Early learning and childcare providers - local authority funding and support: overview

Introduction

1. Funding Follows the Child provides the underpinning policy framework to support delivery of funded Early Learning and Childcare (ELC). A key aspect of Funding Follows the Child is the payment of sustainable rates to providers in the private, third and childminding sectors for the delivery of funded ELC.

2. In April 2019, guidance was published to support local authorities to set sustainable rates. The guidance was produced based on feedback gathered from across the sector, and sets out the principles that should underpin any approach to setting sustainable rates; and options for taking forward the process.

3. The guidance highlights that the rates paid to providers in the private, third and childminding sectors for the delivery of funded ELC by local authorities should be sustainable and should meet the following:

• the rate will support delivery of a high quality ELC experience for all children
• it will be a rate that reflects the cost of delivery, including the delivery of national policy objectives
• the rate will allow for investment in the setting – staff, resources and physical environment
• it will enable payment of the real Living Wage for those childcare workers delivering the funded entitlement.

4. Reflecting the impacts of the pandemic there is currently Interim Guidance in place to support the implementation of Funding Follows the Child. This Interim Guidance was initially published in July 2020, with an update published in March 2021. This includes Interim Guidance on the payment of sustainable rates, which highlights, in particular, that local authorities 'will work with their funded providers to understand the extent to which the costs of delivering funded ELC have changed due to COVID-19'.

5. The interim Guidance also highlights that 'where there are additional costs for settings as a result of COVID-19 related measures, there are a number of approaches that local authorities may wish to consider in order to ensure that these additional costs are reflected in payments to funded providers. For example, a temporary top-up could be applied to the sustainable rate, or one-off (or less frequent) payments could be made to cover the costs'.

Data Collection

6. In summer 2019 the Scottish Government undertook an exercise to collect information on the rates paid by local authorities to their funded providers in the private, third and childminding sectors, with an accompanying report published in July 2019.

7. The Scottish Government wrote to local authorities on 21 May 2021 to request an update on the hourly rates that are currently paid to providers for the delivery of funded early learning and childcare and the rates local authorities have set for 2021-22. As part of this exercise the following information was also requested:

• local authorities' approach to setting sustainable rates in line with the sustainable rates guidance published in April 2019;
• the payments to funded providers for delivery of the free meal commitment; and
• any additional support that local authorities have offered to their funded providers during the COVID-19 pandemic.

8. This paper sets out the data provided by local authorities in response to this request.

9. The sustainable rates data collection will be updated annually with the updated information published by the end of August each year.

Financial Sustainability Health Check

10. The information from this updated data collection on hourly rates has informed the Financial Sustainability Health Check of the childcare sector that the Scottish Government has undertaken.

11. The Health Check has gathered evidence of the impact of COVID-19 on the sustainability of all types of childcare providers, and assessed the impact of the range of the financial support which has been made available. This exercise has been informed by surveys of childcare services, with a separate survey for day care of children services, and for childminding services – and a series of case studies with a range of providers.

12. The findings from the Health Check, which includes actions that will be progressed to support the setting of sustainable rates, can be found on the Scottish Government web site.