Best Start - strategic early learning and school age childcare plan 2022 to 2026

Priority 3: Ensuring that the delivery of our priorities is supported by a sustainable, diverse and thriving sector and profession

Supporting the sustainability of the childcare sector

We cannot deliver good outcomes for children and families without a sustainable, diverse and thriving childcare sector. Childcare services and professionals across the public, private, third and childminding sectors have provided vital support to families and children during the COVID-19 pandemic. We know that businesses and individuals are still experiencing real challenges as a result, and that these pressures are being compounded by economic upheaval not seen for a generation that is already impacting people, businesses, public services and the third sector across Scotland.

Demand for childcare has also changed throughout the pandemic, creating particular challenges for small businesses. The number of cancellations of daycare of children services increased in the year to June 2021. Although this followed declines in the number of cancellations in each year between June 2018 and June 2020, we will continue to monitor trends closely. The cancellation rate for childminding services is much higher than for daycare of children services,^[23] and the pandemic has also had a significant impact on professionals working in the childcare sector.

Overall, the Scottish Government has already directed £900 million to support businesses in Scotland this year, including making up to £9.8 million available through the Childcare Sector Omicron Impacts Fund. We will work to ensure that the specific needs of the early learning and school age childcare sector are reflected in any future measures to support businesses and public services that may be required.

As part of our support for the sector, we will legislate to continue the Nursery Rates Relief Scheme, which provides 100 per cent relief on Non-Domestic Rates to eligible day nurseries (subject to subsidy control rules), beyond the currently legislated end date of 30 June 2023. The Scottish Government has now completed an evaluation of the relief, which has demonstrated the benefits of this support, worth an estimated £9.6 million, to eligible nurseries, and the children and families who use these services.

We will develop a business support offer for all parts of the childcare sector through which providers can access tailored, specialist advice on strengthening and diversifying their businesses. We will maintain a robust but proportionate means of monitoring the financial sustainability of the public, private, third and childminding sectors to ensure that both national and local policy is informed by up to date evidence about the health of the sector through this uniquely challenging period.

In 2018 we reached a multi-year funding agreement with COSLA to support the expansion to 1140 hours, and subsequently reached a one-year settlement in 2022-23. This made provision for implementing a number of joint priorities, including measures to mitigate the impact of the COVID-19 pandemic, ensure the provision of sustainable rates and maximise uptake of targeted ELC.

Funding Follows the Child and the National Standard – which we agreed jointly with COSLA – require local authorities to set sustainable funding rates and encourage payment of the real Living Wage to all workers delivering funded ELC. Since then, we have seen real progress in both sustainable rates and the payment of the real Living Wage.

Prior to the expansion, our research showed that over 80 per cent of childcare professionals delivering funded ELC were paid below the real Living Wage at the time^[24]. Our 2021 research found that over 88 per cent of private and third sector providers delivering funded ELC planned to pay all staff in their setting (not just staff whose pay is covered through 1140 funding) the real Living Wage from August 2021. Average rates paid by local authorities to providers of funded ELC have increased by 48 per cent between 2017 and 2021^[25] to £5.44 an hour (for three to five year olds), and Scotland now has the highest average rate within the UK.

Sustainable rates

As a result of the ELC expansion, average rates paid to providers for three to five year olds receiving funded ELC have increased by 48 per cent between 2017 and 2021, from £3.68 per hour in 2017-18 to £5.44 per hour in 2021-22.

[Source: Scottish Government analysis of local authority rates - 2019 and 2021^[25]]

In our 2021 Financial Sustainability Health Check we committed to working with COSLA to strengthen rate-setting processes. COSLA have since worked with partners to run a national cost collection exercise to ensure better quality and comparable cost data from providers. New guidance on rate-setting was published jointly by the Scottish Government and COSLA in May 2022. In light of this we expect further progress to be made in 2022-23, and will publish an update in the autumn on the sustainable rates that have been set by local authorities.

We will also work with local government to review the approach to setting rates in 2022-23 to identify where this can be improved further to ensure that rates reflect the costs of delivering funded ELC and payment of the real Living Wage to staff. This review will inform what further action may need to be taken ahead of the next financial year, within available resources, and the wider approach to rate setting over the rest of this Parliament. This will include consideration of any required updates to the supporting sustainable rates guidance.

We remain committed to fully embedding the real Living Wage across the sector and to ensuring that future funded early learning and school age childcare offers support further improvements to pay and conditions for childcare professionals.

Supporting the diversity of the childcare sector

Through the 1140 expansion, the childcare workforce has grown significantly and now sits at an unprecedented 46,260 professionals (including childminders and teachers) registered to work in the sector^[26]. We are proud that there has been a 52 per cent increase in the number of graduates with degrees relevant to early years working in ELC between 2017^[27] and 2021^[28], and of the wide range of providers and professionals who deliver childcare services in Scotland. ^{29 30}

Daycare of children workforce

The daycare of children workforce has grown by 34 per cent since 2011 - reflecting the ELC expansion over this period.

[Source: SSSC workforce data reports^[29]]

Number of staff with degree level qualifications

The number of staff (FTE) with degree level qualifications has increased by almost 29 per cent between 2017 and 2021.

• 2017 was the first year we collected data on graduates in the ELC census
• Includes centrally employed ELC home visiting teachers

[Source: Scottish Government ELC Census^[30]]

This diversity provides families with choice and flexibility, and offers different opportunities and experiences for children. By fully implementing the Funding Follows the Child and National Standard, families can access their child's funded ELC entitlement at any provider that has a place available, meets the National Standard, and is willing to enter into a contract with the local authorities.

Ahead of the expansion of funded ELC, we projected that around a quarter of funded hours would be delivered by providers in the private, third and childminding sectors. We are pleased that the latest information from local authorities shows that around 30 per cent of hours are delivered by these types of providers.

However, in recent years we have seen a decline in the number of childminding services. We recognise the valuable role that childminders play in supporting children's learning and development, and families' childcare choices. We will continue to work with local authorities and partners to implement the Our Commitment to Childminding Action Plan^[31], and raise awareness of childminding as an option for funded ELC provision, alongside public, private and third sector run services. We will also consider how we can support enhanced approaches to workforce development. For example, by improving awareness of, and access to, high quality mentoring and coaching.

Number of childminding services

We have seen a decline of over 29 per cent in the number of childminding services between 2016 and 2021. However, over this period an increasing proportion of childminding services have been approved to deliver funded ELC.

[Source: Care Inspectorate^[32]]

Through our forthcoming Strategic Framework for Scotland's Childcare Profession, we will work with partners and the sector to develop a range of actions that will support a sustainable, diverse, highly skilled workforce to serve the whole childcare sector. We will strive for professionals to be valued and recognised for their crucial role in providing the highest quality learning and care to enable our children to realise their full potential and improve their, and their families', outcomes.

Number of daycare of children services registered with the Care Inspectorate

The number of daycare of children services registered with the Care Inspectorate has decreased slightly since 2015. However, the total capacity of these services has increased by 14 per cent between 2014 and 2021.

[Source: Care Inspectorate^[33]]

We want to ensure all childcare professionals are able to develop fulfilling careers and enhance their own wellbeing and resilience. We will consider the demand for staff as we make progress in building and designing our new childcare commitments, ensure sufficient provision within the skills system to meet that demand, and enhance engagement across the sector with regard to demand and skills planning. ^[33]

Capacity of daycare of children services registered with the Care Inspectorate

Over the same period, we have seen an increase in the proportion of services run by local authorities, and a small decrease in the proportion run by voluntary or not-for-profit providers.

We will continue to support recruitment across the childcare sector and to develop a diverse profession that represents wider Scottish society. We will ensure that the design of new funded childcare offers embraces the diversity of provision already available and creates further opportunities to develop new, creative types of provision that are responsive to the needs of children and families.