Early learning and childcare: sustainable rates review

Appendix B- Synopsis of Evidence from Partner Providers

B1: Evidence Gathering

1. During the review, funded providers were surveyed, and given the opportunity to provide feedback on the sustainable rate-setting process in their area, what engagement took place between them and local authorities with respect this process; and on the Ipsos-Mori cost collection exercise carried out in 2022. The survey was live from 12th January until 8th February 2023, the deadline having been extended. The survey was distributed via sector representative bodies (and other provider groups), and promoted via Care Inspectorate provider notices.

2. We received a low number of responses to the survey. 65 survey responses were received. 58 of these came from nursery partner providers in the private, voluntary and independent sectors. In some cases a single response has been sent in on behalf of a chain of nurseries. Due to the anonymous nature of many responses, it is not possible to be wholly accurate - however we estimate these responses to be representative of feedback from around 99 settings. At the last census there were 985 providers of funded ELC operating in the private, voluntary and independent sectors, so the response reflects, broadly, around 9% of potential participants.

3. A further 7 responses appear to be from childminders (the survey did not ask the participant to declare whether they were a childminder or nursery, so this information is derived from the response). This is less than 1% of the number of childminders currently approved to provide funded ELC.

4. Responses were spread across the country, with the number of separate survey responses across each local authority varying between 0 and 8. There was also no consistent difference in the response rate when compared with the monetary value of the sustainable rate set by each local authority.

5. As a result, a high degree of caution will need to be applied to the feedback obtained, as it represents a small sample of providers nationally. In addition, it is not possible to identify any trends for any particular local authority, region or sustainable rate value.

6. The sector has had a high number of requests for information post-Covid. In addition, Ipsos Mori conducted a cost collection exercise in 2022, and providers are also expected to engage with their local authority. Given the possible fatigue being experienced on information requests, caution should also be applied before drawing any interpretation from the low response rate.

7. The feedback from this survey is summarised below at B2.

8. A selection of those funded ELC providers who had participated in the survey of providers were subsequently invited to meet with CoSLA and SG officials during March and April 2023. These meetings were offered on an individual basis to maximise participation from the relatively low pool of respondents to the provider survey, and to ensure honest and open discussions. Officials included, as much as the limited sample allowed, providers with different business models and situated in different local authorities.

9. Meetings were held with the 12 providers who responded to an invitation by the deadline given. Officials also took written evidence from the Early Years Scotland Members’ Steering Group to complement the available data; and, met with SCMA to ensure engagement included sufficient evidence around the particular concerns of childminders.

10. The agenda for these meetings was agreed by COSLA and SG, and informed by the responses to the survey they had participated in, and also by the written feedback obtained from local authorities during the sustainable rates data collection exercise at the end of 2022 (which is summarised within Appendix A).

11. Feedback obtained has been broken into 4 broad categories: Rates and Provider Sustainability; Communications and Engagement; Cost Data Collection (including the Ipsos Mori 2022 cost collection exercise), and additional evidence in relation to Childminding.. This feedback is summarised below at sections B3– B6.

B2: Written Feedback from a Survey of Partner Providers (February 2023)

12. Survey participants were asked to ‘provide any feedback on the sustainable rates setting process for 2022-23 in your local authority area(s) that you would wish to be considered as part of the Review’.

13. The most common response received (from 26 participants) was in relation to the level of funding for partner providers not being fair when compared with the level of funding that local authorities are seen to be spending on their own settings. The core message in these responses is an expectation of parity of funding per hour delivered for private and public sector (which is not an objective of the sustainable rates guidance) and in some cases that local authorities are pre-disposed to favour their own provision. One respondent noted ‘if funding follows the child, every child across Scotland should receive the same amount regardless of where they live or what type of setting they attend’. This expectation of fairness or parity often appears independently of sustainability concerns.

14. 14 responses mentioned workforce pressures in relation to the rates set, while 12 mentioned more general business sustainability concerns, again in relation to the level of rate being set. Workforce pressures mentioned include the pay disparity between private and public nurseries, and difficulty recruiting.

15. 5 responses noted difficulty obtaining adequate funding or support for children with additional support needs. 4 responses noted they were not receiving adequate funding for providing meals. Some respondents mentioned issues with the Ipsos Mori data collection during this section, which is covered during the next question.

16. Survey participants were also asked to ‘Please provide details of any engagement that you have had with your local authority as part of the sustainable rate setting process for 2022-23.’

17. 19 responses from funded providers noted that there had been either no, or a minimal amount, of engagement with their responses prior to setting rate. A further 9 responses noted that there had been engagement, however they would have liked more.

18. 14 responses noted that while there had been engagement, they did not find it meaningful. A common theme in these responses, is that engagement doesn’t include the ability for providers to comment or negotiate on rates as they are being set, for example ‘no ability to negotiate’ or ‘advised outcome only’. For these respondents there may be an expectation of being involved at the point of decision making, rather than only when evidence is being gathered.

19. 14 respondents noted that engagement had included meetings, while 10 respondents mentioned engagement relating to the Ipsos-Mori cost collection exercise. 2 respondents mentioned surveys of providers.

20. Survey respondents were finally asked if they had participated in the Ipsos Mori data collection exercise – 45 had, and 18 stated they had not. All participants were then asked for follow on feedback, either why they had not participated, or what feedback they had on the process.

21. The most common feedback (both from those that had participated, and those who had not) was that the survey was flawed because it asked for historical cost figures, and did not ask those participating to project either current or future costs. 19 responses mentioned this, with one respondent noting ‘Pointless. Was backward looking and not based on forecasts.’ These respondents did either not know, or have confidence, that the historical data could be a starting point, with projected increases applied by a local authority later.

22. 12 respondents had issues with the content of the survey. This was commonly because they felt the questions were generic and did not apply well to their particular business; or because they felt the survey was too comprehensive or intrusive, asking questions about their wider business rather than just funded provision.

23. 8 respondents felt the survey was too difficult or time consuming, and 1 mentioned a lack of support whilst completing the survey. 5 respondents who had participated were complimentary and found the process straightforward. 4 respondents who had not participated had been unaware of the survey.

B3: Feedback from Engagement with Partner Providers – Rates and Provider Sustainability

Rates

24. 8 of the 12 providers interviewed raised concern over the fairness of how funding for ELC is allocated between local authority provision and partner provision, with a widespread perception that local authority settings receive more resources per hour of funded ELC delivered than private, voluntary or third sector settings. The evidence from Early Years Scotland also noted this issue. This perceived unfairness was most keenly felt in relation to workforce, where the current policy objective, to support payment of the real living wage for childcare workers delivering funded ELC, was frequently compared with the significantly higher rates of pay available to ELC staff within local authority settings.

25. 7 providers indicated that current rates did not cover their costs of delivery and were not sustainable, with 4 indicating that the rate they were receiving had not kept pace with RLW increases or inflation. 3 providers noted their private prices were higher than the sustainable rate they received for funded provision, while 1 had set a price lower than the sustainable rate. 1 provider noted their private pricing was subsidising funded provision, and 2 noted they had recently had to increase prices.

26. 5 providers noted they were able to maintain their business at current rates, but were clear that just because they were operating within the funding available, this was not necessarily a good indication of long term sustainability (for the reasons described below). The rates also did not enable them to adequately reinvest in their business. 3 noted that the 1140 expansion had increased demand, and that this was beneficial. Early Years Scotland feedback noted that the term ‘sustainability’ was not always helpful, as it indicated that just making ends meet was acceptable, when partner providers sought equity and parity of funding for their funded provision.

27. 8 providers were concerned that the current rate-setting process did not properly account for different business models throughout the sector. This was mentioned in relation to rural settings, settings specialising in outdoor play, as well as community based voluntary and third-sector settings. 2 voluntary settings noted that access to other funding, such as grant awards, had become more difficult in recent years.

28. 5 providers indicated they had concerns over any further expansion to funded childcare given current rate values and/or policy. Notably, those most concerned were typically those most reliant on funded provision, who already had the least ability to influence their business model via private pricing. 2 providers raised concern at the current level of funding for eligible 2 year old provision in their area (noting that not all areas have a separate rate despite the different staffing ratios). There was one instance of a provider being unable to offer funded places for eligible 2 year olds for the rate their local authority paid, and an eligible child is therefore attending on a private basis.

29. 4 providers noted the significant variation in rates being paid by different local authorities, with the term ‘postcode lottery’ being used to describe the funding available by one provider, and another provider with experience of provision in multiple areas asked how the value of these differences could be justified.

30. 3 providers wanted rates set nationally, with 1 noting it should be by an independent body, and 2 noting that multiple rates would be needed for different business models and areas. The group providing evidence for EYS felt that the funding gap between partner settings and local authority settings would continue to widen unless a rate was agreed nationally. 2 providers indicated they wanted more transparency on how local authority settings are funded, and 1 said that local authorities had a conflict of interest while setting rates given responsibilities arising from their own provision.

Sustainability Concerns

31. Workforce challenges were a dominant theme throughout the engagement sessions, with 11 of the 12 providers noting that the recruitment and retention of staff remained a key concern. There was a broad consensus that sustainable rates, as currently implemented, limited what partner providers could pay staff, and that this presented a significant challenge to their business. In particular, for some providers their current rate limited their ability to offer pay above the real Living Wage. 6 of these providers noted specific recent problems arising from losing staff, often to local authority nurseries, sometimes to other sectors. While replacement staff were usually found after a concerted effort, 3 providers noted that they would often lose the most experienced staff to local authorities, and were only able to recruit people new to the sector, who then had to be trained. Some were worried around the high turnover having a potential impact on quality. The one provider who had not had significant workforce challenges recently noted that the local authority whom they partnered was proactively seeking to recruit new people to the sector, rather than relying on recruiting existing partner provider staff.

32. 11 providers commented on their current rates of pay, with 2 unable to pay the real living wage (RLW) to all staff, and the other 9 paying at least the RLW (2 of these providers noting they were paying significantly above). 2 providers noted that they relied on paying modern apprentices less than the RLW in order to maintain their business sustainability. Another 2 noted that as they operated a payscale with the RLW at the minimum level, that increases to the RLW had a contingent effect on more senior staff throughout the business in order for them to maintain differentials, which was not supported by current rate policy.

33. 8 providers indicated that current funding did not support an adequate level of reinvestment in their setting, and 1 noted that more clarity was needed on what was an acceptable return on investment.

34. 8 providers noted the current impact of inflation on other costs across their business, including utilities and property costs. Notably, 6 providers had concerns over their current meal costs and stated that the amounts received had either not increased in line with inflation, or did not currently meet the costs of delivering meals, with several mentioning rapidly rising grocery costs. There was a specific challenge for an island-based provider who reported that they had limited options for buying in bulk to reduce unit costs, and that they already faced an “island premium” in relation to food costs.

35. 4 providers raised concern over the level of funding available to provide the required care for children with additional support needs. Early Years Scotland feedback noted the large disparity in the levels of support offered for children with ASN across Scotland, and the staff providing their care. 3 providers noted that there were still additional costs arising from the pandemic, and the resulting impacts on wellbeing and health.

B4: Feedback from Engagement with Partner Providers – Communications and Engagement

36. When asked, in the broadest sense, to describe relationships between partner providers and their respective local authority, 5 providers indicated they were generally good, or had improved; while 5 indicated that they were poor or had deteriorated. Another provider, operating in two areas, indicated the relationship in one area was usually good, while the other was significantly worse. These results are indicative of the variance in providers’ experiences of communications and engagement from partner local authorities, and significant divergence in how effective this was felt to be, that was evidenced during the engagement sessions.

37. 5 providers noted a change in their local authority staff had been instrumental to either an improvement in their relationship, or that the loss of an LA staff member had resulted in a deterioration. 3 providers specifically noted the importance of having a trusted contact, and 1 provider noted that it was helpful to have access to a financial decision maker. Generally, the engagement sessions demonstrated the crucial role of effective personal relationships between individual staff members in local authorities and partner settings, with partner providers considering the availability of experienced ELC staff members within a local authority to be of particular importance.

38. The most positive comments around LA support were generally in relation to operational aspects. 4 providers noted the value of the additional support package provided by their local authority, including support meeting quality criteria and training for staff. 2 providers noted regular meetings, and 1 provider noted they benefitted from regular communication from their LA.

39. 4 providers noted that increased awareness of LA responsibilities, and how their funding worked in practice, would be helpful to relationships. 2 asked for more national action to be taken to ensure all local authorities were delivering the same level of communications, and 2 also stated that there should be more structured requirements around communications and engagement.

40. Providers were generally more critical when discussing engagement specifically on sustainable rates. 8 providers noted that they felt they had not received enough engagement prior to rates being set, with some noting a lack of meetings or discussion in this area. 5 providers went as far as to state that engagement on rate-setting had not been meaningful, and they had simply been informed of the sustainable rates once they had been set.

41. 8 providers stated that communication on rates had not been timely, or that they had not been given clear timelines on rate decision making. 6 providers stated that when the rate was communicated to them, it was not made clear how the rate had been arrived at, and 2 noted that the rate-setting process needed to be more transparent. The evidence from the EYS group was more positive, with some members giving examples of positive feedback on their engagement with their relevant LAs around rate setting.

42. 2 providers noted that there needed to be more providers involved with their respective LAs, and 1 noted they had been unable to engage effectively as they were not a part of the working group in their area. 1 provider felt that the approach by their local authority was not one of true partnership, while another provider felt that their local authority did not understand their business model.

B5: Feedback from Engagement with Partner Providers – Cost Data Collection

43. 4 providers felt that the survey of cost data collection, conducted by Ipsos Mori (IM) in 2022, was flawed as it had asked for existing costs, perceived as historical costs, and that these were not representative of costs that would be incurred throughout the coming financial year. There was similar feedback from the EYS group, who felt the survey was reinforcing the fact that many settings have had to make heavy cutbacks and savings to be ‘sustainable’ on the rates offered, but that these costs do not reflect the true costs of their services going forward. Generally, there was a lack of trust in how the data would be uplifted to represent current costs – 3 providers asked for greater clarity on how data would be used, and 2 said that a more standardised approach to how the data would be used when setting rates would help build trust in the process.

44. A lack of trust in the process was also demonstrated by some providers with respect to the intentions behind the data collection, with 3 stating they did not fully trust their LA’s motives, and 2 stating they felt that the data would be used to set rates at the lowest possible amount.

45. 4 providers noted concerns around data security, and who their data would be visible to (mentioning local authority, or other providers, potentially accessing commercially sensitive data). The information from the Ipsos Mori cost survey was processed in a way to that protected the confidentiality of providers and data was only provided, at local authority or RIC level, where the response threshold, a sample of at least 10 providers in the area, was met. However these providers were either unaware, or did not fully trust, this safeguarding.

46. 5 providers noted that the questions asked by the Ipsos Mori survey were not able to adequately reflect their costs of delivering funded provision, with one describing the questions as ‘limiting’, and some stating that the questions asked were not appropriate to their business model.

47. 4 providers found the cost collection exercise too difficult or time consuming to complete. It was evident from the engagement sessions that completion of the survey was easier for settings who had dedicated staff for financial management.

48. 4 providers noted that there should be better communications and awareness around the exercise, and in particular its importance for rate setting. 3 providers noted their disappointment that low participation had meant no local data being available in their area. 2 providers wanted partner providers to take more of a lead in developing a future exercise, and 1 noted that LA settings should be subject to the same scrutiny.

B6: Feedback from Engagement with Partner Providers – Additional Feedback in relation to Childminding

49. SCMA withdrew support from the Ipsos Mori cost data collection exercise as they indicated it did not appropriately represent the costs of delivery for childminders, noting that childminders typically work a number of unpaid hours to administrate their provision; and that total costs should be looked at. The SCMA reported that the exercise would require significant reworking in order to increase childminder participation – it should be shorter, and more focussed on key data.

50. The SCMA reported their view that some LAs do not adequately support a blended model of nursery/childminder provision, and the term time model of paying sustainable rates can be problematic for some childminders. Childminders also require IT support to receive rate payments from some LAs, which SCMA are delivering.

51. According to SCMA data, only 13% of childminders can pay themselves at least the real living wage currently; and, in some cases, need to pay an assistant the RLW, which may then exceed their own wage. They feel the onboarding process for childminders needs to be simplified, as the current level of paperwork is seen as bureaucratic and diminishes the effective hourly rate.

52. The sustainable rate needs to reflect the cost of delivery for childminders. The SCMA report that 1 in 3 childminders have increased prices recently, which they are generally reluctant to do. It is felt that separate rates for nurseries and childminders can be divisive and raises questions over how these differences are justified.

53. Childminders are subject to the same inflationary pressures as other providers, with energy, travel and food costs rising, which is not always reflected by increasing sustainable rates.

54. SCMA reported that relationships between childminders and local authorities are mixed, and vary across different areas, with some local authorities more transparent when setting rates. Better relationships are enabled when Local authorities have a strong understanding of childminding provision.

55. SCMA reported that childminders are often unable to attend meetings or respond to communications during the day, and therefore for an LA to engage effectively with childminders they should provide evening options and tailor their strategy around their working hours. Childminders frequently feel their voice is not included in decision making processes, and engagement needs to be more democratic.