Early learning and childcare expansion: BRIA

1. Purpose and intended effect

Background on expansion to 1140 hours

1.1 The Scottish Government’s ambition is for every single one of Scotland’s children to grow up in a country where they feel loved, safe and respected, and able to reach their full potential. It is this ambition that is at the heart of the Scottish Government’s commitment to expanding funded early learning and childcare entitlement that is free at the point of access. It is a transformative policy ambition which will secure positive outcomes for children across Scotland and grow Scotland’s economy.

1.2 The Children and Young People Act (Scotland) 2014 (the 2014 Act) made 600 hours of funded ELC per year available for all 3 and 4 year olds and extended the entitlement to eligible 2 year olds. In a joint agreement with local government, the Scottish Government has committed to almost double the entitlement to 1140 hours per year from August 2020. This commitment was first made in the ‘One Scotland’ Programme for Government 2014-2015.^[1] Subsequent Programmes for Government have also reiterated this commitment.

1.3 In April 2018 the Scottish Government and COSLA agreed a multi-year funding package to fully fund the expansion of ELC. The funding package is based on a robust, shared understanding of the costs attached to the expansion.

1.4 This investment will support the delivery of high quality, flexible ELC that is accessible and affordable for families.

1.5 Local authorities have a statutory duty to ensure that there are funded places available for all eligible children in their area. The funded places are available across a range of providers in the childcare sector, including in local authority run settings and through the local authority commissioning places from providers in the private and third sectors, including childminders. The Scottish Government understands from local authority Finance Templates, which were submitted in March 2018, that currently, around 77% of funded hours are delivered in local authority settings, with around 23% delivered in settings in the private and third sectors, including childminders.

1.6 Settings which offer the funded entitlement are referred to as funded providers.

1.7 In order to ensure that the funded entitlement is delivered in high quality ELC settings, Funding Follows the Child will be introduced in August 2020 alongside the statutory roll-out of 1140 hours. This approach is ‘provider neutral’ and is underpinned by a National Standard that all settings who wish to deliver the funded entitlement will have to meet. Details of how Funding Follows the Child will operate were published on 18 December, including operating guidance for local authorities and providers.

1.8 Other key aspects of Funding Follows the Child include:

• Local authorities will set a rate locally that is paid to funded providers in the private and third sectors, including childminders, to deliver the funded entitlement. This rate should be sustainable and reflect national policy priorities, including funding to enable payment of the real Living Wage to all childcare workers delivering the funded entitlement.
• Every child receiving a funded ELC session will receive a free meal.
• A commitment to simplifying the process for, and reducing the burden on, providers to deliver the funded entitlement.
• Local authorities and providers should work together meaningfully and in genuine partnership in delivering flexible ELC provision, while continuing to ensure that a high quality experience for children is maintained and accessible to all.
• Settings must ensure that the funded hours are free at the point of access and parents and carers are not required to purchase additional hours beyond the funded entitlement in order to access their child’s funded hours at a setting.

1.9 Further supporting technical guidance on establishing sustainable rates for funded providers; meeting the business sustainability in the National Standard, and on transition options on contracting was published on 29 April 2019.

Changes to Minimum Framework for Delivery

1.10 The ELC expansion prioritises the delivery of high quality provision, which will help to play a vital role in closing the poverty-related attainment gap. However, it is also expected that there will be increases in the flexibility and choice offered to families with regards to how they access their child’s funded ELC entitlement.

1.11 Local authorities have a statutory duty to consult parents and carers in their local areas about how they should make ELC available. This is to ensure that funded ELC is delivered through an appropriate mix of providers and patterns of delivery within their authority area and is delivered in a way which is responsive to parental demand.

1.12 1140 hours is equivalent to 30 hours per week over term time (38 weeks per annum – the same number of hours a child attends primary school), but families will have a choice of different patterns of provision including provision over a full year. The offer available across a local authority area will be informed by the local authorities consultation with families.

1.13 In some cases the offer may include longer sessions. Currently Section 51 of the 2014 Act sets out that funded ELC must be delivered in sessions which are no less than 2.5 hours and no more than 8 hours in duration. This is referred to as the minimum framework for the delivery of ELC.

1.14 As set out in the Funding Follows the Child Frequently Asked Questions document the Scottish Government is confident that providers are able to offer a high quality experience over longer sessions and the National Standard will offer opportunities to measure this over time through Care Inspectorate quality evaluations.

1.15 The proposed changes to the minimum framework for delivery are intended to allow funded ELC to be delivered through sessions of 10 hours or less, tying the maximum session length for funded ELC more closely to the working day.

1.16 While flexibility for families is a welcome element of the expansion of hours, the key purpose of the approach is to ensure children have the best start in life. Therefore, the Scottish Government will reserve the right to amend this legislation again if there are concerns that evidence is showing a detrimental impact on children’s wellbeing and outcomes.

Overview of the Childcare Market in Scotland

1.17 The ELC sector in Scotland operates as a mixed economy model with a mixture of public, private and third sector providers. Most of these providers offer the funded entitlement. Care Inspectorate data shows that in December 2017, 83.2% of private nurseries and 92.8% of third sector nurseries were delivering the funded entitlement. Whilst the number of childminders delivering the funded entitlement has been increasing in recent years, a survey of members of the Scottish Childminding Association (SCMA)^[2] indicates that these increases are from a low base.

1.18 The market is also mixed for providers as they receive income both from delivering the funded hours and from fees paid by parents and carers for non-funded hours.

1.19 The Financial Review of Early Learning and Childcare in Scotland: The Current Landscape, published in September 2016, set out more context on the structure of the childcare market in Scotland and the sources of income for providers. This report highlighted for ELC providers in the private and third sectors the majority of income (around 77%) in 2016 came from the fees that they charge to parents and carers for non-funded hours. This could cover fees for non-eligible children (for example those aged 0-2) or for additional hours that parents of eligible children require (e.g. non-funded hours or ‘wrap-around’ hours).

1.20 The share of providers’ income accounted for by the funded entitlement is expected to increase with the roll-out of 1140 hours as settings allocate more of their capacity towards delivering the funded hours.

1.21 The Financial Review Analysis highlighted that, in 2016, the funding rate paid by local authorities to around 40% of funded providers in the private and third sectors did not cover the funded providers’ costs for delivering the funded hours. In 2016 the average (mean) reported rate paid to providers by local authorities for delivery of the funded hours (for 3-5 year-olds) was £3.59 per hour. This compared to an overall estimated average (mean) cost to providers of £3.70 for providing one hour of ELC to 0-5 year-olds. Given different staff ratios by age, it is estimated, in the Financial Review, that costs for providing ELC to three and four year olds could be up to 15 per cent lower than this and costs for 2 year olds up to 20 per cent higher^[3].

Objective

1.22 The Children and Young People (Scotland) Act 2014 (Modification) (No.1) Order 2019 (“the Order (No.1)”) is intended to modify the current minimum framework to

a) Remove the minimum session length (currently 2.5 hours);

b) Extend the maximum session length to 10 hours or less (currently less than 8 hours)

1.23 It is important to note that the effect of the Order (No.1) will only be to change the minimum and maximum session length for funded ELC provision. It is intended that Order (No.1) will come into force from 1 August 2019. Bringing this change in from 1 August 2019 will support local authorities to provide more flexibility on session lengths, and to test new delivery models, during the phasing period and in preparation for full implementation of 1140 hours.

1.24 The Children and Young People (Scotland) Act 2014 (Modification) (No.2) Order 2019 (“the Order (No.2)”) will amend the 2014 Act to place a statutory duty on education authorities (i.e. local authorities) to secure 1140 hours of funded ELC in each year for which a child is eligible and a pro-rata amount for each part of a year. It is intended that this will come into force from 1 August 2020.

Rationale for Government intervention

1.25 The primary driving force behind the expansion of funded ELC is to secure improved outcomes for children in Scotland.

1.26 The provision of high quality ELC is a key contributor to our ambition to close the poverty-related attainment gap. International research and evidence from the Scottish Government’s Growing Up in Scotland study shows that children, particularly those from more disadvantaged backgrounds can benefit from attending high quality funded ELC.

1.27 Recognising the opportunity ELC provides to improve children’s development and narrow the attainment gap, the expansion to 1140 hours intends to maximise the opportunity to ensure that all children in Scotland get the best possible start in life and receive an equal chance to succeed.

1.28 As part of the expansion, it is also envisaged that an increase in the flexibility of how the funded entitlement is delivered will allow more parents to work, train or study, especially those who will benefit from routes into sustainable employment and out of poverty.

1.29 The move to modify the minimum delivery framework is intended to ensure funded ELC is sufficiently flexible to meet parents’ and carers’ needs within a framework of high quality provision. Extending the maximum session length would permit ELC settings to offer full day sessions (up to 10 hours) of funded hours which are more closely tied to the working day (e.g. 08:00-18:00).

1.30 The Scottish Government is also taking the opportunity to remove the minimum session length. The minimum session length was introduced in the 2014 Act in order to ensure a minimum level of service would be provided. ‘Day care of children’ services are required to be registered with the Care Inspectorate where the service meets the minimum service duration - of more than two hours in any day. While there is currently no legislative requirement that all funded ELC should be registered with the Care Inspectorate, in practice the Scottish Government and local authorities require it to be so. The National Standard for becoming a funded provider requires settings to achieve minimum Care Inspectorate inspection grades and so assumes that services are registered and therefore regulated with the Care Inspectorate and meet the minimum service duration and a defined quality standard.

1.31 The policy to expand ELC entitlement to 1140 hours via the Order (No.2) will contribute to the following National Outcomes:

• We grow up loved, safe and respected so that we realise our full potential
• We are well educated, skilled and able to contribute to society
• We tackle poverty by sharing opportunities, wealth and power more equally
• We have a globally competitive, entrepreneurial, inclusive and sustainable economy
• We have thriving and innovative businesses, with quality jobs and fair work for everyone