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

Summary of the Returns

13. 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 delivery of the funded ELC entitlement in 2020-21 and 2021-22 [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 2021-22 [Annex C]; and
• A summary of the additional support for providers during the COVID-19 pandemic by local authority [Annex D].

14. 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 for the delivery of the free meal commitment and for snacks.

15. Some entries in the table in Annex A are marked as TBC (to be confirmed). This reflects, where some local authorities have not yet confirmed their rates for 2021-22.

16. 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 additional information provided by local authorities on specific rates offered to childminders and top-ups to the sustainable rate to cover meals and snacks where applicable.

17. The information set out in Annexes A-B indicates that:

Delivery of funded Early Learning and Childcare entitlement across local authorities

• 30 local authorities have confirmed rates for 2021-22, whilst, at the time of publication, 2 local authorities were currently in the process of finalising the rates to be paid to funded providers for the delivery of funded ELC in 2021-22.
• 16 of the 30 local authorities who have confirmed rates for 2021-22 pay a higher rate for 2 year old children than for children aged 3-5 years old. The other 14 local authorities pay the same hourly rate for 2 year old children as for children aged 3-5 years old.
• In the majority of local authorities, childminders receive the same rate as private and third sector funded providers. However, 5 local authorities offer a separate, slightly lower hourly rate for childminders delivering funded ELC.
• In 3 local authorities providers also receive an enhanced hourly rate, if additional support is agreed for a child in a funded provider setting.
• With regards to the 30 local authorities who have confirmed rates for 2021-22, 10 have increased their hourly rates in comparison with 2020-21 (although only 9 authorities increased rates for both 2 year olds and 3-5 year olds), 19 have kept the same rates as in 2020-21, and 1 local authority has decreased their rate for eligible 2 year olds.
• In 2020-21, 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 £5.00 to £6.40.
• In 2020-21, the average rate across local authorities for 3-5 year olds was £5.35 per hour.
• Local authorities who have confirmed rates for 2021-22 report that from August 2021, rates for delivering an hour of funded ELC for 3-5 year olds will vary from £5.21 to £6.40.
• The average rate across those local authorities who have confirmed rates for 2021-22 is £5.44 per hour.
• The hourly rates for eligible 2 year olds (excluding rates for childminders) in 2020-21 varied from £5.31 to £8.50.
• The average rate across local authorities who placed eligible 2 year olds with providers was £6.07 per hour in 2020-21.
• In 2021-22, local authorities indicate that the hourly rate for eligible 2 year olds varies from £5.31 to £8.50.
• Based on the local authorities who have confirmed rates for 2021-22, the average rate for eligible 2 year olds is estimated to be £6.08 per hour in 2021-22.

Payments for delivery of the free meal commitment

• 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.
• 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.
• Funding to deliver this commitment is additional to the sustainable rate and 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
• The most common approach for 2021-22 is that local authorities will provide settings with a payment for each meal (with 24 local authorities following this approach). 8 local authorities provide payments for meals through a top-up to the sustainable rate.
• The returns highlight some variations in the level of payment made to settings for delivery of free meals.
• Where a payment is made per meal/day this varies from £1.77 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 £0.35 to £0.50 per hour.

Summary of Approaches to setting Sustainable Rates

18. In April 2019, the Scottish Government published guidance to support local authorities to set sustainable rates for funded providers in the private and third sectors, including childminders. The guidance sets out the principles for setting sustainable rates, and provides a range of potential approaches that local authorities may wish to use in order to gather the evidence required to allow them to set sustainable rates for their funded providers.

19. A key principle set out in the guidance is that 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.

20. Section 5 of the guidance sets out the following potential approaches for local authorities to set sustainable rates for their funded providers:

• Survey (Costs) – Review detailed cost information provided by private and third sector providers;
• Working Group - Agree, for each cost, a percentage (%) figure and indicative cost through a working group;
• Survey (Prices) - Review current rates charged by private and third sector providers in the local area; and,
• Cost Modelling – Develop costs based on modelling of an 'average' local ELC setting.

21. The guidance highlights that a local authority may choose to use a process, aligned with their available resources, that uses the principles and the points explained in Section 4 (Developing a Local Rate) of the guidance, but which differs from the four process set out above.

22. Annex C sets out the information that local authorities provided regarding their approach to setting sustainable rates for 2021-22. As highlighted in paragraph 17, a small number of local authorities are currently in the process of confirming their sustainable rates for 2021-22.

Summary of Additional Support for Funded Providers during the COVID-19 pandemic

23. Annex D sets out the responses from each local authority regarding the work that they have undertaken to understand the impact of the pandemic on funded providers and any additional support measures that they have offered. The returns from local authorities indicated that the following areas of support were offered:

Covid-related guidance and support

• Regular contact with funded providers through meetings which provide an opportunity to discuss issues such as financial sustainability.
• A temporary increase to sustainable rates paid to funded providers.
• Disseminating information and support to consolidate understanding of changing public health guidance.
• Support with providing and sourcing PPE and cleaning materials.
• Support with Covid recovery plans and risk assessments for re-opening of the sector.
• Guidance developed to support funded providers with remote learning.
• Support from peripatetic nursery staff.
• Information sessions for positive case management.
• Needs-based financial assistance for settings who have demonstrated that Covid has impacted on their financial sustainability.

Grants to funded provides

• Administration of Scottish Government targeted financial support for the sector including the Transitional Support Fund and the Temporary Restrictions Fund; and supporting communication to ensure that providers were aware of the funds available to them.
• Grant schemes established by local authorities including grants targeted specifically at childminders; grants to make improvement to outdoor spaces; ICT grants to support home learning; grants to mitigate some of the additional costs incurred due to the pandemic and to support appointment of an additional Modern Apprenticeship.

Training and development

• A suite of Continuous Professional Development (CPD) resources developed to support funded providers.
• Organised sessions on sharing good practice in relation to learning at home, transitions and Care Inspectorate guidance.
• A range of training and development opportunities as well as professional qualifications.

Actions taken to understand the impact of the pandemic on funded providers:

• Working Groups were established to look at a methodology and survey questions to better understand the impact of Covid.
• A review of additional costs incurred by providers due to Covid, working with partners throughout the pandemic to understand the pressures they have faced to stay in business.
• Regular communication on an individual / group basis which ensured the local authorities were aware of the impact of Covid on individual services.

Next steps

24. Alongside this report we have also published the Financial Sustainability Health Check, which, drawing on the Health Check evidence and analysis and the information set out in this report, sets out the further actions that will be taken to strengthen the process for setting sustainable rates including:

• reviewing and updating the sustainable rates guidance, originally published in April 2019, to ensure it reflects the current delivery cost factors for services and the varying cost considerations for different types of services;
• working with COSLA and local authorities to support the sharing of good practice in the application of the sustainable rates guidance and in working with the sector to establish sustainable rates; and
• exploring the potential for making additional support and advice available to local authorities, where required, to support the sustainable rates setting process to ensure that rates reflect the costs of delivery, provide scope for reinvestment and enable delivery of the real Living Wage commitment.

25. We will work with COSLA to ensure that these changes are made in time to be reflected in the process for setting sustainable rates for August 2022.