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

Conclusions

The landscape of ELC in Scotland is undergoing transformative change. The sector is moving rapidly toward provision of 1,140 hours of funded ELC by the end of the current parliamentary session even while the system is still adjusting to meet the requirements of the Children and Young People (Scotland) Act 2014 of 600 hours of ELC, provided with increasing flexibility to meet the needs of parents.

This report summarises the findings of the Financial Review and captures a snapshot of the ELC system as change is introduced and further change is planned for. It provides a solid evidence base to inform the planning and development of delivery options for the expansion of the funded entitlement. In particular, the new evidence gathered for the Financial Review on the costs and expenditure involved in delivering the current entitlement provides the necessary basis for modelling the financial implications of delivering 1,140 hours.

The research has shown that, on average, delivery of ELC is significantly more costly per hour when delivered in local authority settings than in partner provider settings, a cost differential which is evident across all age groups although quality also tends to be higher in local authority settings. The research also identifies the overwhelming role of staff pay in explaining the unit-cost gap. By any standard, pay in private and not for profit partner providers is low, even at senior and management grades.

The research has also identified wide variation in both local authority unit costs and in the evolution of ELC-related expenditure following the implementation of the Children and Young People (Scotland) Act 2014 and there may be benefit in exploring further the drivers of this variation.