Early learning and childcare - sustainable rates for funded providers: overview 2023 to 2024

Introduction

1. Funding Follows the Child provides the underpinning policy framework to support the delivery of funded Early Learning and Childcare (ELC). A key aspect of Funding Follows the Child is the payment of sustainable rates to providers in the private, third and childminding sectors for the delivery of funded ELC.

2. In April 2019, guidance was published to support local authorities to set sustainable rates. The guidance was produced based on feedback gathered from across the sector and sets out the principles that should underpin any approach to setting sustainable rates; and options for taking forward the process.

3. Updated joint Scottish Government and COSLA guidance on setting sustainable rates for 2022-23 was published on 26 May 2022.

4. The guidance highlights that the rates paid to providers in the private, third and childminding sectors for the delivery of funded ELC by local authorities should be sustainable and should meet the following criteria:

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

5. The guidance also highlights that from a local authority perspective the rate must be sustainable for authorities in terms of the budgets available, and that:

• the rate does not have a detrimental effect on the local authority's ability to continue to pay for the service in the long-term;
• the wider package of 'in-kind benefits', available to funded providers as part of their contract with the local authority in addition to the sustainable rate, is considered; and
• the rate does not need to be cross-subsidised by parents and carers through charges for non-funded hours.

6. The joint guidance is clear that local authorities need to reflect the most up-to-date cost information in setting rates, and that is particularly important for providers during the current costs crisis. The guidance also emphasises the importance of ongoing consultation and dialogue between local authorities and their local ELC providers.

Data Collection

7. The Scottish Government is committed to collecting and publishing data on sustainable rates annually. The previous report on sustainable rates, with information for 2022-23, was published on 22 December 2022. However, at the time of this report being published 2 local authorities reported that they were planning to agree their rate(s) in early 2023. Updated information on the final sustainable rates set for 2022-23 was collected as part of the joint Scottish Government and COSLA Review of Sustainable Rates, which was published on 20 December 2023. This up-to-date information on 2022-23 rates is used for comparisons in this report.

8. The Scottish Government wrote to local authorities on 10 November 2023 to request an update on the hourly rates that are currently paid to providers for the delivery of funded early learning and childcare and the rates local authorities have set for 2023-24; as well as the payments to funded providers for delivery of the free meal commitment.

9. Alongside the request for data on rates, the Scottish Government also utilised this survey to begin collecting information on the support package local authorities are offering to their funded providers for the delivery of ELC to children with additional support needs. Collection of evidence on how children with additional support needs are being supported was a recommendation of the joint Scottish Government and COSLA Review of Sustainable Rates (this data is discussed below at Rates Review and Next Steps).

10. During previous sustainable rate data collection reports we collected and published information on the general support packages made available by local authorities to funded providers. This year, given the additional requirement for local authorities to provide information on how children with additional support needs are being supported, and that it has only been around one year since the previous report was published, we agreed that this information would not be collected to keep the exercise manageable for local authorities. This information will be collected again in a future report.

11. Nonetheless, it is important to note that the general support package is a significant part of the overall support available to private and third sector providers of funded ELC. A range of approaches to the provision of support are in place across local authorities and can include, for example, funded access to professional learning opportunities and quality improvement resources; administrative, business and legal support; and targeted support to improve business sustainability; or access to pedagogical support, for instance through a teacher. The rates presented in this report should therefore be viewed within the context of the overall package offered by each local authority. For further information about the support packages offered by local authorities in 2022-23, see Annex D of last year's report.

12. This document is only intended to set out the information provided by local authorities in response to this request.