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

Reform of the sustainable rates setting process and Next Steps

59. In December 2023 the Scottish Government and COSLA published the Sustainable Rates Review. The Review set out a wide ranging programme of reform to strengthen the process for setting sustainable rates.

60. This included updating the sustainable rates guidance, in particular to move towards greater standardisation; and working with local government and funded providers to consider options for obtaining more robust and reliable cost data to ensure a full understanding of the costs of providing funded ELC in different settings.

61. The Scottish Government and COSLA published updated Sustainable rate setting guidance for local authorities in 2025-26 on 20 February 2025. The guidance sets out a consistent and transparent approach for passing on to providers the additional £9.7 million made available by the Scottish Government for funding the real Living Wage increase in 2025-26; as well as implementing the Sustainable Rates Review reforms, including greater standardisation in the rate setting process.

62. Collecting robust and reliable data on costs across different types of funded providers is critical to underpinning wider improvements to the rate-setting process, including updates to the sustainable rates setting guidance. It will also lay the foundation for any further future work in this area.

63. The Scottish Government has contracted an external delivery partner, the Diffley Partnership, to undertake a new cost collection exercise in Spring 2025.

64. New sustainable rates guidance will be published in early 2026 to reflect the outputs of the cost collection exercise, and to support rates setting from 2026-27 onwards.