A blueprint for 2020: the expansion of early learning and childcare in Scotland – consultation analysis report

7. Financing and Delivering the Expansion

Funding Model Options

Funding for delivery of the ELC entitlement of 600 hours is currently included within the general revenue grant provided to local authorities.

Additional resource, both revenue and capital, will be required to fund the expansion in entitlement to 1140 hours and this must be delivered efficiently whilst ensuring that a high quality service is provided.

There are a range of potential approaches being considered to funding the provision of ELC in future. They range from predominantly supply-side models where funding is directed through providers, to demand-led approaches where funding is directed through parents and carers.

Four broad funding models under consideration are:

Option 1: Funding Dependent on Delivery - funding to continue to be routed through the local government block grant route.

Option 2: Funding Follows the Child - more demand-led where parents and carers choose the provider and the funding follows, whilst still being administered by local authorities.

Option 3: Early Learning and Childcare Accounts - demand-led system where parents and carers receive the funding.

Option 4: A hybrid approach - a model with similar principles to the self-directing care approach, where parents and carers choose how their child receives their ELC support, e.g. this could be determined by the local authority; parents and carers could choose their provider and then the money follows; or parents receive the funding (this could also be in the form of an Early Learning and Childcare Account).

Question 19: What funding model would best support our vision for high quality and flexible ELC provision, which is accessible and affordable for all?

7.1 196 respondents (58%) answered this question.

Preferences for funding model

7.2 97 respondents provided a clear indication of their preference for one of the funding models proposed. Table 7.1 overleaf gives a summary of their preferences.

Table 7.1: Summary of funding model preferences

Funding models	Number of respondents
Option 1: Funding dependent on delivery	32
Option 2: Funding follows the child	37
Option 3: ELC accounts	23
Option 4: A hybrid approach	5

7.3 Option 2, a model whereby funding follows the child, was identified most frequently as the preferred funding model to best support the vision for high quality and flexible ELC, which is accessible and affordable for all.

7.4 Seven respondents did not support any of the four options in particular, but expressed their support for funding to go directly to providers, in either a ring-fenced or voucher-style model of funding. Ten respondents, including three unions, provided support for an alternative model whereby local authority provision is expanded in a universal model of equitable provision for all, free at point of use. Several individual respondents suggested funding focused on enabling families to look after their children in their home setting.

Option 1: Views on advantages

7.5 Those in favour of Option 1 were largely local government respondents, one of whom argued that this option cannot be classed as wholly supply-led when it offered a responsive service, adapting to changing needs. Views were mixed on whether funding under this option should be ring-fenced or not.

7.6 The main advantages to this option were viewed as:

• Ensures a co-ordinated, predictable and sustainable approach.
• Already well understood with systems in place such as quality assurance; performance management.
• Will be ready to cope with increased demand within the timescale for expansion.
• Ensures protection for vulnerable families; families in deprived areas.
• Benefits from economies of scale; efficient; represents Best Value.
• Ensures continuity and investment in developing staff.
• Will result in quality standards being maintained.
• Safer for partner providers as more guaranteed income.

Option 1: Views on drawbacks

7.7 The main drawbacks to this option were viewed as:

• Limits flexibility and choice for parents who may not be offered the ELC setting of their choice.
• Bureaucratic; excessive paperwork.
• Uncertainty regarding how much funding will be allocated by local authority.

Option 2: Views on advantages

7.8 Those in favour of Option 2 were largely private sector providers and individual respondents, some of whom envisaged the return of vouchers within this model, possibly in the form of online "e-vouchers".

7.9 The main advantages to this option were viewed as:

• Gives parents real choice in ELC provision.
• Provides flexibility - can be used for 52 weeks of the year; more in school holiday periods.
• Gives parents with particular requirements, such as Gaelic-medium provision, greater likelihood of securing this.
• Avoids post-code lotteries.
• Cuts down provider administration.
• Avoids local authorities using allocated funding for other things.
• Providers receive payment quicker.

Option 2: Views on drawbacks

7.10 The main drawbacks to this option were viewed as:

• Too much flexibility results in parents chopping and changing, which is not good for children.
• Uncertainty of take-up and business, leading to fragility of settings, particularly in rural areas.
• Market forces risks, such as providers undercutting others, reducing staff wages, laying off staff when child numbers are lower.
• Difficult for providers to plan which will deter investment in staff and infrastructure.
• Markets may not respond quickly enough to expanded demand, with parents left without provision.
• Providers may opt out of delivering minimum standards and choose to be outwith the funding model, resulting in parents unable to use their funding to access free places.
• Parents may overspend their entitlement and run out of funds.
• Relies on parents being fully aware of the choices on offer and how to manage their funds.

Option 3: Views on advantages

7.11 Those in favour of Option 3 were also largely private sector providers and individual respondents.

7.12 The main advantages to this option were viewed as:

• Gives the best choice for parents.
• Funds can be spread over school holidays.
• Reduces bureaucracy.
• Parent power will drive up standards.
• Removes cross-boundary issues where, for example, parents live in one local authority and they require childcare in another.
• Helps parents to understand the scope and limits of the "free" provision.

Option 3: Views on drawbacks

7.13 The main drawbacks to this option were viewed as:

• Lack of certainty regarding funding for private providers and local authorities alike.
• Not predictable, may not work for rural communities, increasing fragility of provision.
• Administration could be complicated and parents may not understand the system.
• Parents may use funding for things other than ELC.
• Relies on there being provision to choose from, which may not be the case.

Option 4: Views on advantages

7.14 Those in favour of Option 4 included individuals, a private sector respondent and a local government respondent.

7.15 The main advantages to this option were viewed as:

• Flexible approach.
• May encourage creative solutions from parents.
• Reduces the administrative burden on providers.

Option 4: Views on drawbacks

7.16 The main drawbacks to this options were viewed as:

• Not all parents will have the capacity to manage this funding model which may require much administration by parents.
• Lack of certainty over sustainable funding for local authorities and partner providers.
• Local authorities will need to follow up on the creative solutions identified by parents.

General views

7.17 Many respondents re-iterated or made reference to points they had made in response to earlier questions. In particular, there was much support for setting and enforcing minimum standards of provision, whatever the funding model; and for national pay scales with more funds available to ensure Living Wages are paid.

7.18 Several respondents emphasised their view that childminders and other community solutions should form part of the options under the different funding models.

Views relating to Question 19 emerging from consultative events

7.19 Option 2 (funding following the child) and Option 3 ( ELC accounts) received most support in consultative events as offering most flexibility for families which could address challenges such as cross-border issues. One group suggested that under Option 3, parents could work together to lobby for local provision, such as workplace ELC.

7.20 Two groups posed the question of whether unused entitlement in a community could be re-allocated where needed.

Phasing of the expansion

The expansion will require sustantial levels of investment in both the workforce and in infrastructure. The investment will be phased over a 3 - 4 year period to ensure that the required capacity is in place by 2020 to enable full roll-out of the expanded entitlement.

The Scottish Government considers that an approach to smoothing the transition from 600 to 1140 hours entitlement is to phase in the additional entitlement for some children as additional capacity (both infrastrucuture and workforce) becomes available. There are a number of options for phasing in entitlement, for example:

Option 1: Incremental increase in the level of entitlement made available (e.g. at some point between now and 2020 the entitlement could increase from 600 hours to, for example, 800 hours, as a step towards 1140 hours).

Option 2: Allow local authorities to expand entitlement incrementally as increased capacity becomes available.

Option 3: Expanded entitlement offered to cover a range of cohorts, geographic areas and providers.

Question 20: If it were possible for aspects of the entitlement to be phased in ahead of the full roll out by 2020, how should this be implemented?

7.21 207 respondents (62%) answered this question.

7.22 A common view was that the expansion will require detailed planning to ensure the necessary physical and workforce infrastructures are in place to support additional hours. A recurring theme was that quality should not be compromised in the expansion.

7.23 Amongst the respondents to the question were many who expressed their opposition to the expansion. Despite their concerns, however, several respondents still provided constructive comments on phasing the expansion.

7.24 A recurring view amongst local government and individual respondents in particular was that information will be needed, as soon as possible, on capital and revenue funding available for the expansion. This was seen as crucial for long-term planning and to enable providers in different settings to work towards expanding capacity according to their means.

7.25 Many respondents across a range of settings identified workforce planning as another key pre-requisite to expanding provision in an equitable and strategic manner. This included detailed discussions with Skills Development Scotland, Business Gateway, and colleges and universities, over providing relevant and accessible training to support the future ELC workforce.

7.26 Another recurring theme was that the 2017 trials will provide lessons to be shared; and that new trials should be designed to fill gaps, for example, in specific settings or locations.

7.27 A small number of respondents, across a range of settings, considered that phasing would happen naturally and organically, as infrastructure gradually developed, staffing levels increased, and current under-used capacity is identified and utilised.

Views on the options suggested in the consultation

7.28 Of the three options suggested, Option 3 received the greatest explicit support. Around 80 respondents, from a wide range of sectors, provided commentary which suggested that they supported Option 3. One respondent remarked:

"There is no 'one size fits all' approach to phasing. In some areas, it may make sense to target provision at areas of deprivation. In some areas, the best group might be parents who need childcare for work, and are on lower incomes. Remote areas with no other forms of childcare might also be a good place to start. This might be better planned on a local level to meet the needs of each community context." (Local Government)

7.29 Emerging from the supporters of this option were many perceived priorities for early expanded entitlement, the most frequently mentioned being:

• Deprived areas
• Trials across all settings which included childminders
• Working parents
• By age (both oldest to youngest and vice versa mentioned)

7.30 Support for Option 1 and Option 2 was approximately equal, with around 20 respondents explicitly identifying each as their preferred approach.

7.31 Those providing rationale in favour of Option 1 suggested that a universal, phased approach would avoid a post-code lottery and would encourage settings across the board to put in place infrastructure in readiness for the next phase.

7.32 Those favouring Option 2 suggested that local authorities could work pragmatically, stepping up entitlement in line with developments in capacity and as funding is released to them. A few respondents considered that local authorities would focus on areas of deprivation initially.

Views relating to Question 20 emerging from consultative events

7.33 Only one group addressed this question with support given for a phased approach to increasing entitlement, perhaps to 900 hours in the first phase.