73,000. So if you and/or your partner earn less than this (combined) on an annual basis you will be entitled to some level of subsidy.
For example, a family with two children under 15 years of age would have a maximum net income threshold of €51,300 (gross income of about €77,000); a family with three children under 15 years would have a maximum net income threshold of €55,100 (gross income of about €85,000).
However, it’s not all bad news if you don’t qualify, as parents of children aged between six months and 36 months, or until they qualify for the free pre-school initiative, will be entitled to a universal subsidy, which will not be means-tested and will be available for families at any income level.
This is offered at a rate of 50 cent an hour of care pro rata. For a 40-hour week, the subsidy would work out as €80 a month or €960 a year (see also above).
Moreover, it seems that Zappone’s plan is to increase the threshold at regular intervals to bring it more in line with international norms – funding permitting, of course. As she said: “I hope that future budgets will enable me increase this threshold year on year.”
Those who want to go back to work
If the high cost of childcare has put you off going back to work after having your family, the new scheme is unlikely to make you think differently. Given the cost of childcare in Ireland, the monthly bill can be like a second mortgage – if not more – and many parents take the view that it’s just not worth their while working, whether they want to or not.
Unfortunately, however, the new scheme is unlikely to change this view, or at least not yet.
If you have a child under the age of 36 months, you will be entitled to the universal childcare payment, but this works out at a rate of just €0.50 an hour or €80 a month. And the income limits are so low, that while you might qualify on one parent’s income, you may not qualify if both parents work.
Those who use a childminder . . . for now
A key element of the new scheme is that for the State to subsidise your childcare provider on your behalf, they must be registered with Tusla. However, while some 4,500 creches and nurseries are already registered with the State’s Child and Family Agency, just 125 of these are childminders.
The barrier, it seems, is that once a childminder minds three children, they have to operate under the same criteria as a much larger creche. Indeed, it has been estimated that there are about 80,000 children under the age of five who are cared for by childminders who won’t be eligible for payment.
Moreover, many parents of school-going children may have more casual ad-hoc arrangements. These might include other parents caring for their children after school or dropping them to after-school activities. Others may depend on grandparents or other relatives who will not qualify for the scheme.
But parents shouldn’t despair just yet. It’s understood that an arrangement to cover more childminders is likely to be in place in advance of next year’s budget, with a facility to cover those who look after a small number of children in the childminder’s own home.
As noted in a briefing document on the scheme, the department is working with Childminding Ireland to explore how childminding services can be quality-assured in order to access State funding under the scheme.
“Options to be explored will include a system of non-statutory quality assurance, possibly leading to statutory registration for a wider group of childminders in the medium to long term,” the document says.
