Expansion of Early Learning and Childcare – Reinstatement of 1140 statutory duty - Business and Regulatory Impact Assessment (BRIA)

1. Purpose and intended effect

Legislation being brought into force:

• Expansion of early learning and childcare - The Children and Young People (Scotland) Act 2014 (Modification) Order 2021 - Reinstatement of 1140 statutory duty

Background

1.1 In June 2019 a Business and Regulatory Impact Assessment was produced to support the introduction of:^[1]

• The Children and Young People (Scotland) Act 2014 (Modification) (No.1) Order 2019
• The Children and Young People (Scotland) Act 2014 (Modification) (No.2) Order 2019.

1.2 Order (No.1) came into effect from 1 August 2019 and updated the Minimum Framework for delivery to: (1) remove the minimum session length; and (2) extend the maximum session length to 10 hours or less. These changes have supported local authorities to provide more flexibility on session lengths, and to test new delivery models, during the phasing period and in preparation for full implementation of 1140 hours.

1.3 The Children and Young People (Scotland) Act 2014 (Modification) (No.2) Order 2019 ("the Order (No.2)") was due to come into force from 1 August 2020. It amended the 2014 Act to place a statutory duty on education authorities (i.e. local authorities) to secure 1140 hours of funded ELC in each year for which a child is eligible and a pro-rata amount for each part of a year.

1.4 However, following the impact of the COVID pandemic in late March 2020 the difficult decision to pause the ELC expansion was made. This decision was necessary to allow local authorities and childcare providers to respond to the pandemic and provide critical childcare to key worker families and vulnerable children and because elements of the expansion simply could not proceed during lockdown. As a result, the statutory duty for local authorities to secure 1140 hours of funded ELC from 1 August 2020 was revoked.

1.5 The Children and Young People (Scotland) Act 2014 (Modification) Order 2021 will reinstate the 1140 hours statutory duty, which is proposed to take effect from 1 August 2021.

Expansion to 1140 hours

1.6 The Scottish Government's ambition is for every single one of Scotland's children to grow up in a country where they feel loved, safe and respected, and able to reach their full potential. It is this ambition that is at the heart of the Scottish Government's commitment to expanding funded early learning and childcare entitlement that is free at the point of access. It is a transformative policy ambition which will secure positive outcomes for children across Scotland and grow Scotland's economy.

1.7 The Children and Young People Act (Scotland) 2014 (the 2014 Act) made 600 hours of funded ELC per year available for all 3 and 4 year olds and extended the entitlement to eligible 2 year olds. In a joint agreement with local government, the Scottish Government has committed to almost double the entitlement to 1140 hours per year from August 2020. This commitment was first made in the 'One Scotland' Programme for Government 2014-2015.^[2] Subsequent Programmes for Government have also reiterated this commitment.

1.8 In April 2018 the Scottish Government and COSLA agreed a multi-year funding package to fully fund the expansion of ELC. The funding package is based on a robust, shared understanding of the costs attached to the expansion. This investment will support the delivery of high quality, flexible ELC that is accessible and affordable for families.

1.9 Local authorities have a statutory duty to ensure that there are funded places available for all eligible children in their area. The funded places are available across a range of providers in the childcare sector, including in local authority run settings and through the local authority commissioning places from providers in the private and third sectors, including childminders.

1.10 To ensure that the funded ELC entitlement is delivered in high quality settings, the sector was working towards the introduction of Funding Follows the Child.^[3] This was to have been introduced alongside the statutory roll-out of 1140 hours of funded ELC entitlement in August 2020.

1.11 Funding Follows the Child is 'provider neutral' and is underpinned by a National Standard that to be a funded provider - regardless of whether they are in the public, private or third sector, or childminders - settings will have to meet.

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

1.13 Interim Guidance on the delivery of Funding Follows the Child was published in July 2020.^[4] This highlighted that in light of the impact of the pandemic it was no longer feasible to set a national requirement for all funded ELC providers to meet the National Standard from August 2020. However, local authorities have continued to use the principles and criteria of Funding Follows the Child and the National Standard as a framework to shape local funded ELC delivery. The national requirement for all funded ELC providers to meet the National Standard will now take effect from August 2021.

The decision to delay 1140 hours

1.14 The UK Coronavirus Act 2020 received Royal Assent on 25 March 2020. The Scottish Government immediately used powers conferred by that Act to bring forward the Health Protection (Coronavirus) (Restrictions) (Scotland) Regulations 2020 ("the first regulations"), to implement physical distancing and impose restrictions on gatherings, events and operation of business activity. They came into force on Thursday 26 March 2020.

1.15 In late March 2020 the difficult decision to pause the ELC expansion was made. This decision was necessary to allow Local Authorities and childcare providers to respond to the pandemic and provide critical childcare to key worker families and vulnerable children and because elements of the expansion simply couldn't proceed during lockdown.

1.16 The Scottish Government has continued to monitor the progress across Scotland to help Scottish Ministers and COSLA Leaders determine when the expansion to 1140 hours could realistically be delivered in full, while ensuring quality of experiences for children remains at the heart of all that we do.

Current figures

1.17 The latest data return from local authorities report indicates that:

• More than 80% of children are receiving more than 600 hours (74,000 children);
• 61% of eligible children - more than 56,000 - are already receiving 1,140 hours of funded ELC, despite the statutory expansion being paused in April;
• More than 93,000 children are benefitting from high quality care and learning;
• 87% of the additional staff forecast to be required for August 2020 are in place; and
• In August 2020, nationally 27% of provision was being accessed in private settings, compared to 72% in local authority settings, with the remainder being accessed with childminders. This is in line with the split of provision that was forecast pre-COVID by local authorities for September 2020.

Overview of the childcare market in Scotland

1.18 The formal childcare sector in Scotland operates as a mixed economy model with a mixture of public, private, third and childminding sector providers. The formal childcare sector delivers services to both children aged 5 and under and to school-aged children (through, for example, out of school care provision and childminders).

1.19 As of 31 October 2020 there were approximately 1,840 private and third sector childcare settings, including out-of-school care settings, 1,750 local authority nurseries and around 4,390 childminders registered with the Care Inspectorate.

1.20 Around 60% of private and 40% of third sector day care of children providers are currently estimated to deliver the funded Early Learning and Childcare (ELC) entitlement. On average the payments that these providers receive from their local authority for delivery of these hours are estimated to account for around a third of a private funded provider's total income, and around 60% of a third sector provider's total income - although there can be significant variations across providers.^[5] The remainder of their income comes from fees charged to parents and carers for non-funded hours (e.g. to children aged 0-2 or for additional wrap-around hours for children receiving a funded ELC).

1.21 Whilst there have been increasing numbers of childminders offering the funded ELC entitlement, the numbers remain relatively low (the Scottish Childminding Association's Early Learning and Childcare Audit 2019 reported that in July 2019 around 13% of childminders had been approved to offer funded ELC to 3 and 4 year olds, although only around 4% of childminders were actually delivering funded ELC to these children).

1.22 The majority of staff working in ELC and the formal childcare sector are women: around 100% of registered childminders are women, 96% of staff in day care of children services^[6] and 94% of teachers delivering funded ELC are women.^[7]

COVID-19 and ELC and the formal childcare sector

1.23 COVID-19 has impacted on formal childcare services in a number of ways:

• declines in income from private sources from March 2020 as services either closed or operated at reduced capacity (it they remained open to deliver critical childcare);
• increased costs due to the requirements of the public health guidance for the sector; and
• restrictions on capacity in order to operate in line with public health guidance.

1.24 The Scottish Government undertook a survey of providers between 19-24 June 2020 in order to better understand the potential impacts of the reopening guidance on their settings.^[8] The survey included questions regarding changes in costs, capacity and private income generation.

1.25 This was intended to focus mainly on the impact of the reopening guidance for day care of children settings published on 15 June (which enabled these services to reopen from 15 July if they chose to do so), but replies were also received from some childminders regarding the impacts of the specific guidance for childminding settings.^[9] Childminding settings, along with fully outdoor day care of children settings, were able to reopen from 3 June 2020 and separate specific guidance documents for these settings were published on 1 June 2020.

1.26 There were 651 responses to the survey, with 430 from private and third sector providers and 221 from childminders, which indicated that:

• 52% of private and third sector respondents expected an increase in staffing requirements.
• 79% of private and third sector respondents expected average costs to increase upon reopening compared to business as usual.
• 80% of private and third sector respondents expected capacity to decrease upon reopening compared to business as usual.
• 81% of private and third sector respondents expected their capacity for private income generation to decrease upon reopening compared to business as usual.
• 65% of childminder respondents expected no change in costs or for costs to decrease.
• 49% of childminders responding to the survey expected no change, or an increase, in overall capacity.
• 45% of childminders responding to the survey expected no change, or an increase, in overall private income generation compared to business as usual.

1.27 An analysis of the survey results is available on the Scottish Government website.^[10]

Policy Objective - Reinstatement of 1140 hours

1.28 The policy to expand ELC entitlement to 1140 hours via the Children and Young People (Scotland) Act 2014 (Modification) Order 2021 will contribute to the following National Outcomes:

• We grow up loved, safe and respected so that we realise our full potential
• We are well educated, skilled and able to contribute to society
• We tackle poverty by sharing opportunities, wealth and power more equally
• We have a globally competitive, entrepreneurial, inclusive and sustainable economy
• We have thriving and innovative businesses, with quality jobs and fair work for everyone

1.29 The impact of the Coronavirus pandemic on the 1140 expansion programme has been significant. In March it was agreed that the statutory duty on education authorities to provide 1140 hours from August 2020 would be revoked, in recognition of the direct impact on expansion programmes and the likely ongoing impact on service delivery.

1.30 The ELC Joint Delivery Board - which is co-chaired by the Minister for Children and Young People and the COSLA Spokesperson for Children and Young People, provides joint governance and monitors progress of the expansion programme - has continued to consider the data and intelligence gathered across all authorities areas, and make an assessment of readiness for 1140 hours delivery in relation to a number of key components. These include uptake and eligibility, capacity, infrastructure, partners, workforce, quality, the impact of COVID guidance on capacity, and the impact of COVID on finance.

1.31 The ELC Joint Delivery Board have noted that since the duty was revoked a significant proportion of the programme has continued to be delivered. In January 2021, 15 authorities were offering 1140 hours to all children and all authorities are offering 1140 hours to some or most children. To do this in the face of the COVID 19 pandemic has required difficult choices about how services are delivered, and in many areas the offer will continue to develop. However, this high level of delivery has been achieved only through extensive effort and commitment from all local authorities and their delivery partners.

1.32 The ELC Joint Delivery Board, on considering the evidence on progress across all local authorities, recommended in December 2020 that the 1140 hours expansion should be implemented across Scotland in August 2021. They considered that the data and intelligence available at the time indicated that delivery risk nationally in August 2021 was lower than eight months out from the original implementation date of August 2020, and that there is confidence in successful delivery at a local and national level. They noted that there is scope in some authorities, or in some localities, to continue to expand provision ahead of the August 2021 date.

Rationale for Government intervention

1.33 The primary driving force behind the expansion of funded ELC is to secure improved outcomes for children in Scotland.

1.34 The provision of high quality ELC is a key contributor to our ambition to close the poverty-related attainment gap. International research and evidence from the Scottish Government's Growing Up in Scotland study shows that children, particularly those from more disadvantaged backgrounds, can benefit from attending high quality funded ELC.

1.35 Recognising the opportunity ELC provides to improve children's development and narrow the attainment gap, the expansion to 1140 hours intends to maximise the opportunity to ensure that all children in Scotland get the best possible start in life and receive an equal chance to succeed.

1.36 As part of the expansion, it is also envisaged that an increase in the flexibility of how the funded entitlement is delivered will allow more parents to work, train or study, especially those who will benefit from routes into sustainable employment and out of poverty.