Expansion of Early Learning and Childcare – Reinstatement of 1140 statutory duty - Business and Regulatory Impact Assessment (BRIA)

3. Options

3.1 This section sets out the range of options that have been considered for the reinstatement of 1140 hours.

3.2 Two options are considered:

• Option 1: The reinstatement of the statutory duty to deliver 1140 hours to be set for August 2021
• Option 2: Statutory duty to deliver 1140 hours reintroduced at a later date than August 2021 (and will remain at 600 hours in August 2021)

3.3 The following sectors and groups will be affected under Options 1 & 2

• Children and their families - under Option 1, from August 2021 all 3 and 4 year olds and eligible 2 year olds will be entitled to 1140 hours of funded ELC. Families will benefit from the increase in the number of hours that are free at the point of delivery from August 2021, which could influence household budgets and decisions regarding work and/or study. Children will also benefit from the increase in funded entitlement. This option will maximise the positive impacts high quality ELC has on children's wellbeing, educational and developmental outcomes, particularly for those children from disadvantaged backgrounds. Parents will also benefit from the changes to the maximum session length for funded ELC as this provides further flexibility for parents wishing to access their child's funded entitlement over full day sessions more closely tied to the working day.
• Private and Third Sector childcare providers, including childminders - there is an expectation that, under Option 1, these providers will continue to play an important role in the delivery of the funded hours. Introduction of the expanded funded entitlement will, in general, require providers to consider how to evolve their business models. The sustainable rate will include funding to enable payment of the real Living Wage to childcare workers delivering the funded entitlement. However, funded providers will face a business decision as to whether they provide the additional resource to uplift salaries for all workers in their settings, including those not engaged in delivery of the funded entitlement, to the real Living Wage from August 2021 (the funding provided by the Scottish Government and local authorities is only for the funded hours, as if funding were provided for non-funded hours then this could be interpreted as a subsidy).^[13]
• Public sector ELC settings - continued development of delivery models to provide flexibility and to offer provision over longer days and the full year in some settings.
• Local authorities - Development of expansion plans to set out how the expanded entitlement will be delivered. Exploring new delivery models to meet local demands, and to offer choice and flexibility to families. Oversight of local workforce expansion and capital investment programmes.
• Construction sector - Option 1 is supported by £476 million of capital investment to support the increase in capacity across the sector through refurbishments and expansions of existing settings and the construction of new builds where there are identified gaps in local sectoral capacity.

Benefits

Option 1: The reinstatement of the statutory duty to deliver 1140 hours to be set for August 2021

3.4 There are a number of potential benefits associated with Option 1:

Benefits to Children

• Evidence from the UK, including the Growing Up in Scotland Study, and international evaluations and studies of early learning and childcare programmes support the fact that all children, and especially those from disadvantaged backgrounds, can benefit in terms of social, emotional and educational outcomes from attending ELC.
• Contributing to closing the poverty-related attainment gap between the most and least advantaged children.
• By helping to close the attainment gap and contributing to our preventative actions to reduce child poverty, the expansion of ELC entitlement has the potential to generate long-term benefits to the public finances and to economic and labour market outcomes.

Benefits to Parents and Carers

• Expanding the funded ELC entitlement and introducing Funding Follows the Child offers parents and families an increased choice of settings where they can access their child's funded ELC entitlement.
• Parents and carers would benefit from a high quality, flexible system as it helps to support people into work, training or further study which may not have previously been accessible due to prohibitive childcare costs.
• The benefits of increasing the funded ELC entitlement to 1140 hours will also be felt in household budgets (for those families who are not currently receiving 1140 hours of funded ELC). Providing 1140 hours of early learning and childcare entitlement is estimated to save a family, on average, around £4,500 per child per annum compared to a scenario where these hours would have to be paid for (when compared to the current statutory funded entitlement of 600 hours the additional saving would be around £2,000 per child per annum).

Benefits to Providers

• Enables a system that is provider neutral with the focus on the settings best placed to deliver quality outcomes for children. Funding Follows the Child will ensure the expanded entitlement is delivered on a 'provider neutral' basis allowing providers in the private and third sectors to become a funded provider, so long as they meet the National Standard and are willing to enter into a contract with their local authority.
• There is a commitment to simplifying the process for, and reducing the burden on, providers who wish to deliver the funded entitlement. This is expected to make it easier for ELC providers in the private and third sectors (including childminders) to become a supplier of funded ELC (as long as they meet the criteria in the National Standard).
• The multi-year funding agreement between the Scottish Government and COSLA provides the funding to enable the payment of a sustainable rate to providers from August 2020.
• Provide the opportunity for an enhanced role for childminders in delivering the funded entitlement through the introduction of Funding Follows the Child.
• The long-term impacts of the pandemic on the demand for childcare are currently uncertain. The increase in the funded ELC entitlement is expected to result in increases in the proportion of a provider's income that is accounted for by these hours. This will provide a key, and relatively stable, income stream for those providers delivering funded ELC.

Economic Benefits

• Funding is provided to local authorities to ensure that hourly funding rates paid to providers are sufficient to enable payment of the real Living Wage to those workers delivering funded ELC, and the promotion of Fair Work practices across settings.
• The sector is very close to having the workforce it needs to deliver 1140 hours flexibly with local authorities having continued recruitment over summer 2020, including via video interviews.
• The latest data from the Improvement Service, published in September 2020, indicated that the additional workforce in place in August 2020 was 6,575, out of an estimated required workforce of 8,244 FTE staff.
• There will be a need for some further recruitment to enable rollout of the 1140 hours expansion across Scotland. Local authorities are reviewing their total staffing needs for 1140 delivery, and information on this will be set out in the next national progress report in early 2021.
• These employment opportunities will be spread across all local authority areas and within many of our most disadvantaged communities, with a range of roles across different qualification levels presenting a considerable opportunity to support inclusive growth.
• The expansion could increase the supply of labour, either by allowing more parents and carers to increase their hours of work or by more parents and carers entering the labour market. Increases in the supply of labour can contribute to long-term economic growth performance.
• The expansion is underpinned by a substantial programme of infrastructure development, which will help to support employment across the construction sector.

Option 2: Statutory duty to deliver 1140 hours reintroduced at a later date than August 2021 (and will remain at 600 hours in August 2021)

3.5 Under Option 2 it is possible that even in the absence of the 1140 hours statutory duty being reintroduced in August 2021 some local authorities would continue to expand the number of funded hours available to eligible children in their area (including potentially increasing the number of children who can access the full 1140 hours), as has been witnessed in the period to November 2020.

3.6 Where this is the case some, or all, of the benefits described in Option 1 could be witnessed to some degree from August 2021.

Costs

Option 1: The reinstatement of the statutory duty to deliver 1140 hours to be set for August 2021

3.7 As set out in the June 2019 BRIA,^[14] the Scottish Government has worked with COSLA and local authorities to identify the costs of delivering the expansion to 1140 hours (and all the associated policy elements that are part of the wider supporting policy framework). A multi-year funding agreement was reached to meet the full revenue and capital costs of the expansion.

3.8 Table 1 sets out the additional revenue funding requirements for local authorities from 2019-20 to 2021-22, which formed the basis of the multi-year funding agreement between the Scottish Government and COSLA to fully fund the expansion of ELC. The funding agreement will see the Scottish Government provide local authorities with total recurring revenue funding of £567 million per year by 2021-22, relative to funding provided for ELC in 2016-17.

Table 1 - Revenue allocations to local authorities for early learning and childcare 2019-20 to 2021-22

	2019-20	2020-21	2021-22
Scotland	£307,000,000	£508,000,000	£566,656,000

3.9 Local authorities have also received £476 million of capital funding to support the expansion over four financial years from 2017-18 to 2020-21 inclusive. This is to cover the costs of any refurbishments, expansions or new builds where gaps in local capacity have been identified by local authorities.

3.10 All the additional funding provided since 2017-18 for the expansion to 1140 hours has been allocated as a specific grant to local authorities. This is to ensure that it is protected for investment in ELC.

3.11 The Scottish Government is working with COSLA and Local Authorities to identify ongoing funding requirements from 2022-23 onwards.

Costs

Option 2: Statutory duty to deliver 1140 hours reintroduced at a later date than August 2021 (and will remain at 600 hours in August 2021)

3.12 There are no increased direct financial costs to the Scottish Government associated with this option, as funding has already been provided to local authorities for implementation of the ELC provisions in the Children and Young People (Scotland) Act 2014. In addition all capital funding and all revenue funding up to 2020-21 for the expansion of 1140 hours has been provided to local authorities.