Financial review of early learning and childcare in Scotland: the current landscape

ELC Providers

This chapter brings together the evidence on providers currently offering funded ( i.e. the free entitlement to 600 hours) and unfunded ELC services. The key sources drawn upon include the latest published data from Care Inspectorate (2014) and the Scottish Government Early Years and Social Work statistics (2015).

Some of the key findings are:

• There are around 3,700 childcare providers (for children of all ages), of whom 2,500 are offering the funded entitlement. In addition, there are 5,600 childminders.
• Excluding childminders, who are 100 per cent private, 46 per cent of all funded and non-funded services are run by local authorities, 29 per cent are run by the private sector and 25 per cent are run by the third sector.
• 1,500 of the settings that offer the funded provision are run by local authorities and the remaining 1,000 by private and third sector partner providers.
• The number of daycare services in a particular area does not notably vary by the local area level of deprivation. However, in poor areas childcare is provided mainly by local authority providers, whereas private providers tend to operate in relatively more affluent areas.

Number and types of providers

Funded and unfunded ELC is offered by childminders, children/family centres, crèches, holiday play schemes, nurseries, playgroups, out-of-school care providers and occasionally other services, such as women's aid centres.

Table 8: Number of services offering services by age of children

age groups provided for
Services by service type:	under 1	1	2	3	4	5
Childminding	4,882	5,172	5,233	5,257	5,268	5,261
Children / family centre	114	118	130	127	109	96
Crèche	69	71	77	78	76	65
Holiday play scheme	2	2	2	7	13	44
Nursery	762	777	1,057	2,378	2,368	1,708
Out of school care	4	5	6	37	427	684
Playgroup	6	10	239	283	252	132
Other services	21	25	34	33	38	42
Total (excl. Childminding)	979	1,007	1,545	2,942	3,283	2,770

Source: Care Inspectorate Early learning and childcare statistics 2014

As at December 2014, around 3,733 active daycare services for children ^[20] are registered to offer services to children up to the age of fifteen. Of those, 2,400 are nurseries. Additionally, there are 5,600 registered childminding services. ^[21] Not all of these services are delivering childcare to two to four year olds. This is particularly the case for holiday play schemes and out of school care, although some of these services also offer ELC to children who are not yet of school age (see table 8).

Figure 3: Share of settings by type

Source: Care Inspectorate Early learning and childcare statistics 2014

There has been a reduction of the number of services between 2012 and 2014, with the number of active services decreasing from 3,800 in 2012 and 3,764 in 2013. On the other hand, workforce numbers and the number of capacity places (maximum attendance at any one time, measured by number of registered places) have increased slightly, indicating a consolidation of the market. ^{[22] , [23]}

Figure 4: Childcare providers by sector

Source: Care Inspectorate Early learning and childcare statistics 2014

Excluding childminders, who are 100 per cent private, 46 per cent of all services (funded and unfunded) are run by local authorities, 29 per cent are run by the private sector and 25 per cent are run by the voluntary sector.

Table 9: Number of registered childcare services

	Number of services			Percentages of services			Total
Services by main type:	LA	Private	Non-profit	LA	Private	Non-profit
Childminding	0	5,572	0	0.0%	100.0%	0.0%	5,572
Children / family centre	90	3	46	64.7%	2.2%	33.1%	139
Crèche	31	24	28	37.3%	28.9%	33.7%	83
Holiday play scheme	16	6	28	32.0%	12.0%	56.0%	50
Nursery	1,475	767	181	60.9%	31.7%	7.5%	2,423
Out of school care	93	240	368	13.3%	34.2%	52.5%	701
Playgroup	4	38	248	1.4%	13.1%	85.5%	290
Other services	4	14	29	8.5%	29.8%	61.7%	47
Total	1,713	6,664	928	18.4%	71.6%	10.0%	9,305
Total (excl. Childm.)	1,713	1,092	928	45.9%	29.3%	24.9%	3,733

Source: Care Inspectorate Early learning and childcare statistics 2014

The number of settings is broken down by local authority and provider sector in table 10 below.

Table 10: Number of settings (funded and unfunded) by local authority and sector

Local Authority	Public	% public	Private	% private	Voluntary or not for profit	% voluntary	Total
Aberdeen City	69	43%	54	34%	38	24%	161
Aberdeenshire	102	47%	59	27%	57	26%	218
Angus	50	46%	26	24%	32	30%	108
Argyll & Bute	50	60%	15	18%	19	23%	84
Clackmannanshire	18	62%	6	21%	5	17%	29
Dumfries & Galloway	46	46%	29	29%	25	25%	100
Dundee City	29	33%	35	40%	23	26%	87
East Ayrshire	33	50%	12	18%	21	32%	66
East Dunbartonshire	21	28%	32	43%	22	29%	75
East Lothian	33	40%	18	22%	32	39%	83
East Renfrewshire	19	37%	26	50%	7	13%	52
Edinburgh, City of	102	28%	162	44%	102	28%	366
Eilean Siar	21	75%	1	4%	6	21%	28
Falkirk	54	57%	14	15%	27	28%	95
Fife	171	68%	39	15%	43	17%	253
Glasgow City	127	35%	134	37%	106	29%	367
Highland	149	58%	44	17%	65	25%	258
Inverclyde	21	49%	11	26%	11	26%	43
Midlothian	28	38%	17	23%	29	39%	74
Moray	23	36%	20	31%	21	33%	64
North Ayrshire	44	55%	21	26%	15	19%	80
North Lanarkshire	97	53%	55	30%	30	16%	182
Orkney Islands	20	87%	0	0%	3	13%	23
Perth & Kinross	61	49%	39	31%	25	20%	125
Renfrewshire	37	32%	62	53%	18	15%	117
Scottish Borders	46	46%	20	20%	33	33%	99
Shetland Islands	24	75%	5	16%	3	9%	32
South Ayrshire	42	63%	12	18%	13	19%	67
South Lanarkshire	78	44%	65	37%	33	19%	176
Stirling	32	49%	19	29%	14	22%	65
West Dunbartonshire	25	50%	14	28%	11	22%	50
West Lothian	61	47%	27	21%	42	32%	130
Scotland	1,733	46%	1,093	29%	931	25%	3,757

Source: Care Inspectorate Annual Return 2014.

Nurseries

Nurseries provide daycare facilities for children aged five years and under. The service is normally used by parents on a regular basis rather than a drop-in basis and the service is provided as a minimum during the school term.

Nurseries constitute the most common providers of ELC on non-domestic premises. Of all non-domestic settings offering childcare to three and four year olds, around 80 per cent are nurseries.

Table 11: Number of nurseries by local authority and provider sector

Local authority	Active nurseries	% LA	% private	% voluntary
Aberdeen City	96	51.0%	42.7%	6.3%
Aberdeenshire	132	65.9%	32.6%	1.5%
Angus	65	75.4%	24.6%	0.0%
Argyll & Bute	67	71.6%	19.4%	9.0%
Clackmannanshire	20	75.0%	25.0%	0.0%
Dumfries & Galloway	77	58.4%	28.6%	13.0%
Dundee City	62	46.8%	48.4%	4.8%
East Ayrshire	41	68.3%	22.0%	9.8%
East Dunbartonshire	44	43.2%	36.4%	20.5%
East Lothian	49	63.3%	30.6%	6.1%
East Renfrewshire	24	45.8%	41.7%	12.5%
Edinburgh, City of	216	40.7%	50.9%	8.3%
Eilean Siar	22	86.4%	4.5%	9.1%
Falkirk	66	80.3%	19.7%	0.0%
Fife	152	72.4%	23.7%	3.9%
Glasgow City	216	46.8%	43.1%	10.2%
Highland	184	75.0%	15.2%	9.8%
Inverclyde	22	50.0%	40.9%	9.1%
Midlothian	42	64.3%	26.2%	9.5%
Moray	46	47.8%	28.3%	23.9%
North Ayrshire	60	66.7%	25.0%	8.3%
North Lanarkshire	124	68.5%	28.2%	3.2%
Orkney Isles	21	90.5%	0.0%	9.5%
Perth & Kinross	83	56.6%	36.1%	7.2%
Renfrewshire	69	40.6%	49.3%	10.1%
Scottish Borders	66	66.7%	19.7%	13.6%
Shetland	23	82.6%	17.4%	0.0%
South Ayrshire	49	73.5%	18.4%	8.2%
South Lanarkshire	126	54.8%	38.1%	7.1%
Stirling	45	68.9%	31.1%	0.0%
West Dunbartonshire	30	63.3%	30.0%	6.7%
West Lothian	84	69.0%	26.2%	4.8%
Scotland	2,423	60.9%	31.7%	7.5%

Source: Care Inspectorate Early learning and childcare statistics 2014

Childminders

Childminders provide childcare to at least one child (up to the age of 16 years) for more than a total of two hours per day on domestic premises, but not in the home of the child's parents.

Childminding services outnumber non-domestic daycare services by around 50 per cent. However, they often take on far fewer children. The average capacity of a childminding service is around 6, compared with an average of 42 for non-domestic settings. This is a result of higher staff to child ratio requirements but also due to the fact that childminding services are usually run by single individuals; although around 10 per cent of childminders have assistants. ^[24]

Funded entitlement

Of all daycare services, around 3,000 offer services to young children between three and four years. Of those, 2,492 early years settings offer the funded 600 hours ELC entitlement. ^[25] There are fewer providers offering ELC for two year olds (around 1,500), which is possibly a result of lower demand for under threes. 1,526 of the settings offering the funded provision are run by local authorities (60 per cent) and the remaining 966 by private and not-for-profit partner providers (40 per cent). Among private nurseries, 78 per cent are offering the funded entitlement.

Table 12: Number of settings providing funded ELC and registered children in term 1

	Number of providers				Number of children (Age 2-4)
	LA	PP	% LA	Total	LA	PP	% LA	Total
Aberdeen City	45	43	51%	88	2,253	1,230	65%	3,483
Aberdeenshire	87	77	53%	164	3,452	1,459	70%	4,911
Angus	48	34	59%	82	1,315	561	70%	1,876
Argyll & Bute	50	24	68%	74	777	622	56%	1,399
Clackmannanshire	14	5	74%	19	818	123	87%	941
Dumfries & G'way	45	43	51%	88	1,487	962	61%	2,449
Dundee City	28	23	55%	51	2,202	627	78%	2,829
East Ayrshire	33	9	79%	42	1,984	258	88%	2,242
E. Dunbartonshire	19	21	48%	40	1,077	716	60%	1,793
East Lothian	31	19	62%	50	1,584	393	80%	1,977
East Renfrewshire	19	9	68%	28	1,528	192	89%	1,720
Edinburgh, City of	93	118	44%	211	5,047	3,651	58%	8,698
Eilean Siar	20	5	80%	25	371	71	84%	442
Falkirk	53	9	85%	62	2,794	193	94%	2,987
Fife	110	47	70%	157	6,060	944	87%	7,004
Glasgow City	111	94	54%	205	7,571	2,432	76%	10,003
Highland	132	67	66%	199	2,896	1,369	68%	4,265
Inverclyde	19	5	79%	24	1,191	119	91%	1,310
Midlothian	27	15	64%	42	1,476	363	80%	1,839
Moray	22	36	38%	58	685	986	41%	1,671
North Ayrshire	44	21	68%	65	1,921	591	76%	2,512
North Lanarkshire	91	33	73%	124	5,243	1,113	82%	6,356
Orkney Islands	19	2	90%	21	346	40	90%	386
Perth & Kinross	48	37	56%	85	1,872	612	75%	2,484
Renfrewshire	32	37	46%	69	2,048	1,338	60%	3,386
Scottish Borders	44	30	59%	74	1,354	584	70%	1,938
Shetland Islands	20	4	83%	24	389	82	83%	471
South Ayrshire	37	11	77%	48	1,522	333	82%	1,855
South Lanarkshire	75	53	59%	128	4,191	1,774	70%	5,965
Stirling	31	17	65%	48	1,285	384	77%	1,669
W. Dunbartonshire	21	10	68%	31	1,425	392	78%	1,817
West Lothian	58	8	88%	66	3,081	280	92%	3,361
Scotland	1,526	966	61%	2,492	71,246	24,793	74%	96,039

Source: Scottish Government Early Learning and childcare statistics 2015

Across local authorities there are notable differences in how the funded entitlement is delivered. While small local authorities like the Shetland Islands, Orkney Islands or Eilean Siar, provide the funded hours mostly in their own nurseries, larger cities like Glasgow or Edinburgh rely on partner providers to a much greater extent. In Moray more children receive their funded hours from partner providers than local authority settings.

Figure 5: Partner provider and local authority share of settings and children

Source: Care Inspectorate Early learning and childcare statistics 2014

Partner providers

The provision of childcare to children under two and additional hours of childcare out-with the funded part-time entitlement is largely left to parents to arrange as they see fit with the private and third sector providers.

Local authorities hold powers to sub-contract private and third sector providers to deliver the funded entitlement in their area and to decide the rates paid to these partner providers. Up to 2007, the Scottish Government set a minimum advisory floor level of funding for local authorities to pay to partner providers. Following this it was left to local authorities to set their own rates. ^[26] Often this advisory floor is still used as a baseline to arrive at the current partner provider rates. This means that in many cases the (discontinued) advisory floor of £1,550 set in 2007 is uprated for inflation and the increase in funded hours. For reference, the hourly unit cost under the advisory floor in 2007 was £3.76. An uprating for inflation suggests an hourly rate of £4.36.

Partner providers are paid based on the number of children attending ( i.e. participation-based funding) at a pre-agreed rate per child usually set by the local authority. In some cases, partner providers submit bids in a tendering process in which they indicate at what rate they are willing to offer a funded place. The chapter on finance, expenditure and cost covers partner provider rates and estimated partner provider costs in more detail.

Support and quality improvement

Most local authorities offer additional free in-kind support to their partnership settings, in the form of staff training, staff development and continuing professional development and the resource directed to this also varies across different parts of Scotland. This can also include providing access to centrally employed teachers . The financial implications of this are discussed in the chapter on finance, costs and expenditure below.

Quality of childcare services

The Care Inspectorate and Education Scotland both have roles in assessing and improving quality of ELC providers. There is a range of activity on-going on the part of both inspectorates to facilitate streamlined and complementary inspection programmes.

The Care Inspectorate has a legal duty to regulate and inspect all registered care services (including childminders) providing both funded and non-funded ELC under the Public Services Reform (Scotland) Act 2010. Education Scotland has powers to inspect services providing funded ELC under the Education (Scotland) Act 1980. These inspections provide an independent evaluation of the quality of care and educational provision and promote improvement and innovation to enhance children's experiences and lead to better outcomes.

The Care Inspectorate assesses care against four quality themes each of which comprises a number of quality statements. The four themes are

• Quality of care and support
• Quality of environment
• Quality of staffing
• Quality of management and leadership

Education Scotland evaluates quality according to five Quality Indicators ( QIs), defined as

• Improvement in performance
• Children's experiences
• Meeting learning needs
• The curriculum
• Improvement through self-evaluation

For each indicator or theme, the setting is graded by both the Care Inspectorate and Education Scotland from 1 to 6, with six being the most positive grading. On average in any CI quality theme and in all but one Education Scotland QI, ELC settings are graded between good and very good. Overall quality in Scotland is consistently high and analysis of Growing Up in Scotland ( GUS) data found that very few children were attending settings that scored unsatisfactory grades over any of the indicators. ^[27]

Figure 6: Care Inspectorate's quality ratings of daycare services

Source: Care Inspectorate Early learning and childcare statistics 2014

Specifically, the Care Inspectorate's assessment of the quality of childcare services presents positive results. Less than 1 per cent of all daycare services for children (funded and unfunded) were graded unsatisfactory or weak in the categories quality of care, quality of environment and quality of staffing, while around 95 per cent of all day care services were graded good, very good or excellent in these categories. Grades for childminders show a similar picture.

Table 13: Quality of childcare services

	unsatisfactory	weak	adequate	good	very good	excellent
Daycare of Children
Care and support	0.1%	0.8%	4.5%	30.0%	58.1%	6.6%
Environment	0.1%	0.9%	4.2%	37.5%	53.8%	3.6%
Staffing	0.1%	0.7%	4.2%	31.9%	57.8%	5.4%
Mgmt and leadership	0.3%	1.7%	6.8%	39.0%	48.3%	3.9%
Childminding services
Care and Support	0.1%	0.3%	3.3%	31.5%	57.3%	7.5%
Environment	0.1%	0.4%	3.3%	34.4%	56.6%	5.3%
Staffing	2.4%	1.8%	10.1%	40.8%	40.2%	4.7%
Mgmt and leadership	1.6%	0.8%	5.7%	35.4%	51.3%	5.2%

Source: Care Inspectorate Early learning and childcare statistics 2014

Provision of meals and snacks

In addition to the entitlement to funded ELC, children who meet the qualifying free school lunch criteria are also entitled to a free school lunch where they attend at lunch time.

The eligibility criteria for free school lunches for young children are equivalent to the funded ELC eligibility criteria for two year olds (see section on eligibility to early learning and childcare), although as a result of young children attending a morning or an afternoon session per day only a small proportion of children actually receive a free lunch.

Going forward, as a result of local authorities starting to offer greater flexibility and increases in the number of funded hours, it is to be expected that a larger number of children are going to attend over lunch time. Hence, where settings do not provide lunches as a result of a lack of cooking facilities, amendments to their infrastructure will have to be made.

Figure 7: Provision of lunches

Source: Care Inspectorate Early learning and childcare statistics 2014

As can be seen from table 14, many childcare services do not provide any meals. However, most offer snacks. While eligible children are entitled to a lunch, many do not attend over lunch time as this falls outside the hours during which the funded entitlement is offered in local authority settings. Local authorities have been provided with additional capital funding to adapt accommodation for the provision of meals ( e.g. kitchen and dining areas) and additional revenue to meet the costs of additional meals arising from more eligible children and more attending over lunch time.

Table 14: Provision of meal by provider type (funded and unfunded)

	Meals provided:				Snacks provided:
	By service only	By parents only	By both	None	By service only	By parents only	By both	None
Main service type:
Childminding	23%	48%	23%	6%	42%	22%	36%	1%
Children / family centre	40%	15%	15%	29%	82%	2%	15%	0%
Crèche	0%	16%	5%	74%	41%	26%	18%	10%
Holiday play scheme	0%	60%	7%	34%	21%	34%	37%	9%
Nursery	25%	11%	10%	54%	89%	1%	9%	0%
of which: providing add. serv.	32%	22%	21%	25%	83%	1%	16%	0%
of which: no add. services	24%	9%	8%	59%	91%	1%	8%	0%
Out of school care	3%	10%	3%	83%	69%	3%	27%	1%
of which: providing add. serv.	4%	13%	4%	79%	69%	3%	28%	0%
of which: no add. services	1%	3%	1%	92%	67%	2%	25%	3%
Playgroup	3%	11%	0%	86%	88%	4%	8%	0%
Other services	11%	28%	7%	54%	52%	11%	26%	11%
Total	22%	34%	17%	28%	58%	14%	27%	1%
Total (excl. childminders)	19%	12%	8%	61%	83%	3%	13%	1%

Source: Care Inspectorate Early learning and childcare statistics 2014

Geography

72 per cent of all childcare services (74 per cent excl. childminders), including those not providing the funded entitlement, are located in urban areas (approximately 62 per cent of the Scottish population lives in urban areas).

In large urban areas, the market is split evenly between private and public providers (46 per cent each). In other urban areas, accessible small towns and accessible rural areas, nurseries run by local authorities become more prevalent (60 per cent to 70 per cent of nurseries run by local authorities). In remote rural areas, 85 per cent of nurseries are run by local authorities. Across all geographical areas, between 7 per cent and 10 per cent of nurseries are run by third sector providers. ^[28]

If childminders are excluded, daycare services are distributed relatively equally across all areas as categorised by the Scottish Index of Multiple Deprivation ( SIMD). ^[29] There does not appear to be a higher density of daycare services in more affluent areas. However, in more deprived areas childcare is provided to a slightly larger extent by local authorities, whereas private providers tend to operate in less deprived areas.

Table 15: Share of settings by sector and index level of deprivation

SIMD category	Local authority settings	Private and third sector settings
1 - most deprived	55%	45%
2	57%	43%
3	57%	43%
4	62%	38%
5	54%	46%
6	54%	46%
7	47%	53%
8	39%	61%
9	41%	59%
10 - least deprived	29%	71%

Source: Care Inspectorate Annual Returns, Improvement Service SIMD data

The average distance between the two nearest daycare services (as defined by postcode area) for children under five across Scotland is 2.42 kilometres. As expected, there is large variation, depending on the specific region, with rural areas exhibiting much greater average distances between the two nearest childcare providers. For example, the distance between two childcare providers in Edinburgh and Glasgow is less than 1 kilometre, whereas on the Orkney Islands childcare settings are on average more than 9 kilometres apart.

Figure 8: Average distance between daycare centres in kilometres by local authority

Source: Ordnance Survey data, Royal Mail data and National Statistics data

Figure 9: Map of settings providing the funded entitlement

Source: Care Inspectorate Annual returns, Ordnance Survey data, Royal Mail data and National Statistics data; Map data ©2016 Google

If only settings that provide the funded entitlement are considered, the average distance between two settings slightly increases to 3.07 kilometres. Figure 9 shows a map of these settings, where the colour of the dots indicate the different local authorities and the size of the dots the size of the respective establishment.

Table 16: Average distances between daycare settings across Scotland ^[30]

Local authority	Avg. distance between settings in km - all settings	Avg. distance between settings in km - funded settings only
Aberdeen City	1.40	1.66
Aberdeenshire	4.40	4.74
Angus	2.96	3.61
Argyll & Bute	5.94	6.57
Clackmannanshire	1.74	2.05
Dumfries & Galloway	4.51	4.94
Dundee City	1.16	1.56
East Ayrshire	3.48	4.64
East Dunbartonshire	1.50	2.18
East Lothian	2.53	3.12
East Renfrewshire	0.78	1.56
City of Edinburgh	0.88	1.15
Eilean Siar	8.71	9.39
Falkirk	1.85	2.59
Fife	2.53	2.86
Glasgow City	0.97	1.27
Highland	4.85	5.65
Inverclyde	2.01	2.05
Midlothian	1.75	2.29
Moray	3.27	3.71
North Ayrshire	2.46	2.99
North Lanarkshire	1.70	2.23
Orkney Islands	9.34	10.33
Perth & Kinross	2.79	3.86
Renfrewshire	1.36	1.33
Scottish Borders	4.31	5.02
Shetland Islands	6.00	7.64
South Ayrshire	3.41	5.07
South Lanarkshire	1.77	2.05
Stirling	3.17	3.56
West Dunbartonshire	1.62	2.04
West Lothian	1.72	2.56
Scotland	2.42	3.07

Source: Scottish Government

Cost to parents

The Family and Childcare Trust undertake an annual survey of local authorities across the UK asking them about childcare prices in their area. ^[31] In practice, local authorities then conduct a review of childcare prices within their region themselves. table 17 below lists the result of the 2016 survey. At £4.16 per hour for twos and over, the funded provision of childcare is potentially worth as much as £2,496 per eligible child per year.

Note that these prices are an average of prices at private/third sector settings and largely subsidised prices in local authority settings and therefore might not be reflective of the actual costs of provision or prices parents typically face for extra hours out-with the funded entitlement as local authority provision of wrap-around hours can be patchy. Also note that the study groups prices for two year olds together with those for children over two, who will have different costs and prices practice.

Table 17: Average prices for one hour of ELC as estimated by FACT

Region	Nursery per hour (under 2)	Nursery per hour (2 and over)	Childminder per hour (under 2)	Childminder per hour (2 and over)
Eastern Scotland	£4.56	£4.27	£3.60	£4.52
Highland and Islands and NE Scotland	£4.54	£4.47	£3.49	£4.28
South Western Scotland	£4.29	£4.08	£3.54	£4.36
Overall Scotland average	£4.45	£4.16	£3.55	£4.40
Britain average of regions and nations	£4.67	£4.48	£3.26	£4.24

Source: FACT childcare survey 2015