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

Section 5: Evidence to support sustainable rates setting

48. 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, and long-term sustainable rates setting.

49. To support this the Scottish Government contracted an external delivery partner, the Diffley Partnership, to undertake a new ELC Costs Survey during 2025. This data collection builds on previous exercises, including the 2016 and 2022 cost reviews (both undertaken by Ipsos Mori), and seeks to provide an up to date picture of costs, address previous evidence gaps in the rates-setting process, and reflect providers views on delivering funded ELC.

50. The Costs of Delivering Funded Early Learning and Childcare (ELC) in Private, Third Sector and Childminding Settings report and supporting data tables, which has been undertaken independently by the Diffley Partnership, are due to be published by the Scottish Government shortly.

51. It is important to acknowledge the complexity of the new information that will be provided in the ELC Costs Survey, which includes new data not previously available to support sustainable rates setting.

52. The Scottish Government and COSLA also recognise that it is important that both local and national government take time to consider the ELC Costs Survey report and supporting data carefully in partnership with childcare providers and sector representative organisations. Next steps on the continued implementation of the joint Sustainable Rates Review will be considered by the Sustainable Rates Review Implementation Working Group, with any significant changes to be agreed through COSLA’s governance processes and by Ministers.

53. In 2026-27 in particular, it is recognised that local authorities’ ability to take account of findings from the ELC Costs Survey as part of local rate setting is limited due to the need to set local budgets ahead of the new financial year and as such local engagement and consideration for 2026-27 will already have taken place in many areas.

Local intelligence and provider engagement

54. The local rate setting process should reflect consideration of local childcare market conditions and ongoing consultation and engagement with local funded providers. Local authorities are encouraged to keep funded providers updated on timelines for information gathering and decision making, and to prioritise ongoing engagement with funded providers so that there is a local forum to discuss and resolve issues on an ongoing basis.

55. This local intelligence can complement the outputs from national cost collection exercises, and will remain a key aspect of the sustainable rate setting process from 2026-27 onwards.

56. For example, local authorities may wish to review local data on childcare prices, if available, to compare against the cost information available to them. It is assumed that providers set their prices with reference to their underlying costs of delivery plus an adjustment for profit / surplus. Changes in prices could give an indication of movements in cost pressures for providers; and could provide a local benchmark to inform sustainable rates.

57. Where any additional local data is collected the local authority should confirm the data protection arrangements in place, including assurance that no commercial information submitted will be shared with other funded providers.

Next steps on the ELC Costs Survey

58. As highlighted it is important that both local and national government take time to consider the ELC Costs Survey report and supporting data carefully in partnership with childcare providers and sector representative organisations.

59. Alongside this the Scottish Government and COSLA will ask the Sustainable Rates Review Implementation Working Group, to consider any specific issues raised in the research, which could inform their future programme of work.

60. New sustainable rates guidance will be published in early 2027 to support rates setting from 2027-28 onwards.