Funded early learning and childcare 2026-27: guidance for setting sustainable rates

Section 3: Reform of the sustainable rates setting process

26. This guidance further progresses the reforms to the sustainable rates setting process set out in the Sustainable Rates Review.

27. The Review set out a series of actions to update the Sustainable Rates Guidance in order to:

• Enhance guidance on the approach to rates-setting, in order to provide a more standardised approach and minimise any unwarranted variation between the rates set by local authorities (recognising that a certain level of variation is expected), including how frequently they are set.
• Further develop guidance around the rates payable for eligible 2 year olds to help ensure these rates are sustainable and are reflective of the costs of delivery.
• Further develop the guidance in relation to meal rates, to help ensure these are set sustainably and are reflective of costs.
• Set clearer expectations around engagement and communications for both local authorities and funded providers in the private, third and childminding sectors regarding the rates setting process – including ensuring that providers have greater certainty and clarity on rates to support their financial planning.
• Ensure the guidance adequately supports local authorities when setting sustainable rates for, and engaging with, childminders.

28. These changes were initially set out in the 2025-26 Sustainable Rates guidance. Local authorities were expected to make progress towards reflecting them in the rates setting process during 2025-26, ahead of fully embedding within rate setting from 2026-27 onwards.

29. Whilst some of the actions to reform the sustainable rates setting process will take time to fully implement, the Scottish Government and COSLA recognise the importance of continuing to introduce changes quickly where possible.

30. The Review recommended that further evidence on how local authorities are supporting funded providers to meet the needs of children with Additional Support Needs is collected. This work is being progressed through the ASN Short-Life Working Group. The ELC Costs Survey will provide further evidence on the impact on the costs of delivery and sustainability of having a larger proportion of children with ASN, and consideration will be given as to how this can be reflected as part of the wider work on ASN.

31. The Scottish Government and COSLA recognise that it will be important to ensure regular and clear communications to the sector as this work progresses, and that where some aspects of reform require longer timescales we are clear on the reasons for this.