Childcare providers and parents have protested outside Leinster House to highlight issues with funding for the sector.

They say that new core funding proposals for Early Childhood Care and Education (ECCE) providers and day care services are threatening to close hundreds of local services.

Under the proposals, providers are being asked to cap fees at last year's rate of inflation of 2.2%.

Organised by the Federation of Early Childcare Providers (FECP), today's demonstration coincides with a presentation to TDs in Leinster House.

"ECCE services represent one third of all childcare providers and was a vulnerable sector even before Covid," said FECP President Elaine Dunne.

"Now, in the context of inflation, historically low funding, staffing and regulatory pressures, many services are in real financial difficulty," she added.

The group is expressing its opposition to the freezing or capping of fees at a time of high inflation and is also calling for a subsidy of €100 per child on the ECCE scheme to cover costs currently subsidised by the childcare owner.

The Government has said that the cutting of childcare costs for parents will be one of its priorities in October's Budget.

Meanwhile, SIPTU is calling for a pay deal for childcare workers saying it is the only way to deal with the worsening staffing crisis in the sector.

"Workers simply cannot afford to stay in their chosen profession," SIPTU Head of Strategic Organising Darragh O'Connor said.

"This is bad for workers who cannot make ends meet. It is also bad for providers who are struggling to recruit and retain staff," he added.

Tánaiste Leo Varadkar said he wants most of the additional money to assist with the cost of childcare in next year's Budget to go to parents through subsidies.

Speaking on RTÉ's Morning Ireland, Mr Varadkar said he would favour subsidies, rather than tax breaks.

"Tax breaks can work as well, but they can be quite complicated. There are people who don't pay tax for one reason or another and tax breaks tend to benefit higher paid people obviously, rather than people on lower pay and the subsidies can be done more fairly."

He said he acknowledges that those running childcare facilities are facing rising costs and, as a result, some of the funding must go into supporting them also.

Mr Varadkar added that the Government had in recent years put a lot of additional State funding and investment into childcare and early childhood education, particularly during the pandemic.

Meanwhile, a Dublin-based childcare provider said she has concerns about the Government funding.

Speaking on the same programme, Colette Woods, who owns Jumblies Playschool in Cabra, said that she and other providers have not seen the terms and conditions of the scheme.

She explained that providers do not have to finalise their commitment until August, but in order to do so they must promise not to increase fees.

Not having seen the terms and conditions or the details of the contract, is "quite worrying", she said.

"We're not sure if we're going to be able to keep our doors open going forward, so I guess that's partly why we're protesting too".

Ms Woods said that since the ECCE scheme began in 2009 there has been one increase in the capitation funding.

She said she is not sure if she can continue in business as she has to absorb so many costs apart from normal costs of insurance and other overheads.

"I have a lot of demand for my service, and I've considered expanding, but I never really did it, mainly because I couldn't really afford to pay someone the rate that I would like them to get".

She said that she does not know about the sustainability of staying in business in future.