Scottish councils accused of 'short-changing' on childcare with underfunding

Childcare providers are being short changed and children are missing out because of underfunding from Scottish councils, an industry body has claimed.

Information from councils revealed Scottish private and independent nurseries are delivering almost a third of the country’s funded childcare places but local authorities are only allocating about a fifth of their budgets to pay for it.

The National Day Nurseries Association (NDNA) Scotland submitted a Freedom of Information (FOI) request to all Scottish local authorities asking what percentage of funded early learning and childcare (ELC) places for two, three and four-year-olds from August 21 to March 22 were delivered by “partner providers”.

Councils were then asked what proportion of their total ELC budget was used to procure these places.

On average councils reported that almost a third (30.2%) of their ELC delivery was through partner providers, rather than via council maintained nurseries, based on those who responded.

However, they only spent an average of just over a fifth (21.5%) of their ELC budgets on these partner places. The average gap between the proportion of delivery and the allocation of budget was 8.1%.

But in some areas, the difference was significantly higher with East Lothian reporting a 16.5% gap, South Lanarkshire a difference of 15.4% and Moray 14.2%.

“The data that councils have provided backs up what we have been saying since the childcare offer was expanded – funding does not fully follow the child,” said Purnima Tanuku OBE, chief executive of NDNA Scotland.

“And for most settings, the ‘sustainable rates’ being paid do not cover the full costs of high quality early learning and childcare.

“Providers are being short changed and children are missing out where councils are dedicating a significantly lower proportion of their budget than the number of hours being delivered.

More than nine in ten local authorities responding (91.3%) admitted that the proportion of funded childcare places in partner settings was higher than the share of the budget used to pay for them. You can download the full table of responses below

Only two local authorities, Aberdeenshire (+1.6%) and East Renfrewshire (+3.2%) reported a positive gap, where they were allocating higher proportions of budget to partner providers than the percentage of hours being delivered.

Last summer, nine out of 32 councils confirmed to NDNA Scotland that their hourly rates to providers stayed the same as the previous year, despite significant increases in costs to partner providers such as rising inflation and minimum and living wage increases.

“It isn’t right that children receive different levels of funding depending on where parents choose to send them,” said Ms Tanuku.

“We need to see urgent changes if this policy is to be truly provider neutral, offer real parental choice and have funding follow each child.”

The Convention of Scottish Local Authorities (COSLA) said that work to almost double the number of funded childcare hours has seen an increase of nearly 50% in the rates paid by councils to private and voluntary providers.

Councillor Tony Buchanan, COSLA’s children and young people spokesperson said: “Since last August, councils and their partners have worked hard to almost double the number of funded hours for Scotland’s families.

“We are proud that this has allowed over 121,000 children to benefit from more opportunities to play and learn, and their parents and carers have more time to work, study or volunteer.

The expansion has also seen an increases of almost 50% in the rates paid by councils to private and voluntary providers to deliver childcare- from an average of £3.70 per hour in 2017-18 to an average of £5.35 per hour in 2020-21.

“Local authorities set rates for providers in line with guidance agreed by the Scottish Government and COSLA, and funding provided by the Scottish Government to councils for childcare is provided at a level to reflect this guidance.

“There is limited value in creating simplistic comparisons without this wider context, as well as recognising the additional costs for local authorities of providing childcare in rural and deprived areas, and in areas where there is not the same level of private or third sector provision.

“Councils must act as a provider of last resort in cases of market failure and are always there to support quality improvement, staff development and training for all providers in every local area across Scotland”.