Early learning and childcare - sustainable rates for funded providers: overview 2024 to 2025

Introduction

1. Funding Follows the Child provides the underpinning policy framework to support the delivery of funded Early Learning and Childcare (ELC). A key aspect of Funding Follows the Child is the payment of sustainable rates to providers in the private, third and childminding sectors for the delivery of funded ELC.

2. In April 2019, guidance was published to support local authorities to set sustainable rates. This guidance was produced based on feedback gathered from across the sector and sets out the principles that should underpin any approach to setting sustainable rates; and options for taking forward the process.

3. In 2024-25 the Scottish Government provided local authorities with an additional £16 million to meet the additional costs of paying childcare workers delivering funded ELC in private and third sector services at least £12 per hour from April 2024. The commitment was also to be applied in a fair and sustainable way for all childminders who deliver funded ELC. As confirmed by the Living Wage Foundation, £12 per hour was also the level set for the real Living Wage in 2024.

4. The Scottish Government and COSLA jointly published the Funded early learning and childcare (ELC) - setting sustainable rates 2024 to 2025: guidance on 8 March 2024, which set out how the additional funding for the commitment will be passed onto providers through the 2024-25 sustainable rates setting process. The 2024-25 guidance was a complement to the 2019 guidance.

5. The 2024-25 guidance stipulated that all funded ELC providers in the private, and third sector, and all childminders delivering funded ELC, would receive a minimum uplift of 7.6% to the sustainable rate(s) they received in 2023-24 to support delivery of the commitment in 2024-25.

6. The final sustainable rate(s) for 2024-25 should also reflect other, non-staffing, cost elements and the 2024-25 guidance. This includes providing scope for reinvestment.

7. As set out in the Sustainable Rates Guidance, published in April 2019, the rates paid to providers in the private, third and childminding sectors for the delivery of funded ELC by local authorities should be sustainable and should meet the following criteria:

• 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; and
• it will enable payment of the real Living Wage for those childcare workers delivering the funded entitlement.

8. The 2019 guidance also highlights that from a local authority perspective the rate must be sustainable for authorities in terms of the budgets available, and that:

• the rate does not have a detrimental effect on the local authority’s ability to continue to pay for the service in the long-term;
• the wider package of ‘in-kind benefits’, available to funded providers as part of their contract with the local authority in addition to the sustainable rate, is considered; and
• the rate does not need to be cross-subsidised by parents and carers through charges for non-funded hours.

Data Collection

9. The Scottish Government is committed to collecting and publishing data on sustainable rates annually. The previous report on sustainable rates, with information for 2023-24, was published on 9 February 2024.

10. The Scottish Government wrote to local authorities on 2 October 2024 to request information on the hourly rates that they have set for providers for the delivery of funded ELC in 2024-25; as well as the payments to funded providers for delivery of the free meal commitment.

11. Alongside the request for data on rates, the Scottish Government also utilised this survey to collect information on the general support packages local authorities offered to funded providers for the delivery of ELC. A range of approaches to the provision of support are in place across local authorities and can include, for example, training, targeted support, support visits, general support and advice from the early years team, pre and post care inspection support, financial support, funding for accredited qualifications professional learning and workforce support. The rates presented in this report should therefore be viewed within the context of the overall package offered by each local authority.

12. Information about the general support packages offered by local authorities was last collected in the 2022-23 sustainable rates data collection exercise (published in December 2022).

13. This document is only intended to set out the information provided by local authorities in response to this request.

Summary of the Returns

14. Annexes A-C set out the following information provided by local authorities:

• Hourly rates for 3 - 5 year olds, and eligible 2 year olds, for the delivery of the funded ELC entitlement in 2023-24 and 2024-25 [Annex A].
• Payments for delivery of free meals to providers [Annex B].
• Additional support for funded providers [Annex C]

15. To allow for consistent comparisons of sustainable rates across local authorities – and in line with the Funding Follows the Child guidance (i.e. meeting the costs of delivering an hour of ELC to one child) – the rates presented in Annex A do not include any top-ups to the sustainable rate for the delivery of the free meal commitment and/or for snacks (these payments are presented separately in Annex B).

Hourly Rates paid by local authorities for the delivery of funded Early Learning and Childcare

16. All 32 local authorities have confirmed rates for 2024-25. Tables A1 and A2 outline the hourly rates paid by local authorities for 2 year olds and 3-5 year olds in 2023-24 and 2024-45, as well as the percentage change between the two years.

17. In Orkney, all non-local authority ELC provision is currently provided by childminders. For consistency, their rates are excluded from the minimum and maximum rates, and the calculation of averages highlighted in this summary. All sustainable rates paid to childminders for the delivery of funded ELC are provided separately in Tables A3 and A4.

18. 27 of the remaining 31 local authorities pay a higher rate for 2 year old children than for children aged 3-5 years old. The other four local authorities pay the same hourly rate for 2 year old children as for children aged 3-5 years old in 2024-25. In comparison, in 2023-24, eight local authorities paid the same hourly rate for 2 year old children as for children aged 3-5 years old.

19. Due to the variation in approaches to funding children with Additional Support Needs, enhanced rates for these children are not included.

3-5 year old rates

20. In 2023-24, the hourly rates paid to providers (excluding separate rates for childminders) to deliver funded ELC for 3-5 year olds varied from £5.50 to £6.89 per hour, and the average reported rate across local authorities for 3-5 year olds was £6.04 per hour.

21. This rate has increased across all local authorities. In 2024-25 the hourly rates paid to providers (excluding rates for childminders) to deliver funded ELC for 3-5 year olds varied from £6.00 to £7.48 per hour, and the average reported rate across local authorities for 3-5 year olds was £6.55 per hour (an increase of 8.4%).

22. Average rates paid to providers for 3-5 year olds receiving funded ELC have increased by around 78% between 2017 and 2024, from £3.68 per hour in 2017-18 to £6.55 per hour in 2024-25.

23. In 2023-24 the difference between the lowest rate (£5.50 per hour) and highest rate (£6.89 per hour) paid for 3-5 year olds was £1.39 per hour, or 25.3%.

24. In 2024-25, the difference between the lowest rate (£6.00 per hour) and the highest rate (£7.48 per hour) paid for 3-5 year olds is £1.48 per hour, or 24.7%. The percentage gap between the lowest and highest rate paid for 3-5 year olds has decreased by 0.6 percentage points since 2023-24.

2 year old rates

25. In 2023-24, the hourly rates paid to providers (excluding separate rates for childminders) to deliver funded ELC for eligible 2 year olds varied from £5.50 per hour to £8.50 per hour, and the average rate across local authorities for eligible 2 year olds was £6.68 per hour.

26. This rate has increased in 2024-25 for all but one local authority. In 2024-25 the hourly rates paid to providers (excluding rates for childminders) to deliver funded ELC for 2 year olds varied from £6.15 per hour to £9.08 per hour, and the average reported rate across local authorities for 2 year olds was £7.25 per hour (an increase of 8.5%).

27. In 2023-24, the difference between the lowest rate (£5.50 per hour) and highest rate (£8.50 per hour) paid for eligible 2 year olds was £3.00, or 54.5%.

28. In 2024-25, the difference between the lowest rate (£6.15 per hour) and the highest rate (£9.08 per hour) paid for eligible 2 year olds was £2.93 per hour or, 47.6%. The gap between the lowest and highest rate paid for 2 year olds has reduced by 6.9 percentage points since 2023-24.

Childminding rates

29. This section sets out the hourly rates paid to childminders to deliver funded ELC for 3-5 year olds and eligible 2 year olds.

30. Tables A3 and A4 outline the hourly rates paid to childminding providers. In the majority of local authorities, childminders receive the same rate as private and third sector funded providers. However, in some local authorities, childminders are paid different rates.

31. Paragraphs 32 – 39 provide a summary of the rates paid to childminding providers across all 32 local authorities. Paragraphs 40 - 42 summarise the rates paid to childminders where these rates are different from those paid to private and third sector providers.

Childminding rates across all local authorities

Childminding rates for 3-5 year olds

32. In 2023-24, the hourly rates paid to childminders across the 32 local authorities to deliver funded ELC for 3-5 year olds varied from £4.76 per hour to £6.95 per hour, and the average reported rate across local authorities for 3-5 year olds was £5.92 per hour.

33. In 2023-24, the difference between the lowest rate (£4.76 per hour) and highest rate (£6.95 per hour) paid to childminders for 3-5 year olds was £2.19 per hour, or 46%.

34. In 2024-25, the hourly rates paid to childminders across the 32 local authorities to deliver funded ELC for 3-5 year olds varied from £5.83 to £7.48 per hour, and the average reported rate across local authorities for 3-5 year olds was £6.47 per hour (an increase of 9.3%).

35. In 2024-25, the difference between the lowest rate (£5.83 per hour) and highest rate (£7.48 per hour) paid to childminders for 3-5 year olds was £1.65 per hour, or 28.3%. The gap between the lowest and highest rate paid for 3-5 year olds has reduced by 17.7 percentage points since 2023-24.

Childminding rates for 2 year olds

36. In 2023-24, the hourly rates paid to childminders across the 32 local authorities to deliver funded ELC for eligible 2 year olds varied from £4.76 to £8.50 per hour, and the average rate across local authorities for eligible 2 year olds was £6.45 per hour.

37. In 2023-24, the difference between the lowest rate (£4.76 per hour) and highest rate (£8.50 per hour) paid to childminders for eligible 2 year olds year olds was £3.74 per hour, or 78.6%.

38. In 2024-25, the hourly rates paid to childminders across the 32 local authorities to deliver funded ELC for eligible 2 year olds varied from £5.83 to £9.08 per hour, and the average rate across local authorities for eligible 2 year olds was £7.05 per hour (an increase of 9.3%).

39. In 2024-25, the difference between the lowest rate (£5.83 per hour) and the highest rate (£9.08 per hour) was £3.25 per hour, or 55.7%. The gap between the lowest and highest rate paid to childminders to deliver funded ELC for 2 year olds has decreased by 22.8 percentage points since 2023-24.

Overview of Separate Childminding Rates

40. In 2023-24, nine local authorities paid a different rate to childminders from the rate paid to private and third sector providers. These rates varied from £4.76 to £7.87 per hour for eligible 2 year olds. These rates varied from £4.76 to £6.95 per hour for and 3-5 year olds. The average rate for 3-5 year olds was £5.64 per hour, and the average rate for eligible 2 year olds was £5.77 per hour.

41. In 2024-25, three of these local authorities moved to align the rates paid to childminders with the rates paid to private and third sector providers. Six local authorities paid a separate rate for childminders in 2024-25. These rates vary from £5.83 to £6.49 per hour for eligible 2 year olds. These rates vary from £5.83 to £6.46 for 3-5 year olds.

42. The average rate paid to childminders by the 6 local authorities who pay a separate rate in 2024-25 for childminders for 3-5 year olds was £6.09 per hour for 3-5 year olds per hour, and £6.23 per hour for eligible 2 year olds.

Payments for delivery of the free meal commitment

43. Every child attending a funded ELC session – which is any session that includes funded hours, regardless of whether they are mixed with 'paid for' hours – from August 2021 is provided with a free meal.

44. Local authorities provide settings with the funding to deliver the free meals, unless, in cases where a setting does not have onsite catering facilities, there may be an agreement that the local authority will provide meals to the setting.

45. Funding to deliver this commitment is additional to the sustainable rate and, as set out in the Funding Follows the Child guidance, local authorities must ensure that they are transparent as to the funding being provided to private and third sector providers for the delivery of the free meal commitment.

46. The most common approach in 2024-25 was for local authorities to provide settings with a payment for each meal (with 21 local authorities following this approach). 11 local authorities provide payments for meals through a top-up to the hourly sustainable rate. No local authorities changed how they made the payment to providers for the free meal commitment between 2023-24 and 2024-25.

47. Across all 32 local authorities, 11 increased the rate paid for meals in 2024-25 (although for one local authority this reflected the previously separate meal and snack payments being combined into one overall meal payment), while 21 maintained the same rate as 2023-24.

48. In most local authorities childminders received the same level of payment for delivering the free meal commitment as private and third sector funded provider. However, some local authorities reported that they paid a separate rate to childminders. Where this has been reported the details are set out in Annex B, and a short summary is provided below in the relevant section (either payment per meal or payment via a ‘top-up’ to the sustainable rate).

Payment per meal

49. In 2024-25, where local authorities provided a payment per meal, the average paid was £2.88 per meal, representing an increase of 2.1% from the 2023-24 figure (£2.82 per meal).

50. Seven of these 21 local authorities increased their rate in 2024-25 (although, as highlighted above, for one local authority this reflected the combination of previously separate meal and snack payments into one payment), while 14 maintained the same rate as 2023-24.

51. Where a payment was made per meal this varies from £2.00 to £4.23 per meal in 2024-25, a difference of £2.23 (or 112%) between the lowest and highest meal payment. These figures are unchanged from 2023-24.

52. Three of the local authorities that pay a separate rate for the meal payment reported that they paid childminders a separate rate. These separate meal payments for childminders ranged from £2.05 to £3.00 per meal.

Payment via a ‘top-up’ to the sustainable rate

53. In 2024-25, where local authorities provided a top-up to the sustainable rate for delivery of the meal commitment, the average paid was £0.45 per hour, representing an increase of 2.3% from the 2023-24 figure (£0.44).

54. Four of these 11 local authorities increased their rate, whilst seven maintained the same rate as 2023-24.

55. Where local authorities provide a top-up to the sustainable rate for delivery of the meal commitment, this top-up varies from £0.32 to £0.57 per hour, a difference of £0.25 per hour, or 78.1%. In comparison, in 2023-24, the lowest ‘top-up’ was £0.30 per hour and the highest was £0.57 per hour, a difference of £0.27 per hour, or 90%. The gap between the lowest and highest rate paid for the top up to the sustainable rate for delivery of the meal commitment has decreased by 11.9 percentage points since 2023-24.

Rate setting timeframes

56. All 32 local authorities reviewed their rates in 2024.

57. In 2024-25, seven out of 32 authorities agreed and set their rates in advance of their introduction at the start of the financial year (1 April 2024).

58. All local authorities reported that they either introduced their 2024-25 rate by April 2024, or backdated their new rate to April 2024.