Funding follows the child and the national standard for early learning and childcare providers: guidance for setting sustainable rates from August 2020

Section 2: Principles of Setting Sustainable Rates

23. Engagement with stakeholders, in particular local authorities, private and third sector providers, has included discussion on the principles of establishing sustainable rates.

24. The following principles should be applied when establishing sustainable rates and illustrate key agreed themes that emerged throughout these discussions:

• Local authorities and providers should approach the sustainable rate setting process with a focus on a high-quality ELC experience for children and their families;
• The rate should be evidence-based, taking account of the cost of providing ELC in a local area based on parameters which are clear and transparent;

• Local authorities and funded providers should work together to be as transparent and open as commercially reasonable when discussing rates and costs;
• The definition of a 'sustainable rate', as set out in paragraph 20 should be read and understood by all parties before rate setting exercises are undertaken;
• Local authorities should clearly set out what is included (and not included) in the support package in addition to the hourly rate, at the point of application;
• Inflationary and real Living Wage increases should be reviewed on a regular basis, to understand any changes to these and their impact on costs;
• A sustainable rate (or rates) for the funded hours will be set at local authority level; and,
• The sustainable rate setting process should consider return on investment or surplus whilst recognising that funded hours will generally not represent all the hours a private or third sector provider, including childminders, delivers.