Milk and Healthy Snack Scheme (Scotland) Regulations 2021: business and regulatory impact assessment

Sectors and Groups Affected

Day Care Providers and Childminders

After the Scheme is implemented in August 2021 there will be a transition period whereby day care providers and childminders who are currently on the UK NMS will continue to be able to submit claims to the NMRU for milk purchased on or before 31 July 2021. This period will last for six months until 31 January 2022.

Like any new scheme, there is an initial registration process required which the Scottish Government recognises will create a one-off administrative burden for day care providers, childminders and local authorities. Registration will be required for all settings who wish to take part in the Scheme. The registration itself will be a simple platform set up by local authorities seeking information such as financial details in order to set up payment methods, business information and information relating to the number of children enrolled in each setting. This step is required in order for local authorities to calculate accurate level of funding to be delivered to each setting.

Thereafter, any administration required from childcare settings will be to update local authorities on any changes of circumstances, updates on financial information and submitting information for monitoring requirements set by the local authority. This could include keeping receipts or contractual information as a record of expenditure, though as settings need to do this under the current UK NMS, this should not represent a new administrative burden.

The Scottish Government also recognises that where settings are currently in contract with milk suppliers or agents for the provision of milk, that these contracts may need to be reviewed and potentially replaced with new contracts. It would be for the setting to agree a price for the continued provision of milk based on their funding allocation from the local authority. Scottish Government will work with COSLA and local authorities to ensure that settings are supported as much as possible in this process.

Local Authorities

Local authorities will be responsible for setting up the registration and payment processes necessary for the delivery of the Scheme to settings in their areas. Local authorities will have flexibility to tailor these approaches to their local needs, within a framework for delivery that will be set out in Scottish Government guidance.

The Scottish Government will pay an administration fee to local authorities for delivering the funding for the Scheme. Scottish Government acknowledge that the costs associated with developing and implementing a registration process for non-funded day care providers will be higher than where existing administration processes are in place for funded ELC provision.

Funding will be provided to local authorities on an annual basis for the full "academic" year (1 August-31 July), based on the registration information that they provide to Scottish Government. Local authorities will be responsible for completing monitoring procedures on an annual basis. Further detail on this is provided below under Monitoring, Enforcement and Sanctions.

Contractors and Milk Agents

The Scheme does not dictate how settings should purchase or procure the milk and snack. The key focus of the Scheme is to route the funding for these purchases directly to the childcare setting, as opposed to requiring them to claim back costs. As noted above, indicative costings have used NMRU claims data, which include the administrative costs charged by milk agents or others contracted by settings to provide the milk.

NMRU data suggests that 1,391 childcare settings in Scotland use milk agents. This represents 16% of the 8,754 childcare settings in Scotland, or 38% of non-childminder settings (if we assume that the majority of childminders do not use agents and remove them from the calculation).

Contrary to concerns expressed by some stakeholders, the new Scheme need not preclude a continuing procurement relationship between local authorities/settings and contractors and milk agents. Nor will it prevent new relationships from being established. However, it will change the way in which payment is made to contractors and milk agents. Currently, some contractors and milk agents reclaim their total costs for the provision of milk direct from the NMRU, rather than from the childcare setting. The introduction of the new Scheme would mean that any local authority or childcare setting in contract with an agent for the provision of milk will be responsible for agreeing a total price and paying this direct to the agent from the funding received from their local authority.

The Scottish Government recognises this will have an impact on the how milk agents and other contractors operate with their clients who are day care providers or childminders. Contractors and agents will no longer make claims on behalf of settings, and settings will need to make arrangements to pay contractors.

Dairy Industry

Some stakeholders from the dairy and farming sector indicated that the new Scheme could be a very important asset to the industry and beyond, playing a key role in encouraging consumption of Scottish dairy products. They thought the Scheme was a clear opportunity for children to make a connection with farming and the wider food supply chain, providing children with an understanding of where food comes from and the high standards of domestic production. While the benefits of the Scheme were highlighted, some stakeholders raised the need to ensure funding was secured to allow for increased uptake and that funding is delivered without any interruptions to current supply chains. Scottish Government has factored full uptake of the Scheme from inception into cost estimates to ensure that the desired increase in uptake can be supported with the appropriate funding levels. Scottish Government and COSLA will continue to work with the sector to communicate the changes in advance of transition to mitigate against any disruption to supply chains.

Feedback from stakeholders also suggested that smaller Scottish dairies may be impacted if day care providers or childminders in receipt of funding through the Scheme decide to source milk from larger suppliers. Others believed that those day care providers or childminders who have existing arrangements with suppliers would remain in those arrangements to avoid unnecessary administrative changes. Scottish Government recognises the importance of supporting small and local businesses, and will take this into consideration in the development of the guidance supporting the delivery of the Scheme.