Funding follows the child and the national standard for early learning and childcare providers: guidance for setting sustainable rates from August 2020

Section 1: Characteristics of a Sustainable Rate

18. Responses to the ELC Service Model for 2020: Consultation Paper demonstrated that sustainability was of key importance to funded providers. This section defines a sustainable rate in the context of ELC services and its' stakeholders.

19. For clarification, 'rate' is the sum of money paid to a funded provider for a set period, usually either hourly or sessional, for the provision of funded ELC services to one child.

20. The Funding Follows the Child Operating Guidance sets out that the sustainable hourly rate set by local authorities to be paid to funded providers in the private and third sectors, including childminders, to deliver the funded entitlement should meet the following:

• 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.

21. In particular, feedback gathered from local authorities and provider bodies indicated that a sustainable funding rate should cover the cost of running the service and allow for future investment and development. This differs from a rate which only reflects short-term operational costs.

22. Local authorities also indicated that the rate must be sustainable for them in terms of the budgets available. The following points are also important to consider when setting a sustainable rate:

• 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', which are separate to the sustainable rates and are available to the funded provider as part of the contract with the local authority; and
• The rate does not need to be cross-subsidised by parents and carers through charges for non-funded hours.