Financial sustainability health check of the childcare sector in Scotland

Support for Childcare Services

19. Childcare services in Scotland have been able to access a range of financial support during the pandemic. This has ranged from:

• Targeted Scottish Government grant support for the childcare sector.
• UK wide support schemes introduced by the UK Government; and
• Scottish Government economy wide grant support schemes.

20. Table 2 provides a summary of the key financial support schemes and draws on the survey responses to highlight the impact on childcare providers.

Table 2: Overview of financial support schemes for childcare services

Targeted Scottish Government Support

Continued early learning and childcare payments for funded ELC services

• Services delivering funded ELC continued to receive funded ELC payments for the duration of the closure periods – from March 2020 to August 2020 and during the temporary restrictions in early 2021.

Childminding Workforce Support Fund

• Fund targeted at childminding services experiencing financial hardship and who were struggling to access financial support through other schemes.
• Operated two rounds in July 2020 and October 2020 with total funding of £420,000 (£390,000 from the Scottish Government funding and £30,000 from SCMA).
• The Fund was administered by the SCMA.
• Provided grants of £350 to 1,185 childminders in total.
• 46% of childminding services who responded to the survey reported that they had received a grant from the Fund. Those services delivering funded ELC were more likely to have received a grant (51% of services).

Transitional Support Fund

• Up to £11.2 million was made available to provide one-off grants to day care of children services to enable them to meet the costs of meeting the requirements of the public health guidance for day care of children services.
• Grants ranged from £1,500 to £8,000 dependent on the size of the service.
• The scheme was open for applications between September and October 2020, and was administered by local authorities with a single application process.
• 1,588 services received a grant through the Fund.
• The majority of day care of children services who responded to the survey had received a grant from the Fund. Those delivering funded ELC were the most likely (95% of services), and those not delivering funded ELC least likely (82% of services).

Temporary Restrictions Fund

• The Temporary Restrictions Fund (TRF) provided grants to services during the period of temporary restrictions in place from Boxing Day 2020.
• Restrictions applied to all day care of children services and to childminding services registered for 12 or more children. Restrictions for ELC services ended on 22 February 2021, whilst restrictions for school age childcare services ended on 15 March 2021.
• The size of grants varied according to the registered capacity of the service.
• The Fund was administered by local authorities using a single application process.
• There were 3 rounds of grants through the Fund:
  • o Round 1 provided grants to services who remained open during the restrictions period in January 2021.
  • o Round 2 provided a TRF grant to services who were open in February and a one-off restart grant for all registered day care of children services and childminding services registered for 12 or more children.
  • o Round 3 was targeted at school age childcare services only as restrictions for this part of the sector carried on until March 2021. Support included a TRF grant for services who remained open and a one-off restart grant for all school age childcare services.
• Responses to the surveys indicated that services delivering funded ELC were most likely (84% of services) to have received at least one grant from rounds 1 and 2 of the Fund. Those not delivering funded ELC were the least likely (64% of services) to have received at least one grant during rounds 1 and 2 – reflecting the predominance of school age childcare only services in this category.

Childminding Business Sustainability Fund

• Provided a one-off grant of £750 to all registered childminding services. Grants were issued in March and April 2021.
• The Fund was administered by the Scottish Government.
• 3,669 childminding services received a grant through the Fund (accounting for around 87% of all registered childminding services).

UK Government support schemes

Coronavirus Job Retention Scheme (CJRS)

• The CJRS has enabled employers to claim grants to cover the wages of workers furloughed since March 2020.
• The scheme was initially due to run until 30 May 2020, but has been extended on a number of occasions. The CJRS is currently scheduled to end on 30 September 2021.
• The CJRS initially covered 80% (up to a maximum of £2,500 per month) of a furloughed workers wages as well as their national insurance and pension contributions. The level of support provided through the CJRS has varied at different points since August 2020.
• From July 2020 flexible furloughing arrangements were introduced to allow employers to claim for usual hours not being worked by their employees (but who were now working some of their hours).
• The majority of respondents to the survey reported that they had accessed support through the CJRS at some point since March 2020.
• SAC only services were the most likely to have accessed the CJRS (95%), whilst services in the third sector were least likely (73%).
• At the time of the survey some services were still accessing support through the CJRS. SAC only services were most likely to still be accessing CJRS support (65%), with funded ELC services least likely (18%).

Self-Employment Income Support Scheme (SEISS)

• The SEISS has provided grant support to the self-employed, and the scheme initially opened in May 2020.
• The final round of the SEISS, based on the information available at the time of writing, will cover the period 1 May 2021 to 30 September 2021.
• The support available through the SEISS is determined by average monthly trading profit. The initial grant provided support for a 3 month period based on 80% of average monthly trading profit (up to a maximum grant of £7,500). To date five rounds of SEISS grants have been made available.
• The maximum level of grant support available has varied across the various grants provided through the SEISS.
• Initially to be eligible for a SEISS grant the claimant must have been trading, and submitted a tax return, for the 2018-19 tax year (in later rounds those who became self-employed in the 2019-20 tax year could apply).
• 70% of childminding services who had responded to the survey reported that they had accessed some grant support through the SEISS. Childminding services delivering funded ELC were more likely (78%) to have accessed SEISS support than childminding services not delivering funded ELC (66%).
• For those childminding services who had accessed the SEISS the total average level of support received, at the time of completing the survey, was around £6,100. Applications for the fourth SEISS grant were open (until 1 June 2021) at the time of the survey.

Loan schemes

• The UK Government introduced loan schemes to enable businesses to access loans quickly The main two schemes that childcare services were able to access were:
  • Bounce Back Loan Scheme – introduced in May 2020 and aimed at small businesses impacted by the pandemic. Businesses could borrow between £2,000 and up to 25% of their turnover (to a maximum of £50,000). The UK Government covered interest payments for the first 12 months.
  • Coronavirus Business Interruption Loan Scheme – small and medium sized businesses, with turnover below £45m, could access up to £5m in finance. No interest paid for the first 12 months.
• Private childcare services were the most likely (51%) to report that they had taken out a loan through the Bounce Back Loan Scheme.
• The average value of loan secured through the Bounce Back Loan Scheme is around £40,000.
• 7% of childminding services had secured a loan through the Bounce Back Loan Scheme, with an average loan value of around £4,400,
• The majority of respondents who took out a loan through the Bounce Back Loan Scheme have indicated that they will have started to make repayments by July 2021.
• Only a small number of respondents reported that they had taken out a loan through the Coronavirus Business Interruption Scheme. Services delivering funded ELC were most likely to have taken one of these loans (9%).
• For those who have accessed support through the Coronavirus Business Interruption Loan scheme the average value of the loan is around £120,000.
• Services that secured Coronavirus Business Interruption Loan indicate that they will make their first repayment between May 2021 and December 2021.

Scottish Government economy wide grant support schemes

Small Business Support Grant

• Small business could apply for a grant up to £10,000 if they were:
  • the registered non-domestic rate payer (even if they did not pay rates due to being eligible for reliefs)
  • a business who leases the property from the registered non-domestic rate payer.
• Applications to the Fund close in July 2020.
• Private sector services were the most likely to have accessed a grant through the Fund (with 28% of respondents in this group receiving a grant).

Pivotal Enterprise Resilience Fund

• The Pivotal Enterprise Resilience Fund, which was managed through Scotland's enterprise agencies, provided grants to SMEs which were assessed as being vital to Scotland’s local or national economy but have been made vulnerable by the COVID-19 pandemic.
• Applications to the Fund closed in May 2020.
• Responses to the survey indicated that only a small number of childcare providers receiving a grant through this route.
• Services delivering funded ELC were most likely to report that they had received support through the Fund (9%).

Other Scottish Government support schemes

• The Newly Self-employed Hardship Fund has provided support to those whose status as being newly self-employed makes them ineligible for the Self-employment Income Support Scheme (SEISS).
• 5% of childminding service reported that they had received support through the Newly Self-employed Hardship Fund.
• A small number of respondents reported that they received a Third Sector Resilience Fund grant.

21. In addition some services may have been able to draw on existing support (for example general business support and advice), as well as other targeted measures such as the Nursery Rates Relief Scheme, which has now been extended until at least 30 June 2023. Some local authorities have provided additional support to their funded providers in the private, third and childminding sectors during the pandemic (further information on support that has been made available is set out in Overview of Local Authority Funding and Support for Early Learning and Childcare Providers).

22. Many childcare services are also members of one (or more) of the childcare sector representative bodies: Care and Learning Alliance (CALA), Early Years Scotland (EYS), National Day Nurseries Association (NDNA), Scottish Childminding Association (SCMA), and the Scottish Out School Care Network (SOSCN).

23. The representative bodies provide their members with a range of targeted support and advice. They receive funding from a variety of sources including membership fees, grant support from the Scottish Government, delivery of services (in some cases), and accessing grant support from other schemes where possible.

24. As part of the Health Check we undertook in-depth discussions with each of the representative bodies to understand the impact of the pandemic on their organisations. This included changes in the support that they have offered to their members and on their own financial sustainability. As part of our provider case study interviews we have also, where relevant, sought the views of providers on the representative bodies of which they are members.

25. These discussions have highlighted that:

• Childcare services, in general, have been highly appreciative of the level of support and advice that they have received from their representative bodies.
• The representative bodies have had to significantly restructure the nature of the support and advice that they provide to their members, and all have indicated that they have incurred some additional costs in order to alter the way their organisations operate.
• The representative bodies have also had to increase the amount of time that they are spending in engagement with the Scottish Government and local authorities to help inform the response to the pandemic and to ensure that the specific challenges for private, third and childminding sector services are reflected.
• Financial sustainability is an increasing concern for the representative bodies with many having to make challenging decisions (in particular where they also operate services).
• There is a willingness to support the sector in new ways and develop additional income generating streams, however core funding is crucial for the representative bodies to effectively plan for the future, including to the ability to increase staff capacity.
• Membership fees for services have generally remained unchanged during the pandemic period.
• The representative bodies will need to continue to look for opportunities to restructure their approaches in order to ensure financial sustainability as most expect this to remain an ongoing concern in the foreseeable future.