Technical Notes 2024, Issue 102 - Sustainable Rate Setting for Funded Providers of Early Learning and Childcare in East Dunbartonshire

1. This Technical Note is to update Elected Members regarding the increase of sustainable rate funding for Early Years funded providers across East Dunbartonshire. 

2. The rate paid to Funded Providers for the provision of the statutory entitlement of 1140 hours is known as the Sustainable Rate.  Each local authority has the responsibility for setting its own rate and guidance is provided by Scottish Government to support with this process.  

3. In session 2023-2024, the Council approved the increase to the sustainable rate for funded providers by 2% to £5.89 for 3-5 year olds and £7.09 for eligible two year olds.  The rationale for the increase was included in report EDC/022/23/AD which was considered by a meeting of Council on 14 December 2023.  It should be noted that in line with national guidance funded providers were consulted through this process. This increase was applied from 1st August 2023. 

4. For session 2024-2025, the Scottish Government is providing £16m additional funding to enable childcare workers delivering funded early learning and childcare (ELC) in private and third sector services to be paid at least £12 per hour from April 2024. The commitment will also be applied in a fair and sustainable way for all childminders who deliver funded ELC.

5. Consultation has taken place with the Funded Providers, with 28 representatives attending from 17 funded provider establishments on Thursday, 18th April 2024. The group was keen to see the minimum 7.6% increase applied as soon as possible.

6. Scottish Government has provided the Council with £293, 000 to cover the cost of this increase which it has indicated should be an uplift of 7.6% of rates from 2023/2024. However, for the Council to provide such an uplift, this would cost £624,266 which results in a short fall of £331, 266. 

This 7.6% increase would increase the sustainable rate for 2024/2025 to:-

• £6.34 for 3-5 year olds
• £7.63 for eligible 2 year olds.

The current rate for session 2023/2024 is:-

• £5.89 for 3-5 year olds.
• £7.09 for eligible 2 year olds.

This would result in a 45p per hour increase for 3-5 year olds and a 54p per hour increase for eligible 2 year olds.

7. The Council has noted the continued challenges facing the sector and the findings of the joint review of the sustainable rate setting process.  However, it should also be noted that moving forward, the sustainable rate should not have a detrimental effect on the Council’s ability to continue to pay for the service in the long-term.  The Council will continue to engage and consult with Funded Providers in the rate setting process. 

8. All Councils received advice from COSLA stating that apply a minimum 7.6% uplift to 2023-24 rates reflects the estimated increase in the average staff cost element of the sustainable rate required to meet the £12 per hour (real Living Wage) pay commitment in 2024-25. This reflects staffing costs accounting for, on average, 75% of the sustainable rate in 2023-24. 

9. Ordinarily, this matter would be the subject of a report to the relevant Committee or to Council.  However, Members will be aware that the Council’s outstanding diary or meetings was cancelled because of the impending General Election, which means that it would not be considered until August.  Officers are concerned that a delay until August is not sustainable, not least given demands from the Funded Providers and the receipt of complaints.

10. In light of the above, and having regard to the advice from COSLA and the Scottish Government position, it is proposed that the increase to the Sustainable Rate from £5.89 to £6.34 for 3-5 year olds and from £7.09 to £7.63 for eligible 2 year olds will now be implemented and be backdated to 1 April 2024 in line with national guidance.

11. As stated above, the cost of the uplift amounts to £624,266.  The Council has received funding of £293,000 from the Scottish Government to cover the cost of this increase, resulting in a shortfall of £331, 266.  In the short term these additional costs will place pressure on in-year revenue expenditure, the year-end position and ultimately Council reserves.  In future years additional savings will require to be specified to ensure that the additional cost of applying this rate so that it remains financially sustainable at a Council level.

12. Officers will communicate this uplift to Funded Providers and work with colleagues within the Council to ensure payments are made as soon as possible.