Funding Follows the Child and the National Standard for Early Learning and Childcare Providers: interim guidance - update

1. Overview

1. The previous version of the Interim Guidance on Funding Follows the Child and the National Standard, published in March 2021, maintained a degree of flexibility for certain aspects of the National Standard for the period August 2021 to July 2022. This was to reflect where the impact of the pandemic may have prevented services or authorities from being able to demonstrate delivery against aspects of the National Standard.

2. The Interim Guidance also committed the Joint Delivery Board to undertake a review of the timetable for moving to full implementation of Funding Follows the Child following the national roll-out of 1,140 hours.

3. To inform their review, the Joint Delivery Board considered a range of evidence regarding the current implementation of Funding Follows the Child and the National Standard. This included evidence from local authorities and from funded services across the private, third and childminding sector.

4. In light of the evidence presented, the Joint Delivery Board agreed that there will be a gradual move towards full implementation of Funding Follows the Child and the National Standard in August 2023.

5. As a result updated Interim Guidance, as set out in this document, will remain in place for 2022-23. There will be a further review point on implementation in late 2022, ahead of updated guidance documents being made available in Spring 2023, to support full implementation from August 2023.

6. The key changes in this updated Interim Guidance are:

• National Standard Criteria 1.2 (benchmark qualification) will take effect for practitioners and managers working in settings from August 2022. However, local authorities will continue to have flexibility over National Standard Criteria 1.2 (benchmark qualification) for childminders.
• National Standard Criteria 8 (Fair Work) will take effect from August 2022;
• Clarification is provided regarding the process for introducing and extending Service Improvement Periods for services for whom one or more of their Care Inspectorate evaluations have fallen, or remained, below 'good';
• Clarification of how the new Quality Framework from the Care Inspectorate, which will come into effect for services from 1 June 2022, will be reflected in the National Standard; and
• Supporting interim guidance on setting sustainable rates for August 2022 (provided in Annex A) to reflect the programme of actions, set out in the Financial Sustainability Health Check, to strengthen the process for setting sustainable rates and the current economy wide cost pressures.

1.1 Background

7. Quality is at the heart of the delivery of funded Early Learning and Childcare (ELC) entitlement.

8. The universal funded entitlement to high quality, nurturing early learning and childcare for all 3 to 5 year old and eligible 2 year old children in Scotland increased to 1,140 hours across Scotland in August 2021. High quality funded ELC helps every child to develop socially, emotionally, physically and cognitively, supporting them to have the best start in life.

9. Funding Follows the Child ensures the delivery of high quality funded ELC. The approach is 'provider neutral' and is underpinned by a National Standard that all settings – regardless of whether they are in the public, private or third sector, or childminders – will have to meet in order to be able to deliver funded ELC.

10. For families this means that they will be able to access high quality funded ELC with the provider of their choice – in the public, private, or third sector or a childminder – if that provider meets the criteria set out in the National Standard, wishes to deliver the funded entitlement, has a space available, is able to offer the funded hours in-line with their local authority's ELC delivery plan (subject to the capacity of the setting), and is in contract with their local authority to deliver the funded hours.

11. The criteria of the National Standard focus on what children and their families should expect from their ELC experience, regardless of where they access their funded entitlement.

12. We will continue to ensure that the funded ELC entitlement is delivered in high quality settings across Scotland. The ELC sector remains committed to working towards delivering in full the Funding Follows the Child principles and the National Standard.

13. This document provides an update to the Interim Guidance published in March 2021. It is recognised that as the impact of the pandemic continues to be felt that some of the flexibility that the Interim Guidance previously afforded will need to remain in place for delivery from August 2022.

1.2 Impact of COVID-19

14. The impact of the pandemic on all our lives led to a delay in the statutory roll out of 1,140 hours, which was intended to be introduced in August 2020. That duty came into effect from August 2021.

15. In line with public health guidance all ELC providers have, to date, experienced two periods of significant restrictions in 2020 and early 2021. Additional COVID-19 mitigations were introduced across the sector in December 2021 in response to the emergence of the Omicron variant of COVID-19, reflecting the scientific and public health advice in place at that time. In line with the Scottish Government's Strategic Framework for managing COVID-19, which was published on 22 February 2022, the COVID-19 guidance for the ELC sector was updated on 17 March 2022 to move to "routine protective measures" in settings from 18 April 2022. This guidance was further updated at the end of April 2022 to reflect the new 'stay at home' guidance replacing self-isolation.

16. This interim guidance on implementation of Funding Follows the Child serves to identify the areas in which the impact of the pandemic may have been such that it has prevented settings or authorities from being able to demonstrate delivery against aspects of the National Standard. Where this is the case then some flexibility may be required.

17. For example, the Care Inspectorate suspended routine quality theme inspections as a result of the pandemic between March and September 2020 and again between December 2021 and March 2022. During those periods, inspection that did take place was based on intelligence and risk and focused primarily on Key Question 5: "Operating an early learning and childcare setting (including out of school care and childminders) during the pandemic". This means that some settings will not have received an evaluated inspection based on the quality themes. We also recognise the impact of the pandemic will mean that some settings who were working towards improving their Care Inspectorate quality evaluations will not have an opportunity to complete this work ahead of August 2022.

18. The impact of COVID-19 has also resulted in sustainability challenges for some parts of the sector, as highlighted in the Financial Sustainability Health Check published in August 2021,

19. That is why the Scottish Government has made up to £35 million of targeted financial support available to the childcare sector since the onset of the pandemic. This includes up to £9.8 million that was made available through the Childcare Sector Omicron Impacts Fund in March 2022.

20. For childcare services delivering funded ELC the Scottish Government recognises that the payment of sustainable rates by local authorities to services in the private, third and childminding sectors will be vital to supporting the financial sustainability of these services, and to enabling the delivery of ELC. Updated guidance on setting sustainable rates for August 2022 is included at Annex A.

1.3 Implementation of Funding Follows the Child and the National Standard for ELC providers

21. Funding Follows the Child remains the long-term policy framework that will support the delivery of funded ELC, and has been agreed by both the Scottish Government and COSLA.

22. Important progress has already been made and the principles of Funding Follows the Child have been embedded in many local authorities' approaches to funded ELC delivery. In particular, the need to ensure high quality funded ELC experiences for children; the principle of provider neutrality; the need for effective partnership working; and embedding fair work practices in ELC delivery.

23. The National Standard will ensure that families can be reassured that, regardless of where they access their child's funded ELC entitlement, a high quality service will be delivered.

24. Many local authorities are already using the National Standard criteria in their funded ELC contracts with providers. It is expected that the National Standard, will continue to form the basis of contracting arrangements with providers.

25. However, for August 2022 there will continue to be some flexibility (as set out in section 3 of this guidance) around when providers are expected to meet certain aspects of the National Standard. The remaining flexibilities are in recognition of:

• The return to routine Care Inspectorate inspections as a result of the pandemic, which impact on sub-criteria 1.1, 2.1 and 3.1;
• Concerns regarding continued challenges for some childminders if the flexibility for the benchmark qualification (sub-criteria 1.2) is removed for childminding services; and
• The impact on financial sustainability as a result of the pandemic may continue to present challenges for some services in providing the required evidence on criteria 7 (Business Sustainability) as they continue to recover from the impacts of the pandemic.

1.4 Setting sustainable rates for August 2022

26. The payment of sustainable rates to funded providers in the private, third and childminding sectors is vital to supporting financial sustainability, and is a key aspect of Funding Follows the Child. The rate paid to funded providers should be sustainable and should meet the following:

• the rate will support delivery of a high quality ELC experience for all children
• it will be a rate that reflects the cost of delivery, including the delivery of national policy objectives
• the rate will allow for investment in the setting – staff, resources and physical environment
• it will enable payment of the real Living Wage for those childcare workers delivering the funded entitlement.

27. It is recognised that ensuring a sustainable rate in the current economic climate is challenging. This reflects the ongoing cost of living pressures and continuing high levels of inflation across the economy, as well as the ongoing impacts of the COVID-19 pandemic.

28. In August 2021 the Scottish Government published the Financial Sustainability Health Check, and Early learning and childcare providers - local authority funding and support: overview which set out updated information on the sustainable rates that services in the private, third and childminding sectors currently receive from their local authorities to deliver funded ELC. In light of the evidence from these reports, and given the importance of sustainable rates to the financial sustainability of these providers, a series of actions have been taken forward to strengthen the process for setting sustainable rates for August 2022.

29. A key area where local authorities identified a need for more support is in gathering robust evidence on the costs of delivery, which could then be used as the starting point for developing local sustainable rates. To support this COSLA and local authorities, through the Improvement Service, commissioned Ipsos Mori to undertake an independent cost collection exercise. Ipsos Mori collected information from funded services in the private and third sector through a detailed survey in March 2022. This will be followed by a separate cost collection exercise of funded childminding services.

30. The findings from the cost collection exercise provide local authorities with a robust evidence base on which to start their local rate setting process. However, the outputs of the national cost collection exercise are only a part of the rate setting process, and authorities need to consider the outputs alongside local market conditions and ongoing consultation with their local ELC providers.

31. To support local authorities in the rate setting process, and to reflect the factors set out above, Annex A provides updated interim guidance on setting sustainable rates for August 2022.

1.5 Supporting Quality in services delivering funded ELC

32. Since 2016, Education Scotland's 'How Good is Our Early Learning and Childcare?' self-evaluation framework has been embedded in ELC practice. The framework supports evidence-based self-evaluation, enabling settings to identify areas for improvement and to aim for excellence. Her Majesty's Chief Inspector of Education (HMIE) continues to provide improvement support through their review and inspection of funded ELC.

33. The Care Inspectorate published a new Quality Framework on 21 March 2022, which will come into effect for settings from 1 June 2022. The new self-evaluation framework will help settings assess their own performance in delivering high quality care and learning for children, identify areas for self-improvement and evidence their practice at inspection. Inspections continue to be prioritised based on risk and intelligence.

34. The Care Inspectorate is implementing a package of support for providers and local authorities to build confidence in using the new framework as a self-evaluation tool.

35. Some updates are required to sub-criteria 1.1, 2.1 and 3.1 in the National Standard to align it with the terminology and approach in the new Quality Framework. These changes will apply to services inspected under the new Framework from 1 June 2022. The full suite of Funding Follows the Child guidance will be updated to reflect the new Quality Framework, and any other required changes, ahead of full implementation in August 2023.

36. From 1 June 2022 the Care Inspectorate will use key questions, which can be read across to the previous quality themes:

Key questions

1: How good is our care, play and learning? Quality theme: Quality of care and support

2: How good is our setting? Quality theme: Quality of environment

3: How good is our leadership? Quality theme: Quality of management and leadership

4: How good is our staff team? Quality theme: Quality of staffing

37. Quality improvement support is in place at the national level, complementing the support that is being delivered by local authorities including:

• The Care Inspectorate's Quality Improvement Programme, which is funded by the Scottish Government. In 2022-23 this programme enables all local authority areas to nominate settings to participate. It is providing targeted quality improvement support to existing funded ELC providers that do not have current Care Inspectorate evaluations of 'good' or better, but who have been commissioned to provide funded ELC hours, or that have previously achieved a grade of 'good' but are now at risk of falling below that at their next inspection.
• The Children and Young People Improvement Collaborative (CYPIC) Learning Exchange is supporting ELC practitioners and Equity and Excellence Leads to use Quality Improvement tools to improve outcomes, connect people and share learning.
• Education Scotland has a dedicated landing page on the National Improvement Hub with links to relevant information on improving the quality of children's experiences and outcomes. National practice guidance Realising the Ambition (2020) increases expectations of high quality practice whilst providing support for all who work in ELC. The Education Scotland ELC team provides national, regional and bespoke local support to all ELC sectors supporting the development of high quality practice. This is enhanced by support from a range of specialist colleagues including in curriculum, inclusion, digital and family learning, across the whole Curriculum for Excellence 3-18 journey.

1.6 Summary

38. This guidance is designed to continue to support local authorities and providers to work in partnership to enable the delivery of as much of the National Standard criteria as possible, but to highlight where flexibility may still be required. It is intended to complement the detailed Operating Guidance, and supporting technical guidance, produced for the sector to support the implementation of Funding Follows the Child and the National Standard for ELC providers.

39. Enquiries in relation to this document should be sent to: ELCPartnershipForum@gov.scot