Funded early learning and childcare in private, third sector and childminding settings: delivery costs

Delivering Funded ELC Sustainably- Perspectives from Providers

As part of the cost collection exercise, providers were invited to share their views on the sustainability of delivering funded ELC. The responses reflect a wide range of experiences and concerns, shaped by local context, provider type, and operational model.

While some settings reported constructive relationships with their local authorities and a degree of financial stability, the majority described significant challenges in maintaining quality, retaining staff, and balancing budgets under the current funding arrangements. This section summarises the most commonly raised themes, supported by illustrative quotes, and concludes with additional points that highlight the diversity of pressures facing the sector.

Funding Parity and Equity Across Provider Types

A dominant theme in the responses and engagement was concern about perceived unequal funding between local authority (LA) and funded providers in the private, third and childminding sector. Many participants felt that the principle of Funding Follows the Child is not being upheld in practice.

While all providers are subject to the same regulatory standards and inspection frameworks, LA settings are perceived to receive higher hourly rates and more generous support.

This disparity was seen to undermine sustainability in the private, third and childminding sector, particularly in relation to staffing and quality of provision. Several providers described losing staff to LA settings due to better pay and conditions, despite delivering equivalent services.

“We all have equal qualifications and are graded under the same system… therefore rates to all providers should be the same hourly rate per child.”

“Local authorities are overfunding themselves and vastly underfunding partners… there should be an independent body ensuring all providers are funded exactly the same.”

This perceived inequity was not only financial but also reputational, with some providers feeling that parents were being steered toward LA settings.

Staffing Costs, Recruitment, and Retention

Staffing costs were consistently cited as the most significant pressure on sustainability. Providers described struggling to offer competitive wages, particularly in comparison to LA settings, where pay rates were reported to be £3–£5 per hour higher for equivalent roles.

This gap was seen to drive staff turnover and limit the ability to recruit qualified practitioners:

“We cannot match council salaries but deliver a service equal or better than the council nurseries… we should be paid a sustainable rate so that we can afford to pay our staff more.”

“Recruiting staff on the wages we can afford to pay is a real challenge… Local authorities steal the best staff.”

Some providers called for national pay frameworks or a standardised funded rate that would enable parity in pay across sectors. Others highlighted the impact of wage inflation, National Insurance increases, and pension contributions, all of which were reported to be rising faster than the funded rate.

Adequacy and Structure of the Funded Rate

Many participants reported that they felt that the current funded rate does not reflect the true cost of delivering high-quality ELC. Rising costs across wages, utilities, food, insurance, and compliance were described as outpacing any increases in the sustainable rate.

Several providers suggested that the rate should be indexed to inflation or linked to wage benchmarks to ensure it remains viable over time:

“The rate per hour needs to increase substantially in line with cost of delivery… We need at least £10–£12 per hour.”

“Each year the increase in minimum wage is not met or covered by the increase in local authority funding.”

Some also raised concerns about the timing and structure of payments, and for more predictable funding to support cash flow and planning.

Governance, Transparency, and Local Authority Relationships

A number of providers expressed frustration with the governance model, particularly the role of local authorities in setting rates while also operating their own services.

This dual role was seen as a conflict of interest, with concerns about transparency, fairness, and accountability:

“We feel the council being in charge of the purse strings whilst also being competitors to the private sector is absolutely corrupt.”

“Funding is supposed to be administered on a ‘provider-neutral’ basis, but the local authority is in charge of overseeing it and are providers in their own right.”

Some providers suggested alternative models, such as direct funding to parents or national standardised rates, to reduce local variation and perceived bias.

Inclusion and Support for Children with Additional Support Needs (ASN)

Several providers highlighted the increasing number of children with ASN and the lack of dedicated funding to support their needs. This was described as placing additional strain on staffing and resources, particularly where 1:1 support was required but not funded.

“We are experiencing a rise in the number of children with ASN… but with little or no external support provided.”

“Supporting children with additional needs often requires extra staff and/or extra time, and accessing funding for this is difficult.”

Providers emphasised their commitment to inclusion but noted that the current funding model does not adequately support the additional costs involved, which can compromise sustainability and quality.

Additional Points Raised

Beyond the core themes of funding parity, staffing pressures, and rate adequacy, providers raised a number of additional issues that affect the sustainability of delivering funded ELC. These comments reflect the diversity of settings across Scotland and highlight operational challenges that may be concealed through financial data alone.

While less frequently mentioned, these points offer valuable insight into the day-to-day realities of running ELC services and suggest areas where policy and practice could be strengthened to support long-term viability. These themes were as follows:

• Meal and snack funding: Several providers noted that the meal allowance only covers lunch and does not reflect the cost of providing snacks or breakfast, especially under new nutritional guidelines.
• Administrative burden: Monthly reporting requirements and payment delays were described as adding to the cost and complexity of delivering funded hours.
• Rural and small settings: Providers in rural areas or small settings highlighted the volatility of enrolment and the need for minimum guaranteed funding to maintain viability.
• Infrastructure and maintenance: Some settings, particularly outdoor or nature-based nurseries, reported high infrastructure costs (e.g. for equipment) that are not accounted for in the funded rate.
• Sector morale and recognition: A number of comments reflected a broader concern about how the private, third and childminding sector is perceived and supported, with calls for greater recognition of its role in delivering national ELC ambitions.