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

Methodology

This section outlines the approach taken to design and deliver the data collection exercise on the costs of delivering funded ELC in private, third sector, and childminding settings. The methodology was developed in close collaboration with providers, the Scottish Government, COSLA and sector and local authority representatives to ensure that the process was proportionate, transparent, and capable of generating robust, policy-relevant insights.

Research Design

The study was designed to collect detailed financial and operational data from funded ELC providers across Scotland. The research focused on capturing cost data across key domains including staffing, premises, meals, and surplus requirements, with the aim of informing sustainable rate-setting guidance.

The design process included:

• Review of previous cost collection exercises, including the 2016 and 2022 studies, and feedback from the Sustainable Rates Review.
• Input from providers through a programme of Provider Reference Groups in Autumn 2024, and ongoing direct provider engagement, to refine the scope and ensure relevance to sector needs.
• Engagement with the Sustainable Rates Review Implementation Working Group and
• Development of tailored survey instruments for different provider types, including bespoke versions for childminders and chain providers, which were piloted with a range of providers.

Questionnaire Development

A key priority in this study was to ensure that the questionnaire was proportionate and accessible for providers, particularly given sector concerns about the length and complexity of previous cost collection exercises. To address this, the research team worked closely with providers, the Scottish Government, COSLA and the Sustainable Rates Review Implementation Working Group, to co-design a streamlined survey instrument. The questionnaires were also refined and developed through a piloting phase with providers.

This collaborative process led to:

• A shorter and more focused questionnaire than previous exercises
• Clearer guidance and definitions to support accurate completion
• Tailored routing and question logic for different provider types
• A tailored questionnaire for childminders and form to support multiple entries for chain providers
• Inclusion of a PDF preview version to help providers prepare responses offline

The final questionnaire was designed to balance the need for robust financial data with the practical constraints faced by providers, particularly small settings and childminders.

Sampling and Recruitment

The sampling frame was based on the private and third sector day care of children services who were delivering funded ELC in September 2024. This was produced by Scottish Government analysts by matching data from the annual ELC Census to Care Inspectorate registration data. An equivalent sampling frame for childminders was not available. All registered childminders were made aware of the research, whilst targeted messages were sent by local authorities to their funded childminders to raise awareness.

All eligible providers were invited to participate via email, with support from the Scottish Government to promote engagement through representative bodies and local authority networks.

A total of 506 settings provided usable responses, including:

• 342 day care of children settings (224 private, 118 third sector)
• 164 childminders, though many did not complete financial sections

Approximately 270 responses contained sufficient data to support cost per hour calculations.

In total, around 36% of the estimated funded day care of children settings in the private and third sector (with around 24% provided the data to support cost per hour calculations) and 5% of all childminding settings engaged with the cost collection exercise.

Survey Design and Piloting

Survey instruments were developed using SurveyMonkey and designed to be:

• Clear and accessible, using plain English
• Tailored to provider type and operational context
• Structured to minimise burden and maximise completion

A pilot phase was conducted with a sample of providers to test clarity, usability, and data quality. Feedback from the pilot informed refinements to question wording, routing logic, and guidance materials.

Data Collection

The main data collection phase ran from May 2025 to August 2025. Providers were invited to complete the survey online, with the option of telephone support or assisted completion where needed. A dedicated helpdesk was available throughout the fieldwork period to respond to queries and support participation.

Multiple reminder emails were issued to maximise response rates, and targeted follow-up was conducted with providers who initially engaged in the exercise but had not completed it.

Data Validation and Analysis

Returned data was subject to a structured validation process, including:

• Investigation of outliers and anomalous responses
• Follow-up with partial respondents to clarify missing or inconsistent data
• Exclusion of invalid returns from analysis

Due to variation in accounting periods across settings, financial data was not harmonised. Instead, the analysis focused on identifying consistent patterns and calculating mean and median values across key cost domains. Subgroup comparisons were conducted by provider type, geography, and operational characteristics. Where appropriate, qualitative feedback from open-ended responses was also reviewed to contextualise findings.

In addition, cost data from childminder settings was incorporated at a high level to provide comparisons with the analysis of day care of children settings. Where detailed breakdowns are presented only for day care of children this is noted, reflecting differences in the underlying models and data structures. Estimates for childminder settings are reported separately and this is noted throughout the report.

Presentation and interpretation of findings

Findings are presented throughout the report using a combination of summary statistics, charts, and tables. Where appropriate, results are disaggregated by provider type and geography. Mean and median values are reported to provide a balanced view of cost patterns, alongside the data cleaning process described below, which removes incomplete or inconsistent responses and mitigates the impact of outliers.

It is important to note that all data is reported as submitted by respondents. While validation checks were applied, the accuracy of financial data depends on the quality and completeness of provider submissions. Where data was incomplete or inconsistent, it has been excluded from analysis. In interpreting the findings, readers should consider the limitations outlined below and the broader context in which providers operate.

Local authority-level estimates have only been produced where response levels were sufficient to provide a robust and reliable figure. This was determined by applying minimum thresholds for the number and proportion of providers responding within each local authority. Findings are only presented where the study team are confident that the estimates meet these standards, supported by the data validation process designed to maximise reliability.

Finally, greater variability should be expected in results that are disaggregated by geography or provider type, particularly where estimates are based on smaller numbers of responses.

Limitations

While the dataset provides valuable insights, several limitations should be noted:

• Accounting Period Variation: Providers submitted expenditure data based on different accounting periods, which introduces inconsistencies in the timing of cost inputs and affects comparability. This is accounted for in the final analysis.
• Wage Pressures Not Reflected: In some cases the estimates do not incorporate recent or anticipated wage increases, which are a significant and growing cost pressure for many providers.
• Limited Financial Disclosure: A large proportion of ELC providers chose not to share detailed financial data. While they engaged with earlier parts of the research, many expressed reluctance due to viewing local authorities as competitors and queried the fairness of the exercise and existing model.
• Cost Estimates Anchored to Current Funding Model: Many providers indicated that their reported costs are shaped by the current 1140 hours funding model. As a result, the estimates may reflect what providers can afford to deliver under existing constraints, rather than the true cost of high-quality provision.
• Uncaptured Investment in Quality: The estimates do not reflect the investments providers would make to improve quality, such as enhanced staffing, paying comparable wages to public provision, enriched learning environments, or broader family support, if more funding were available or the potential built up costs of not making these investments over time. The current model’s focus on delivering a fixed number of funded hours limits the scope for a more expansive definition of quality and sustainability in childcare provision according to many who engaged with the research team.

These limitations are discussed further in the relevant findings sections and should be considered when interpreting the results.