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

Summary of the Returns

13. Annexes A-B set out the information provided by local authorities in the following formats:

• Hourly rates for 3 - 5 year olds, and eligible 2 year olds, for the delivery of the funded ELC entitlement in 2022-23 and 2023-24 [Annex A].
• Payments for delivery of free meals to providers [Annex B].

14. To allow for consistent comparisons of sustainable rates across local authorities – and in line with the Funding Follows the Child guidance (i.e. meeting the costs of delivering an hour of ELC to one child) – the rates presented in Annex A do not include any top-ups to the sustainable rate for the delivery of the free meal commitment and/or for snacks (they are presented separately in Annex B).

15. Where local authorities provided additional explanations of the data, these are set out in the "Comments" column of the respective tables. The "Comments" column also sets out any additional information provided by local authorities on alternative rates offered to providers, including childminders, and when the rate was last reviewed.

16. Where local authorities offer different rates depending on whether settings provide evidence of paying staff the real Living Wage, the rates presented in Annex A are the ones paid to the majority of providers in that local authority, and the rate paid to the minority of providers is presented in the "Comments" column of the table.

Hourly Rates paid by local authorities for the delivery of funded Early Learning and Childcare

17. All 32 local authorities have confirmed rates for 2023-24.

18. 23 of the 32 local authorities pay a higher rate for 2 year old children than for children aged 3-5 years old. The other 9 local authorities pay the same hourly rate for 2 year old children as for children aged 3-5 years old.

19. In 5 local authorities, the rate can vary between providers for reasons other than the age of the child or additional support needs. Angus pays a different rate if the provider operates from Council premises; Shetland Islands pays a different rate if the provider is not in receipt of their Building Support Package; Argyll and Bute pays an enhanced rate once the provider is paying the increased real Living Wage of £10.90 per hour; similarly, Scottish Borders only paid the increased 2023-24 rate to providers who paid their staff the real Living Wage; finally, Perth and Kinross introduced a new Community childminding pilot, which pays an enhanced rate for care-experienced children.

20. Due to the variation in approaches to funding children with additional support needs, enhanced rates for these children are not included.

21. In Orkney, all funded provision is currently provided by childminders. For consistency, their rates are excluded from the minimum and maximum rates, and the calculation of averages highlighted in this summary. A summary of childminding rates is provided separately in the section on Childminding rates.

3-5 year old rates

22. When last reported for 2022-23 the hourly rates paid to providers (excluding rates for childminders) to deliver funded Early Learning and Childcare entitlement for 3-5 year olds varied from £5.45 to £6.62 per hour, and the average reported rate across local authorities for 3-5 year olds was £5.80 per hour.

23. Out of the 32 local authorities, 23 have increased their hourly rates for 3-5 year olds in 2023-24. The other 9 have kept the same rates as reported in 2022-23.

24. Local authorities report that rates for delivering an hour of funded ELC for 3-5 year olds (excluding childminders) will vary from £5.50 to £6.89 per hour in 2023-24.

25. The average rate for 3-5 year olds across the local authorities is £6.04 per hour in 2023-24.

26. The average rate paid to providers for 3-5 year olds has increased by around 4.1% since 2022-23 (an increase in the average rate from £5.80 per hour to £6.04 per hour).

27. Average rates paid to providers for 3-5 year olds receiving funded ELC have increased by around 64.1% between 2017 and 2023, from £3.68 per hour in 2017-18^[1] to £6.04 per hour in 2023-24.

28. In 2022-23 the difference between the lowest rate (£5.45 per hour) and highest rate (£6.62 per hour) paid for 3-5 year olds was £1.17, or 21.5%. In 2023-24, the difference between the lowest rate (£5.50) and the highest rate (£6.89) paid for 3-5 year olds is £1.39, or 25.3%. This means that the variance between the lowest and highest rate paid for 3-5 year olds has increased by 3.8 percentage points since 2022-23.

2 year old rates

29. When last reported for 2022-23, the rates paid to providers (excluding rates for childminders) to deliver funded ELC for eligible 2 year olds varied from £5.50 to £8.50 per hour, and the average rate across local authorities for eligible 2 year olds was £6.43 per hour.

30. Out of the 32 local authorities, 19 have increased their hourly rates for eligible 2 year olds since 2022-2023 and 13 have kept the same rates as in 2022-23.

31. Local authorities report that rates for delivering an hour of funded ELC for eligible 2 year olds (excluding childminders) vary from £5.50 to £8.50 per hour.

32. The average rate for eligible 2 year olds across the local authorities for 2023-24 is £6.68 per hour. This represents an increase of around 3.9% compared to 2022-23.

33. In 2022-23, the difference between the lowest rate (£5.50 per hour) and highest rate (£8.50 per hour) paid for eligible 2 year olds was £3.00, or 54.5%. In 2023-24, the difference between the lowest rate (£5.50) and the highest rate (£8.50) paid for eligible 2 year olds has remained at the same as in 2022-23 – a gap of £3.00 per hour, or 54.5%.

Childminding rates

34. In the majority of local authorities, childminders receive the same rate as private and third sector funded providers. However, 8 local authorities offer a separate hourly rate for childminders delivering funded ELC. The summary to follow does not include Perth and Kinross's pilot of community childminding for care-experienced children.

35. For the 8 local authorities paying a separate rate for childminders in 2023-24, these rates vary from £4.76 to £6.30 per hour for both eligible 2 year olds and 3-5 year olds. The average rate for 3-5 year olds is £5.51 per hour, and the average rate for eligible 2 year olds is £5.55 per hour.

36. In one local authority, the separate rate paid to childminders for eligible 2 year olds has decreased since 2022-23. The other separate rates paid to childminders have either increased or stayed the same compared to 2022-23.

Rate setting timeframes

37. Out of 32 local authorities, 30 reviewed their rates in 2023, and 2 of them last reviewed their rates in 2022.

38. In 2023-24, 18 out of 32 authorities agreed and set their rates in advance of their introduction, whereas 14 backdated them. In cases of backdating, the rates are either set from the start of the financial year (April 2023) or from the start of the academic year (August 2023).

39. 12 of the 32 local authorities introduced the 2023-24 rate, or decided to keep their existing rate, from April 2023, while 20 introduced it from August 2023. One authority initially introduced an increased rate from April 2023, but reviewed it and modified it in August 2023.

40. Out of 32 local authorities, 7 authorities who introduced or reviewed their 2022-23 rate for August are now introducing the 2023-24 rate from April, in line with the financial year (up from 5 local authorities doing this in 2022-23, to 12 local authorities in 2023-24).

Payments for delivery of the free meal commitment

41. Every child attending a funded ELC session – which is any session that includes funded hours, regardless of whether they are mixed with 'paid for' hours – from August 2021 is provided with a free meal.

42. Local authorities provide settings with the funding to deliver the free meals, unless, in cases where a setting does not have onsite catering facilities, there may be an agreement that the local authority will provide meals to the setting.

43. Funding to deliver this commitment is additional to the sustainable rate and, as set out in the Funding Follows the Child guidance, local authorities must ensure that they are transparent as to the funding being provided to private and third sector providers for the delivery of the free meal commitment.

44. The most common approach for 2023-24 is that local authorities will provide settings with a payment for each meal (with 21 local authorities following this approach). 11 local authorities provide payments for meals through a top-up to the hourly sustainable rate. Since 2022-23 only 1 local authority changed its approach, moving from a set rate per meal in 2022-23 to a top-up to the hourly rate in 2023-24.

45. Out of 32 local authorities, 24 kept the same meal rate as last year, 7 increased their meal rate, and 1 changed approach (a change in approach prevents making a comparison with the previous year).

46. The returns highlight some variations in the level of payment made to settings for the delivery of free meals.

Payment per meal

47. Where a payment is made per meal/day this varies from £2.00 to £4.23 per meal in 2023-24, a variance of £2.23 (or 112%) per meal between the lowest and highest set meal rate. In comparison, in 2022-23, the lowest rate was £1.99 and the highest was £3.11, a difference of £1.12 per meal, or 56%.

48. In 2023-24, where local authorities provided a payment per meal, the average paid was £2.82 per meal.

49. On average, the payments made per meal increased by 3% compared to the ones reported in 2022-23. However, this figure is skewed by one local authority increasing its payment by 36%. If this local authority is excluded from the calculation, the average increase is of 1%. Out of the 21 local authorities delivering the free meal commitment through a payment per meal, 4 of them increased their rate in 2023-24, with 3 authorities increasing it between 8% and 10%, and one increasing it by 36%. The other 17 local authorities making payments per meal did not increase their rate.

Payment via a 'top-up' to the sustainable rate

50. Where local authorities choose to provide an additional top-up to the sustainable rate for delivery of the meal commitment, this 'top-up' to the sustainable rate varies from £0.30 to £0.57 per hour, a variance of £0.27 per hour, or 90%. In comparison, in 2022-23, the lowest 'top-up' was £0.30 per hour and the highest was £0.50 per hour, a difference of £0.20 per hour, or 66%.

51. In 2023-24, where local authorities provided the meal payment via a 'top-up' to the sustainable rate, the average 'top-up' to the sustainable rate is £0.44 per hour.

52. On average, the payments made via a 'top-up' to the hourly rate increased by 4% since the 2022-23 report on sustainable rates . This figure should be considered with caution, as out of the 11 local authorities who chose this method, only 3 increased their rate compared to 2022, with these increases ranging from 8% to 14%. Out of the other 8 local authorities, 7 did not increase their rate, and one changed approach, which does not allow for a direct comparison to be made.

53. Three authorities who pay a top-up to the sustainable rate to their private and third sector providers for meals pay a set meal rate to Childminders. These set meal payments range from £1.95 to £3.00 per meal. In other local authorities, Childminders receive the same payment/'top-up' for meals as private and third sector providers (where applicable).