For advocates of free childcare, this week’s election results are good news. The chance of sending your child to daycare or after-school care virtually free from 2029 appears to have increased slightly.
D66, VVD, CDA and GroenLinks-PvdA argued in their election manifestos to continue with the plans for free shelter – and together they have a large majority in the new House of Representatives. The CDA does want parents with a higher income to continue to pay a higher personal contribution.
Shortly before the elections, the Council of Ministers approved a bill by outgoing State Secretary Jurgen Nobel (Participation, VVD) to make childcare free by 2029, a plan that has led to great unrest in parts of the sector. The bill has now been submitted to Parliament internet consultation. Parties from the sector and concerned citizens can respond to it until the end of November. The House of Representatives and the Senate will vote on it later.
Under this plan, the government will soon pay the childcare subsidy directly to the daycare center, childminder agency or after-school care center. Parents only pay 4 percent of the costs themselves, regardless of their income. Every parent who works or studies in the Netherlands will soon be able to take their child to subsidized childcare for up to five days a week.
The outgoing rump cabinet of VVD and BBB explains in one piece how this bill will work out in practice explanation of 118 pages. In this letter, the government confirms the fears of experts that the new system will lead to greater inequality between rich and poorer families. The plan gives parents with the highest incomes many thousands of euros in benefits per year, while it can become more difficult and expensive for people with a lower income to take a child to daycare.
The explanation shows that the government accepts high costs and a range of risks in order to achieve one major goal: the permanent abolition of the childcare allowance. This led to “fundamental problems” in the form of high refunds, which could cause parents to get into financial problems – with the Benefits Affair as the most damaging outcome. Five observations from the bill:
1Richest parents benefit the most
The current childcare allowance works like this: the more parents earn, the less allowance they receive. The government already reimburses 96 percent of childcare costs for parents with the lowest incomes. The highest income earners are reimbursed for 33 percent of the costs for the first child cared for, and 67 percent of the costs for a second or third child. In the new system of ‘free’ childcare, that distinction will disappear. The government will soon reimburse 96 percent of everyone who brings a child to daycare.
The logical consequence is that the richest parents benefit most from this change. That advantage can be significant, according to a calculation example provided by the government. A single parent with an average income who takes two young children to daycare two days a week will save 1,450 euros per year in the new system. In this example, families who earn twice the average income with two children will be more than 5,000 euros cheaper. For families with a joint income of 138,000 euros or higher, the financial benefit is more than 13,000 euros.
According to the outgoing cabinet, this cannot be otherwise. If the amount of financial support remains dependent on how much parents earn, there remains a risk that parents will receive too much subsidy because their income has increased (and they have not reported this in time). Even if that subsidy goes directly to the childcare organizations, the government will have to reclaim money from parents – and that is precisely what politicians want to get rid of.
2More difficult for parents with less money
At the same time, childcare is in danger of becoming less accessible for people with a lower income. The demand for childcare is already greater than the supply, resulting in waiting lists in many regions. If childcare soon becomes virtually free, the demand for childcare places will increase further, according to the government. Childcare organizations may then increase their rates because parents are “probably willing to pay a higher rate for childcare.”
“Given the existing tightness in the market, this could lead to rate increases,” the government writes. “This has risks for the accessibility of childcare, especially for parents on low incomes.” Because families with an income of up to 45,000 euros already receive 96 percent of their costs, childcare for them in the new system will only become more expensive. “This could limit the affordability of care for lower incomes.”
In addition, some parents will also pay more than 4 percent themselves in the new system. Childcare organizations may continue to charge parents a higher hourly rate than the maximum hourly rate reimbursed by the government.
Earlier this year it emerged research from interest group BOinK that more than half of daycare centers and after-school care institutions charge a higher hourly rate than the maximum that the government reimburses. A Chamber motion to legally establish the maximum rate, received a narrow majority in September, but “due to the complexity of the measure” this is not included in the current bill.
Experts have long feared that the new system would lead to growing inequality. Planning agencies CPB and SCP warned in 2023 that the introduction of almost free childcare would increase inequality of opportunity between children. CPB and SCP then called on the cabinet to “reconsider” the plans and to insist that richer parents pay a larger share of the childcare costs themselves.
The outgoing cabinet is consciously going against these advice, State Secretary Nobel writes in the explanatory memorandum, “because of the fundamental problems with the current financing system.” The government has chosen “to create a simpler system in which parents no longer run any risks. Abolishing income dependency is an important part of this.”
3 Free childcare is not cheap
The costs of the new financing system will put pressure on the budget of the incoming cabinet, which will probably have to make billions of euros in cuts in the coming years. At the announce of the plans, State Secretary Nobel wrote that the introduction of free childcare will lead to an “intensification” of structurally 3 billion euros per year. This would bring the total costs for childcare to approximately 8.6 billion euros per year.
In the explanatory memorandum to the bill, the government even calculates slightly higher amounts: from 2029 onwards, the new system will structurally cost 3.4 billion euros more than it does now. This brings the annual cost of childcare to 9 billion euros. To put that into perspective: it is more than the National Police receives annually (8.5 billion) and comes close to the expenditure on primary education (11 billion).
The annual additional expenditure of 3.4 billion is greater than what the Netherlands will spend on development aid from 2027 (3.1 billion), the amount that the government released this year to solve financial shortages in youth care (3 billion) and the compensation for increased heating costs during the 2022 energy crisis (2.8 billion).
The costs will already increase in the coming years. The government is gradually increasing the allowances that parents receive, because switching to virtually free childcare in January 2029 would cause a “market shock”, with demand exploding while there are far too few childcare places.
A gradual increase should gradually increase demand and give providers time to create more shelter places. Increasing allowances will make childcare 280 million euros more expensive next year, an additional 850 million euros in 2027 and another 750 million in 2028.
4Unsure whether parents will work more
The investment in virtually free childcare helps to ‘stimulate labor participation’, wrote Nobel to Parliament in September. In the explanatory memorandum to the bill, the State Secretary acknowledges that this may be a “limited increase”. He refers to earlier research by CPB and SCP, which calculated that the introduction of free childcare is expected to lead to only 0.2 percent more working parents, or 15,000 additional jobs.
According to director Marjet Winsemius of the Foundation for Working Parents, this is probably an underestimate. “We have been polling this among parents for years and have found much higher percentages: parents say they will work between 17 and 20 percent more if they have free childcare. And don’t forget that the abolition of allowances makes a big difference. Many parents do not dare to apply for them for fear of high refunds and prefer to stay at home. That fear will soon disappear.”
The government expects that the demand for shelter in 2031 will be approximately 23 percent higher than it is now. It also hopes for a cultural change, with stay-at-home mothers more likely to work because there is cheap childcare available. “In the longer term, the new financing may contribute to a culture change regarding the use of formal childcare and thus the number of hours worked by the second earner.”
5Still a lot of preparation needed
Before the new system can be successfully introduced, a lot still needs to be done. Childcare organizations are likely to face increased administrative pressure as they have to maintain more financial records and need to be prepared for this. The Ministry of Social Affairs and Employment must create a new supervisory body, whereby officials check whether providers comply with the rules. New ICT systems are needed to properly manage the provision of government subsidies to childcare organizations.
In the explanatory memorandum to the bill, the government identifies a number of risks. For example, the greater demand for care may lead to longer waiting lists, an increasing staff shortage (currently 6,000 people) and a temporarily lower quality of care, because the “market economic incentive to compete on quality is decreasing”. And there is the risk that parents enter into contracts that are too broad and do not take their child to daycare every day.
But, the government emphasizes: nothing is final. The current plans will first be subjected to an evaluation and an implementation test that should provide more insight into the precise consequences and costs. The government also wants to continue discussions with involved parties from the sector to further develop the proposal.
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