On 14 October 2008, as part of Budget 2009, O'Keeffe announced cutbacks and the imposition of increased charges to pay for the running of the Department of Education and Science throughout 2009, including the increase of the primary school teacher:pupil ratio 1:27 to 1:28 and the increase of the post-primary school teacher:pupil ratio from 1:18 to 1:19, although the capital allocation of €889m was increased by €80m. On 29 October 2008, approximately 12,000 teachers and parents demonstrated against the education cuts announced in Budget 2009. The rally outside Leinster House coincided with a Dáil debate on a Labour Party motion calling for the increase in class sizes to be reversed. INTO General Secretary John Carr described the budget as an act of educational sabotage. Ferdia Kelly, representing most second-level school managers, said school principals and deputy principals "are saying loudly and clearly that they are not available to supervise classes where teachers are absent. Failure to act now on this proposal will lead to an unwelcome disruption of school life in January." The cutbacks removed substitution cover for uncertified sick leave, and for teachers on school business at second level, from 7 January 2009. The education cutbacks were supported in the Dáil on 30 October 2008 by Fianna Fáil and the Green Party. O'Keeffe accused the opposition parties of whipping up "hysteria" and said they were being dishonest with the Irish people. The minority Protestant population in the Republic was outraged by cuts announced by the Minister for Education to grants previously available to the 21 Protestant denomination secondary schools. This breached a forty-year-old agreement that had been made when free secondary education was introduced by the then Minister for Education Donogh O'Malley. It was claimed that the cuts would disproportionately affect Protestant schools. Protestant parents claimed that they would have to accept fewer teachers per child, and that their schools would not be funded to employ non-academic staff in the way that their Roman Catholic neighbours are.
Proposed re-introduction of third-level fees
On 11 August 2008, O'Keeffe proposed the re-introduction of third-level fees which had been abolished in Ireland since 1995. While originally indicating that high earners would be hit, it was later announced that this scheme would raise far short of the €500 million in the original report compiled by UCC economist, Dr. Noel Woods. O'Keeffe stated that he wanted to increase third-level participation, and claimed that the "free fees" scheme had not accomplished this. After putting forward a range of options to the cabinet in July 2009, O'Keeffe set a deadline of 15 September 2009 for his colleagues to decide on the issue. The range of options was then discussed in a new programme for government. It was later announced in the new programme for government, brokered by both Fianna Fáil and the Green Party, that third-level fees would not be introduced in the lifetime of the government, although O'Keeffe had stated his support for their introduction and had stated that existing registration fees, commonly described as "fees by another name", faced an increase. His stance on fees was supported by former education ministers Noel Dempsey and Mary Hanafin.
Resignation and retirement
O'Keeffe resigned his position as Minister for Enterprise, Trade and Innovation on 20 January 2011. He retired from politics at the 2011 general election.