Early learning and childcare providers - local authority funding and support: overview 2022 to 2023

Summary of the Returns

18. Annexes A-D set out the information provided by local authorities in the following formats:

• Hourly rates for 3 - 5 year olds, and eligible 2 year olds, for the delivery of the funded ELC entitlement in 2021-22 and 2022-23 [Annex A];
• Payments for delivery of free meals to providers [Annex B];
• A summary of approaches adopted by local authorities to setting sustainable rates for 2022-23 [Annex C]; and
• A summary of the additional support package offered to funded providers by local authorities [Annex D].

19. To allow for consistent comparisons of sustainable rates across local authorities – and in line with the guidance (i.e. meeting the costs of delivering an hour of ELC to one child) – the rates presented in Annex A do not include any top-ups to the sustainable rate for the delivery of the free meal commitment and/or for snacks (they are presented separately in Annex B).

20. Where local authorities provided additional explanations of the data, these are set out in the "comments" column of the respective tables. The "comments" column also sets out any additional information provided by local authorities on alternative rates offered to providers, including childminders.

21. Where a local authority has not yet confirmed a rate for 2022-23, this will also be highlighted in the comments section. For these local authorities, the rate currently being paid is reported.

Hourly Rates paid by local authorities for the delivery of funded Early Learning and Childcare

22. 30 local authorities have confirmed rates for 2022-23, whilst, at the time of publication, 2 local authorities reported that they were planning to agree their rate(s) in early 2023.

23. 23 of the 30 local authorities who have confirmed rates for 2022-23 pay a higher rate for 2 year old children than for children aged 3-5 years old. The other 7 local authorities pay the same hourly rate for 2 year old children as for children aged 3-5 years old.

24. In 3 local authorities, the rate can vary between providers for reasons other than the age of the child or additional support needs. Angus pays a different rate if the provider operates from Council premises, Shetland Islands pays a different rate if the provider is not in receipt of their Building Support Package; and Argyll and Bute pay an enhanced rate once the provider is paying the increased living wage of £10.90 per hour.

25. Due to the variation in approaches to funding children with additional support needs, enhanced rates for these children are not reported in Annex A, but are included within Annex D where they have been provided.

26. As Orkney only pay sustainable rates to childminders, for consistency, their rates are excluded from the minimum and maximum rates, and the calculation of averages highlighted in this summary. A summary of childminding rates is provided at paragraph 37.

27. At the time of the previous report in August 2021, the hourly rates paid to providers (excluding rates for childminders) to deliver funded Early Learning and Childcare entitlement for 3-5 year olds varied from £5.21 to £6.40 per hour, and the average reported rate across local authorities for 3-5 year olds was £5.44 per hour.

28. With regards to the 30 local authorities who have confirmed rates for 2022-23, 27 have increased their hourly rates for 3-5 year olds since the last report in August 2021. The other 3 have kept the same rates as in 2021-22.

29. Local authorities who have confirmed rates for 2022-23 report that rates for delivering an hour of funded ELC for 3-5 year olds (excluding childminders) will vary from £5.45 to £6.40 per hour.

30. The average rate for 3-5 year olds across those local authorities who have confirmed rates for 2022-23 is £5.77 per hour

31. The average rate paid to providers for 3-5 year olds has increased by 6.1% since the time of the previous report in 2021-22 (an increase in the average confirmed rate from £5.44 per hour to £5.77 per hour).

32. Average rates paid to providers for 3-5 year olds receiving funded ELC have increased by around 57% between 2017 and 2022, from £3.68 per hour in 2017-18^[1] to £5.77 per hour in 2022-23.

33. At the time of the previous report in August 2021, the rates paid to providers (excluding rates for childminders) to deliver funded ELC for eligible 2 year olds varied from £5.31 to £8.50 per hour, and the average rate across local authorities for eligible 2 year olds was £6.08 per hour.

34. With regards to the 30 local authorities who have confirmed rates for 2022-23, 23 have increased their hourly rates for eligible 2 year olds since the last report in August 2021. 4 have kept the same rates as in 2021-22, 1 has decreased their rate, and 2 did not set a separate rate for eligible 2 year olds in 2021-22.

35. Local authorities who have confirmed rates for 2022-23 report that rates for delivering an hour of funded ELC for eligible 2 year olds (excluding childminders) vary from £5.50 to £8.50 per hour.

36. The average rate for eligible 2 year olds across those local authorities who have confirmed rates for 2022-23 is £6.40 per hour.

37. In the majority of local authorities, childminders receive the same rate as private and third sector funded providers. However, 8 local authorities offer a separate hourly rate for childminders delivering funded ELC.

38. For the 8 local authorities paying a separate rate for Childminders in 2022-23, these rates vary from £4.76 to £6.03 per hour for both eligible 2 year olds and 3-5 year olds. The average rate for 3-5 year olds is £5.31 per hour, and the average rate for eligible 2 year olds is £5.53 per hour.

Payments for delivery of the free meal commitment

39. Every child attending a funded ELC session – which is any session that includes funded hours, regardless of whether they are mixed with 'paid for' hours – from August 2021 is provided with a free meal.

40. Local authorities provide settings with the funding to deliver the free meals, unless, in cases where a setting does not have onsite catering facilities, there may be an agreement that the local authority will provide meals to the setting.

41. Funding to deliver this commitment is additional to the sustainable rate and, as set out in the guidance, local authorities must ensure that they are transparent as to the funding being provided to private and third sector providers for the delivery of the free meal commitment.

42. The most common approach for 2022-23 is that local authorities will provide settings with a payment for each meal (with 22 local authorities following this approach). 10 local authorities provide payments for meals through a top-up to the sustainable rate.

43. The returns highlight some variations in the level of payment made to settings for delivery of free meals.

44. Where a payment is made per meal/day this varies from £1.99 to £3.11 per meal. Where local authorities choose to provide an additional top-up to the sustainable rate for delivery of the meal commitment this 'top-up' to the sustainable rate varies from £0.30 to £0.50 per hour.

Summary of Approaches to setting Sustainable Rates

45. Local authorities were asked to provide details of how they had set sustainable rates in-line with the updated joint Scottish Government and COSLA guidance on setting sustainable rates which was published on 26 May 2022.

46. Local authorities were also asked follow up questions on engagement with funded providers during the rate-setting process, and how they had ensured that the rate reflected up-to-date costs. This reflected the emphasis in the updated guidance on the need for local authorities to reflect the most up-to-date cost information in setting rates, and that is particularly important for providers during the current costs crisis; and the importance of ongoing consultation and dialogue between local authorities and their local ELC providers.

47. Annex C sets out the information that local authorities provided in response. A small number of local authorities were still in the process of confirming their sustainable rates for 2022-23 when this survey was completed.

48. No direction was given to local authorities on the length of their response. Local authorities have therefore taken different approaches and provided differing levels of detail. For future exercises, the Scottish Government will consider providing suggested word limits, however it is ultimately for local authorities to determine the content of their survey response

49. Local authorities have reported a range of engagement activity with their funded providers as part of the rate setting process – for example, through existing provider engagement forums, communications with providers, and additional meetings or information sessions. Evidence on provider engagement will be considered as part of the joint COSLA and Scottish Government review of sustainable rates in 2023 (see the section on Next Steps).

Summary of Additional Support for Funded Providers

50. The Guidance For Setting Sustainable Rates, originally published in April 2019, highlights that 'along with the sustainable rate, local authorities provide a range of benefits to funded providers and that it is for local authorities to decide the best package to ensure high quality ELC provision is offered to children and families, based on their own local circumstances.' Further information is provided in Section 6 of the April 2019 Sustainable Rates Guidance.

51. It also notes that a local authority should outline the support package available, and its monetary value (where available), to funded providers at the time of application.

52. Local authorities were asked to detail their additional support package, and advised they could include financial and non-financial measures.

53. Annex D sets out the responses from each local authority regarding their additional support package.

54. No direction was given to local authorities on the length of their response. Local authorities have therefore taken different approaches and provided differing levels of detail. Central themes in the majority of responses are training, professional development and support with quality assurance and improvement.

Next steps

55. The Scottish Government and COSLA are undertaking a review of the overall process for setting sustainable rates in 2022-23. This is with the intention of learning lessons to identify where the process can be improved further to ensure that rates reflect the costs of delivering funded ELC and the payment of the real Living Wage to staff delivering funded ELC.

56. This review will inform what further action may need to be taken ahead of 2023-24 and the wider approach to rate setting over the rest of this Parliament, including any required updates to the supporting sustainable rates guidance.

57. Data collected during this survey will be used to inform the review. Local authorities were also given the opportunity to provide general feedback on the rates setting process in this survey. This feedback will inform the rates review.

58. There will be an opportunity for private, third and childminding sector providers to input into the review process, and we will ensure that the provider representative bodies are informed of the process for engaging.

59. The review is expected to be completed by Spring 2023. Concurrently, the Improvement Service is completing a 'lessons learned' review in relation to the Ipsos MORI cost collection exercise carried out in 2022.

60. The Scottish Government is also progressing an update of the Financial Sustainability Health Check of the childcare sector. It is expected that the final report will be published at the end of March 2023.

61. The Scottish Government is committed to collecting and publishing data on the sustainable rates set by local authorities and we will write to local authorities, ahead of August 2023, to request information on the rates for 2023-24.