Early learning and childcare expansion: BRIA

4. Scottish Firms Impact Test

4.1 The consultation section above describes the range of engagement activity undertaken with business through the policy development for the ELC expansion. This includes formal written responses and views gathered from supporting consultation events. Feedback from these consultations has shaped the development of the policy and the support put in place for providers in the private and third sectors, including childminders.

4.2 For each consultation an analysis report of the responses to the questions has been produced, and the individual responses (including from providers, where permission was given) have also been published. Table 3 provides links to the Analysis Reports and full consultation responses for each of the consultation exercises. The reports also reflect the key messages emerging from supporting programmes of consultation engagement events.

Table 3 – Public Consultation; links to published responses

Consultation	Analysis Report and Responses
Early Learning and Childcare 1140 Hours Expansion - Programme of Trials Consultation	Consultation Hub: https://consult.gov.scot/digital-communications/childcare-expansion/ Analysis Report link
A Blueprint for 2020: The Expansion of Early Learning and Childcare in Scotland Consultation	Consultation Hub: https://consult.gov.scot/creating-positive-futures/expansion-of-early-learning-and-childcare/ Analysis Report link
Early Learning and Childcare Service Model for 2020 Consultation	Consultation Hub: https://consult.gov.scot/children-and-families/service-model-for-2020/ Analysis Report link

How has the feedback from Providers informed the development of the policy?

4.3 The feedback gained from providers through written responses to the consultations, and through consultation engagement events, informed the development of the policy framework (in particular the Funding Follows the Child model) that will support delivery of the expanded entitlement.

4.4 In the sections below details are set out as to how potential impacts on providers from the expansion to 1140 hours are being addressed. The key potential impacts raised by providers focused on: (1) the need for payment of a sustainable rate for delivering the funded entitlement (and the real Living Wage Commitment); (2) workforce retention challenges; and (3) strengthening meaningful and genuine partnership working.

4.5 With regards to changes to the minimum framework for delivering funded ELC, the Service Model consultation analysis found a clear preference for the introduction of a maximum 10 hour session. However, respondents drew attention to the fact that this could affect a private or third sector provider business model which can rely on charging parents for wraparound hours, and that a sustainable funding rate was therefore vital.

Payment of a Sustainable Rate

4.6 As highlighted in section 1.21 in 2016 around 40% of funded providers in the private and third sectors were paid an hourly rate for provision of statutory ELC entitlement which was below the cost of delivery. This has meant some providers in the private and third sectors have looked to cross subsidise through selling unfunded provision to ineligible age groups and through wraparound care for eligible children to maintain their business sustainability. A sustainable rate would be required to address this funding gap for providers and to enable them to deliver the funded hours.

4.7 Analysis of local authority finance templates, submitted in March 2018, indicates that the estimated share of funded entitlement hours delivered by private and third sector providers, including childminders, will remain broadly unchanged in 2021-22 (where private and third sector providers, including childminders, are estimated to deliver 24% of the funded hours) relative to the baseline position in 2016-17 (where they were estimated to have delivered 23% of funded hours based on the finance templates). Whilst the share of funded hours delivered by these providers is expected to remain broadly the same this does mean that they will be delivering a considerably higher number of funded hours than at present, and this could increase above local authority assumptions depending on local parental demand.

4.8 The responses from providers indicate the following potential impacts on business models:

• An increase in the proportion of a provider’s income that is accounted for by the funded entitlement (as highlighted earlier, the funded entitlement accounted for, on average, around 23% of income for private and third sector funded providers in 2016).
• A corresponding reduction in the number of hours that providers can offer as “paid for” or wraparound hours. In particular, it is expected that for families whose children currently use more hours than their funded entitlement (currently 600 hours) with a provider – e.g. a combination of funded and unfunded hours – many of their wraparound hours will become funded hours (and funded through the sustainable rate) once the entitlement increases to 1140 hours.
• As highlighted in the benefits section the expansion will also provide a saving to families. How families utilise this saving could have implications for demand for hours with providers – for example, families may choose to increase the total amount of childcare they use in addition to the funded hours (for example holding their total childcare ‘budget’ constant) or they may hold their demand for childcare constant and bank the savings, or take some point in between.
• The Parent Survey highlighted that the majority of parents (around 75% responding to the survey) indicated that they intended to use all or almost all of the 1140 hours. Of these parents over 42% indicated that they would seek additional hours (paid for hours that are additional to the funded hours) after the expansion to 1140 hours, compared to 31% who would not. This suggests that there will still be significant demand for additional wraparound hours.
• The increase in the maximum session length for funded ELC may also impact on a provider’s opportunity to charge for additional wraparound hours (as any 10 hour session could be covered by the funded hours – whereas currently the funded entitlement can only be used for 8 of these hours).

4.9 Whilst these effects may have implications for the business models of providers, it is the rate that they receive from local authorities for delivering the funded hours that will determine the overall impact on income and sustainability. This is why the multi-year funding package, agreed with COSLA, includes a shared commitment to pay sustainable rates to providers in the private and third sectors that reflect the cost of delivery from 2020. The sustainable rate set by local authorities will:

• support delivery of a high quality ELC experience for all children;
• reflect the cost of delivery, including the delivery of national policy objectives;
• allow for investment in the setting – staff, resources and physical environment; and
• enable payment of the real Living Wage for those childcare workers delivering the funded entitlement.

4.10 Supporting technical guidance on setting sustainable rates from August 2020 was published on 29 April 2019.

4.11 The commitment to provide a sustainable rate to funded providers will mean that providers will receive a substantially higher hourly rate from August 2020 across all local authorities compared to the rates identified in the Financial Review in 2016. This will provide an opportunity to address some of the long term financial challenges faced by providers in the private and third sectors. There are already examples of many local authorities using the additional funding for the expansion to substantially increase hourly rates for providers in 2018-19 and 2019-20.

Supporting the Expansion of the ELC Workforce

4.12 The consultation responses, and engagement with providers, highlighted that some providers in the private and third sectors are facing workforce retention challenges as a result of the movement of staff to local authority settings.

4.13 The Scottish Government is working with local authorities and funded providers to take steps to mitigate the impact of these workforce retention challenges. For example, some local authority areas are opting to “grow their own” ELC workforce by retraining staff deployed in other departments of the local authority or by running their own training or apprenticeship programmes for those new to the sector, which means they are not running open recruitments for qualified practitioners which would lead to staff migration from funded providers in the private and third sectors.

4.14 A key element of the Scottish Government’s Delivery Support Plan for Providers is to support workforce recruitment and training. The Delivery Support Plan is intended to be a live document which will be updated as more support becomes available, and to reflect any challenges or opportunities that emerge in the transition to August 2020.

4.15 In April 2018, Scottish Government increased the financial contribution rates across all age ranges for ELC related apprenticeships which helps employers with the costs of training new staff. Since March 2019, private and third sector ELC providers registered with the Care Inspectorate have been able to advertise vacancies for free on the myjobscotland recruitment website on which all local authority vacancies are advertised, to ensure they have access to a wider pool of potential recruits and to provide parity with public sector settings.

4.16 The Scottish Government has, since October 2017, been running regular bursts of a national recruitment campaign to attract people from two distinct audiences to careers in early learning and childcare: school-leavers and career-changers / parental-returners.

4.17 The Scottish Government has also invested in additional HNC Childhood Practice places since financial year 2017-18, and is committed, jointly with Skills Development Scotland, to increasing the number of Social Services (Children and Young People) Modern Apprenticeships by 10%, year-on-year, for the period of the expansion.

Meaningful and Genuine Partnership Working

4.18 A key aspect of Funding Follows the Child is that 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. The Operating Guidance (on pages 10-11) sets out the expectations on local authorities and providers to support partnership working.

4.19 The Scottish Government and COSLA established the ELC Partnership Forum in October 2018 to identify problems, solve them together, and build meaningful and lasting partnerships.

4.20 The Scottish Government has also created mechanisms for sharing good practice partnership working, including through electronic means such as dedicated ELC spaces within Knowledge Hub.

Changes to ELC session length

4.21 With regards to the proposed changes to session length, Care Inspectorate reports show that the majority (97.4%) of private nurseries already provide ‘whole day’ sessions^[6]. This is one of the core offers of many providers in the private and third sectors. As such, it is expected that in the majority of funded settings there is existing capacity to provide 10 hour sessions.

4.22 It is also important to note that changes to the minimum framework will not place a requirement on ELC settings to provide the maximum 10 hour sessions where these are not already offered.

4.23 Moreover, any fees or charges not associated with the funded hours will continue to be at the discretion of individual settings, for example the purchasing of additional hours outside of the funded entitlement.