Peadar Tóibín (Meath West, Aontú)
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945. To ask the Minister for Children, Equality, Disability, Integration and Youth if he will provide the data used to support the allocation of core funding to a sessional model of preschool; if his Department will provide the data demonstrating the way the allocation for a preschool with 22-children single session model is viable; and the way that variations in rent, geographical location, operating cost and inflation have been taken into account. [63309/22]

Roderic O'Gorman (Dublin West, Green Party)
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The structure of Core Funding is based on the recommendations of the Expert Group outlined in Partnership for the Public Good. The primary sources of data that informed the allocation of Core Funding include:

- Survey data, which is collected from providers on an annual basis

- My Department’s own administrative data on funding to providers

- The Tusla register of providers, which gives the maximum available capacity in services 

- Data from Revenue on employments, payroll costs, PRSI etc 

- Independent analysis of data on providers’ income and costs 

- Data on unit cost of delivery, the breakdown of delivery cost across staff and non-staff costs and cost drivers 

- Macro-economic and population trend data 

The original allocation for year 1 of Core Funding in Budget 2022 was €207 million. I grew this to €221 million in early 2022 in response to cost pressures, and increased that again to €259 million in September 2022 based on significant capacity growth in the sector. Contributions towards staff pay, administration staff/time and non-staff overheads are contained within the base rate.

The ELC and SAC sector is diverse in nature, however there are certain characteristics which are shared across sector. The Review of Costs in 2018 identified the broad components of services' operating costs, with staff costs accounting for almost 70% of the overall operating costs. The annual collection of income and cost data including the initial analysis of the latest income and cost data collected in 2022 shows that this 70/30 split holds true. This is prior to the significant injection of funding to the sector through Core Funding.

Core Funding is designed specifically as a supply-side funding stream, paid directly to providers, related to the costs of delivery. Core Funding is based on operating hours, number of places offered by services (whether filled or not), and the age group of children for whom the places are offered, given the staffing requirements determined by the regulatory ratios for different care categories, as well as allocations for graduate leaders in services. These are the primary drivers of services costs and this is therefore the most proportionate and transparent manner to allocate funding.

Structuring Core Funding primarily based on capacity means that Partner Services have an allocation each year that does not fluctuate in line with children’s attendance. Core Funding allows for substantial increases in the total cost base for the sector, related both to pay and non-pay costs, without additional costs being passed on to parents.

With regards to viability, there is no evidence that the new funding model will render ECCE services unsustainable. My Department has extensive data on providers’ existing and projected income and delivery costs through data from Revenue, surveys and demographic and macro-economic information and has extensively analysed the question of sustainability.

Data available prior to the additional investment of Core Funding in the sector showed a median surplus (income in excess of cost) for the sector as a whole of 4%. However, services with the characteristics correlated with ECCE-only provision had higher levels of surplus than other types of provision – ranging from 14% to 23% depending on the characteristic.

- Do not offer full day: 17% income in excess of cost

- Do not offer wrap-around care: 16% income in excess of cost

- Open exactly 38 weeks each year: 19% income in excess of cost

- Low total numbers of childcare hours: 23% income in excess of cost

- Single-site services: 14% income in excess of cost

- Those whose only income source is ECCE funding: 19% income in excess of cost

Separately, Sole Traders, which constitute a large proportion of ECCE-only provision, had an average income in excess of costs of 23%.

This evidence suggests that ECCE-only services had the highest levels of income in excess of costs compared to other types of provision.

My Officials have published case studies of sessional services which are available at: first5fundingmodel.gov.ie/core-funding/. The case studies of sessional services take account of the new minimum rates of pay underpinned by the EROs as well as average contact and non-contact hours for staff.

To date, the sector level data available to my Officials has not indicated widespread financial viability issues connected to these services. Likewise, my Officials have not seen other indications, such as increased closures or call on sustainability funding, to indicate financial viability issues for small, sessional services. However, I have been unequivocal that I do not want any services to be faced with financial sustainability issues and am fully committed to working with these services to support them in delivering early learning and childcare for the public good.

I have secured an increase in the Core Funding envelope for year two of operation (September 2023-August 2024) of €28 million (11% increase), the precise allocation of which will be determined by evidence and analysis emerging from year one of the operation of the scheme.

Given the concerns raised by some small, sessional services, and in order to provide additional timely and robust data in preparation for developments to Core Funding in year 2, I will be undertaking an independent financial review of sessional services. The review will consider the financial situation of the participating services in full, and will not be restricted to questions of sustainability or viability.

The Department continues to examine Core Funding against the current cost pressures, including assurance that the funding model remains appropriate. Additional support, in the form of sustainability funding, remains available to any Partner Services that are not able to meet their costs. This can be accessed through engagement with City/County Childcare Committees (CCCs).

CCCs are receiving very small numbers of services reporting cases of financial unsustainability. Currently, no service has availed of Sustainability Funding through the new strand. This is consistent with the trends we have seen in recent years for low demand for Sustainability Funding with two services availing of financial support across all Sustainability Funding strands in 2022. However, the Department, Pobal and the CCCs continue to closely monitor trends concerning services entering Case Management and will continue to maintain the availability of Sustainability Funding for individual services at risk.

In addition, early learning and childcare services are able to apply for the Temporary Business Energy Support Scheme (TBESS). Under TBESS, businesses engaged in early learning and childcare services who have suffered an increase of at least 50% in the average unit price of electricity and/or natural gas for the relevant billing period in 2022, as compared with the average unit price for electricity and/or gas for the corresponding reference period in 2021, will be eligible under the scheme.

Budget 2023 allocates €1.025 billion to early learning and childcare – a clear demonstration from Government of the value of the sector. Together for Better aims to transform the sector and I am committed to working with Partner Services delivering early learning and childcare for the public good.