Early Learning and Childcare Payment of Sustainable Rates for Funded Providers ECSPB
Renfrewshire Council · 15 May 2025
Back to Education and Children's Services Policy Board — 15 May 2025 and its agenda
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To: Education and Children’s Services Policy Board On: 15 May 2025 Report by: Director of Children’s Services Heading: Early Learning and Childcare – Payment of Sustainable Rates to Funded Providers 1. Summary 1.1 Renfrewshire Council has a statutory duty to provide early learning and childcare (“ELC”) places to all eligible children. The Council continues to observe this duty through the provision of places in local authority, private and voluntary sector nurseries and with childminders. Renfrewshire Council’s Flexible Framework for Early Learning and Childcare Places, reference RC-CPU-20-113 (“Council’s Framework") enables the Council to purchase placements in private and voluntary sector nurseries and with childminders (these private and voluntary services and childminders are identified as “Approved Funded Providers” or “AFP”). 1.2 The purpose of this report is to provide an update on a further review of the sustainable rate paid to AFP for the provision of ELC and to seek approval for the payment of the new rate from 1 April 2025. 2. Recommendations 2.1 The Education and Children’s Services Policy Board is asked to: (i) Note the position of COSLA and the Scottish Government with regards to the sustainable rate paid to AFP; (ii) approve an increase in the sustainable hourly rate paid to Renfrewshire Council’s AFP for the provision of funded early learning and childcare from £6.45 to £6.74 effective from 1 April 2025 for any child aged 3 to 5 years accepted for funding under the Council’s Framework; and (iii) approve an increase in the sustainable hourly rate paid to Renfrewshire Council’s AFP for the provision of funded early learning and childcare from £8.50 to £8.88 effective from 1 April 2025 for any eligible child aged 2 to 3 years accepted for funding under the Council’s Framework.
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3. Background 3.1 Section 1 of the Education (Scotland) Act 1980, as amended by the Standards in Schools etc. Act 2000 and The Children and Young People (Scotland) Act 2014 (“2014 Act”), directs authorities on their duty to provide pre-school education. Renfrewshire Council has continued to observe this duty through the provision of places in local authority, private and voluntary sector nurseries and with childminders. 3.2 All 3 and 4-year-old children and eligible 2-year-old children have a statutory entitlement of up to 1,140 hours of funded ELC each year. 3.3 The Scottish Government published updated guidance on the Funding Follows the Child and National Standard for ELC Providers: Operating Guidance in December 2023. 3.4 The Scottish Government’s Funding Follows the Child Policy tasks Councils with the responsibility of ensuring flexibility and choice, ensuring that there is a range of options for families in their area. Renfrewshire Council continues to ensure families have flexibility in the way they wish to access their child’s entitlement to ELC. In each geographical area parents can choose from a range of Providers, including Council and AFP; and a range of options such as term time and 52 weeks per year, full day, and part-time places. 3.5 The National Standard sets out the required standards for AFP and local authority establishments; with Councils required to be guarantors of quality in ensuring the provision of high quality ELC in AFP settings. The National Standard also sets out a requirement for AFP to have a financially sustainable setting and to pay those staff delivering funded ELC the real Living Wage, with the aim of supporting recruitment and retention of staff, professional learning and investment in their services. 3.6 The Council’s Framework provides a robust scrutiny and assessment process to ensure quality ELC provision and AFP commitment to meeting the National Standards in relation to quality of provision, payment of the real Living Wage, quality staffing and staff retention. 3.7 In Renfrewshire, approximately 1690 eligible children currently access their funded ELC placement in an AFP setting. The Council is dependent on AFP to fulfil its statutory duty to deliver high quality ELC to all eligible children. Private, voluntary sector nurseries and childminders settings in this sector need to remain financially viable and meet the required standards set to ensure the provision of high-quality ELC services. 3.8 The rate paid for the provision of the statutory entitlement to ELC is known as the sustainable rate. Each local authority is responsible for setting their own rate and national guidance produced by COSLA and the Scottish Government provided to support local authorities with this exercise. 3.9 In December 2023, the Scottish Government and COSLA published ELC: Sustainable Rates Review, which set out a wide-ranging programme of reform to strengthen the process for setting sustainable rates. This included updating the sustainable rates
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guidance, to move towards greater standardisation; including considering options for obtaining more robust and reliable cost data to ensure a full understanding of the costs of providing funded ELC in different settings. 3.10 Guidance for Setting Sustainable Rates for the Delivery of Funded ELC in 2025-26 was published by the Scottish Government and COSLA in February 2025. This updated guidance, replaced previous versions of the sustainable rates guidance, sets out the process for local authorities to set sustainable rates for 2025-26. 3.11 The Scottish Government has confirmed an additional £9.7 million funding across Scotland in 2025-26 to enable childcare workers delivering funded ELC in private and third sector services to be paid at least the new real Living Wage rate of £12.60 per hour from April 2025. 3.12 A key principle of the sustainable rates setting process is that it should be evidence- based, taking account of the cost of providing ELC in the local area, and are clear and transparent. To support this approach, and to deliver the recommendation from the Sustainable Rates Review, a new national cost collection exercise will be undertaken in Spring 2025. An organisation called Diffley Partnership has been appointed by the Scottish Government to undertake the cost collection exercise. It is understood that new sustainable rate guidance will be published by the Scottish Government in early 2026 to reflect the outputs of the cost collection exercise, and to support rate setting from 2026-27 onwards. 3.13 On 23 May 2024 the Education and Children’s Services Policy Board approved an increase in the sustainable rate from £5.97 to £6.45 per hour for any eligible child aged 3 to 5 years and agreed the continuation of the hourly rate of £8.50 paid for eligible 2-year-olds. The increase in the rate for eligible 3- to 5-year-olds represented a 10.1% uplift on staffing costs and 2.3% on non-staffing cost (including inflation, seasonality and re-investment). The payment of the revised rate was backdated to 1 April 2024. The revised rate was set in accordance with the Scottish Government guidance (published March 2024) on rate setting for March 2024-25. In line with national guidance, the Council worked collaboratively with AFP on the rate setting process. 3.14 A decision was also taken by the Education and Children’s Services Policy Board at its meeting on 23 May 2024 to retain the existing rate for eligible 2-year-olds, due to Renfrewshire Council paying the highest rate across Scotland, with an average rate of £6.68 per eligible 2-year-old during session 2023-24. This is based on information from a Scottish Government publication in January 2024 on the overview of sustainable rates paid to AFP across Scotland for session 2024-25. The Policy Board also agreed to a review of the 2-year-old rate for future years. 3.15 AFP also receive £3 per meal for an eligible child in line with the 1140 hours of ELC entitlement, this in addition to the hourly rate and the separate £0.58 per session per child as part of the Scottish Milk and Healthy Snack Scheme. 3.16 The Council also continues to provide additional benefits to AFP as part of the Council’s Framework. This is in addition to the sustainable rate paid to AFP. The additional benefits include high quality continued professional learning; a designated link Partnership Support Officer; professional advice and support on quality improvement; access to an Early Years Graduate (in line with SIMD status) and to an Early Years Teacher; an enhanced programme of support for services during a Service Improvement Period due to inspection grades falling below the
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requirements set within the National Standard; financial support towards external workforce training costs to assist in the compliance with SSSC requirements; and other support services such as Educational Psychology and the Education Inclusion Team for support and advice on supporting children with additional support needs, which may also include ASNA support. These forms s of in-kind support enables the Council to discharge its duty as guarantor of quality. 4. Payment of a Sustainable Rate – 2025-26 4.1 The Scottish Government and COLSA updated guidance on setting the sustainable rate for funded ELC in 2025-26 advises on two elements of uplift: an uplift to staffing costs and an uplift to non-staffing costs. 4.2 Through national agreement between the Scottish Government and COSLA, it has been determined that all local authorities should apply a minimum 3.75% uplift to all 2024-25 rates to reflect the estimated increase in the average staff cost element of the sustainable rate required to meet the real Living Wage uplift from April 2025. This reflects staffing costs accounting for, on average, 75% of the sustainable rate. In-line with this guidance non-staffing costs are estimated to account for, on average, 25% of the sustainable rate. 4.3 The guidance also encourages local authorities to: - Work towards a higher rate for eligible 2-year-olds from 2026-27, reflecting the differences in the staff ratio requirements and that the cost for delivering funded ELC to eligible 2-year-olds being higher than for 3–5-year-olds. - Bring the sustainable rate for childminders in line with other AFP. - Work towards setting a separate payment rate for the free meal commitment from 2026-27. Renfrewshire Council is already meeting these recommended practices. 4.4 Additionally, the sustainable rate guidance for 2025-26 requires that the overall rate agreed must be affordable for local authorities in terms of the budgets available. Also advised in the guidance is that sustainable rate uplifts for 2025-26 which are set after 1 April 2025 are expected to be backdated to 1 April 2025 to reflect, from this date, the increased real Living Wage. 4.5 Renfrewshire Council’s existing rate for eligible 2-year-olds is no longer the highest across Scotland. An overview of the sustainable rates paid to AFP across Scotland for session 2024-25 was published by the Scottish Government in March 2025. A review of the sustainable rate paid during session 2024-25 for funded ELC for eligible 2-year- olds varies between £6.15 to £9.08 per hour, with an average reported rate of £7.25 per hour in AFP establishments. 4.6 A proposed uplift from 1 April 2025 for Renfrewshire Council’s AFP, from £6.45 to £6.74 per hour, for an eligible child aged 3 to 5 years reflects the requirements detailed at 4.2 above; specifically, a 5% uplift to the staff cost element of the 2024-25 rate and a 2.8% uplift to the non-staffing element, yielding a blended uplift to the overall rate of 4.5%. In addition, a 4.5% uplift is proposed from 1 April 2025 for Renfrewshire Council’s AFP, from £8.50 to £8.88 per hour, for an eligible 2-year-old.
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4.7 The increase proposed in paragraph 4.6 is linked to a commitment by AFP to pay their ELC staff providing direct care to children who are receiving funded hours with a minimum of £12.60 per hour from 1 April 2025. 4.8 AFP will continue to receive £3 per meal for any eligible child in accordance with the 1140 hours of ELC entitlement and in addition to the hourly rate. The continuation of a rate of £3 per meal is in line with the funding allocated to the Council for meal provision. AFP will also continue to be paid £0.58 for each child, per session, as part of the Scottish Milk and Healthy Snack Scheme. 4.9 Council officers have continued to work collaboratively with a representative group of AFP on the sustainable rate setting process. The AFP representative group were consulted during the preparation on the proposal for the sustainable rate for session 2025-26 being presented to this May 2025 Policy Board. 4.10 The other additional in-kind services the Council provides to AFP, as outlined in paragraph 3.16 above will continue to be provided; this is also in addition to the hourly rate paid to AFP. 4.11 It is expected that further national guidance on rate setting from 2026-27 onwards will be published in early 2026, this will be based on the outputs from the national cost collection exercise as advised in paragraph 3.12 above. A further report will be presented to the Education and Children’s Service’s Policy Board regarding proposed rates from this period onwards. Implications of this report 1. Financial The overall cost of the proposed increase to the hourly rate payable to AFP for ELC is expected to be in the region of £518,000 per year. An additional £9.7 million has been provided for 2025-26 nationally by the Scottish Government to fund the increase in the sustainable rate required to meet the commitment to pay at least £12.60 per hour from 1 April 2025 and, along with other finance settlement adjustments, this leads to an increase in funding for Renfrewshire Council for financial year 2025-26 of £424,000. The implementation of this uplift will therefore represent, ceteris paribus, an estimated additional net cost pressure to Renfrewshire Council Children’s Services of £94,000 per year. As the number of families choosing to access their child’s entitlement in AFP settings varies on an annual basis, the service will continue to closely monitor ongoing affordability. The findings of the joint review of the sustainable rate setting process notes the continued challenges facing the sector. It also notes that any sustainable rate must also be financially sustainable from the perspective of the local authority. Council officers will continue to engage with AFP across Renfrewshire to inform future reviews of the sustainable rate.
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2. HR and Organisational Development None directly arising from this report as it relates to AFP costs. 3. Community/Council Planning Our Renfrewshire is thriving Ensuring the best start in life for children and young people. Our Renfrewshire is well Early intervention will lead to healthier outcomes for children and young people. Our Renfrewshire is safe Local services will benefit children, young people and members of the community. Building strong, safe and resilient communities The quality of community life is enhanced by supporting parents, children and young people. Tackling inequality, ensuring opportunities for all Effective governance arrangements ensure that the organisations receiving funding comply with legislative requirements. Creating a sustainable Renfrewshire for all to enjoy Working together to improve outcomes Support to families and flexible childcare placements will support parents into and sustain employment, training or enter education. Ensuring children have a high quality ELC experience. 4. Legal Services from AFP will continue to be procured in accordance with the Council’s Framework and the Council’s Standing Orders Relating to Contracts. The Scottish Government and COSLA guidance on setting sustainable rates for the delivery of funded ELC provides guidance for Councils, this is not a statutory requirement. Additional funded is provided to support an increase, therefore placing an expectation on Councils to increase rates in accordance with their guidance. 5. Property/Assets None directly arising from this report 6. Information Technology None directly arising from this report 7. Equality and Human Rights No negative impacts on equality groups or potential for infringement of individuals’ human rights have been identified arising from the recommendations contained in the report because the sustainable rate is being increased. If required, the actual impact
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of the recommendations and the mitigating actions will be reviewed and monitored, and the results of the assessment will be published on the Council’s website. AFP are required to comply with the Equality Act 2010 8. Health and Safety None directly arising from this report 9. Procurement Services from AFP will continue to be procured in accordance with the Council’s Framework and the Council’s Standing Orders Relating to Contracts. The process for the proposed variation to the rate will be dealt with in accordance with the Council’s Framework and formal letter issued by the Corporate Procurement Unit to each of the appointed AFP for their agreement. 10. Risk If the Council does not increase the hourly rate to a level that enables AFP to be sustainable and to fulfil the commitment to pay staff £12.60 per hour, there is the risk that: i. There will be a reduction in the level of choice and local provision for parents and possibly impact on the Council’s ability to fulfil its statutory duty and compliance with the Funding Follows the Child Policy and National Standard of ensuring sufficient ELC places. This could result in additional cost for the Council as it will need to expand existing Council ELC services and/or open new Council operated ELC services. ii. There may be reputational damage to the Council if ELC services close due to not being sustainable, leading to disruption to children and families’ lives, loss of local provision, choice and flexibility for families, loss of employment and community- based services. iii. Providers in the private, voluntary and independent sector may not be able to meet the National Standard, recruit and retain staff if they are not able to pay the real Living Wage to those staff delivering funded ELC. iv. Potential reduction in the quality of service provided if qualified and experienced staff cannot be recruited. 11. Privacy Impact None directly arising from this report 12. Climate Risk None directly arising from this report 13. Children’s Rights Article 3 (best interests of the child) - the best interests of the child must be a top priority in all decisions and actions that affect children. Article 28 (right to education) - every child has the right to an education. Article 29 (goals of education) - education must develop every child’s personality, talents and abilities to the full. It must encourage the child’s respect for human rights, as well as respect for their parents, their own and other cultures, and the environment. Article 31 (leisure, play and culture) - every child has the right to relax, play and take part in a wide range of cultural and artistic activities.
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14. COSLA Policy Position The joint review of the sustainable rate setting process was undertaken by COSLA and the Scottish Government. COSLA and the Scottish Government jointly agreed on the sustainable rate setting process as outlined in this report. List of Background Papers - Early Learning and Childcare – sustainable rates for funded providers: overview 2024 to 2025, Scottish Government, March 2025 – https://www.gov.scot/publications/early-learning-childcare-sustainable-rates-funded- providers-overview-2024-2025/ - Guidance for setting sustainable rates for the delivery of funded early learning and childcare (ELC) in 2025-26, Scottish Government and COSLA, February 2025 - https://www.gov.scot/publications/guidance-setting-sustainable-rates-delivery-funded- early-learning-childcare-elc-2025-26/ - Funding Follows the Child and the National Standard for ELC Providers: Operating Guidance, Scottish Government, December 2023. - Funding Follows The Child and The National Standard for Early Learning and Childcare Providers: Operating Guidance - gov.scot (www.gov.scot). The foregoing background papers will be retained within children’s services for inspection by the public for the prescribed period of four years from the date of the meeting. The contact officer within the service is Kathleen McDonagh, Education Manager, 07799034553 - kathleen.mcdonagh@renfrewshire.gov.uk KMcD 17 April 2025 Author: Kathleen McDonagh, Education Manager, Telephone Number 07799034553 kathleen.mcdonagh@renfrewshire.gov.uk