Nursery rates relief: evaluation

Evaluation of the nursery non-domestic rates relief scheme implemented in Scotland during 2018. We committed to evaluating the benefits of the scheme after it had operated for three years.

3. Non-Domestic Rates (NDR) Data on NRR

In 2021, there were 1,100 premises registered as 'day nurseries' on the Valuation Roll in Scotland. There are a two main reasons for this number being so much lower than the figure of 3,522 day care of children services operating in Scotland mentioned in section 1. Firstly, as mentioned in section one, the valuation roll lists premises by their primary use. Some childcare settings may be described as having another primary use on the Valuation Roll. This will include, but will not be limited to, childcare settings operating in churches, community centres, office buildings and in schools/school estates. Secondly, the number of registered settings is sourced from Care Inspectorate registration data which includes many settings which offer childcare for school age children as their primary service.

Data on childcare settings, as published in the Care Inspectorate Data Store (which is the most up to date data available), does not currently allow for services providing school age childcare as their primary service to be distinguished from nurseries in every case. Figures from the Care Inspectorate's Childcare Statistics indicate that there were 716 settings which provided care for school age children as their primary service as at December 2020.

Of the 1,100 'day nursery' premises on the NDR roll, there were 735 nurseries in receipt of Nursery Rates Relief, 240 in receipt of another kind of NDR relief and 125 not in receipt of any relief. The number of settings on the valuation roll, and in receipt of reliefs, has been relatively stable over recent years (as shown in Figure 7). It is not clear why over 100 nurseries are not claiming any relief, however, it is possible that some or all of these nurseries may have reached the limit to the value of state benefits they are able to receive in accordance with the UK's international commitments regarding subsidy control.

Figure 7: Day nurseries on the NDR Valuation Roll - by relief status
Bar chart showing the number of day nurseries by relief status for the years 2019 to 2020. For all years, approximately 70% of the day nurseires on the Valuation roll were in receipt of Nursery Relief, aroound 20% were in receipt of other reliefs and about 10% were not in receipt of relief.

3.1 The value of NRR

In the financial year 2020-21, the total cost to the Scottish Government of providing NRR (i.e. the value of nursery rates relief to nurseries) was £9.6 million at an average value of the relief per nursery of around £13,200. The majority (61%) of day nurseries have a rateable value of between £15,000 and £51,000 (Figure 8).

Figure 8: Number of day nursery premises on valuation roll by rateable value band (2021-22)
Bar graph showing the number of nurseries by rateable value, of which: 450 had rateable values between £15,000 and £51,000; 205 had rateable values up to £15,000; 75 had rateable values between £51,000 and £95,000 and less than 5 had rateable values greater than £95,000.

The average value of the relief varies by premise (due to the valuation of the premises on the valuation roll – which is driven by factors such as rent prices, size of the premise etc.). The variation between the valuations of premises on the role also impacts the value of the relief in each Local Authority. The average value of the relief per nursery in 2020-21 ranged from £5,600 in Dumfries and Galloway, to £24,500 in Aberdeen City.

Figure 9: Total value of NRR by financial year, £millions
Bar chart showing the total value of Nursery Rate Relief by financial year from 2018-19 to 2021-22. The highest value was £9.8 million in 2019-20 and the lowest was £9.4 million in 2021-22.

While the value of NRR has been relatively stable at around £9.6 million per year to date (Figure 9), the next NDR revaluation in Scotland will take effect in 2023. For this, Scottish Assessors will revalue all properties, and the associated rateable values on the roll will be updated. This may result in changes to the overall value of nursery rates relief but it is not yet possible to say whether this is likely to increase or decrease the value of the relief.

It is also not possible to tell from the NDR data how many of the 'day nurseries' in receipt of nursery rates relief are providers of funded ELC hours. Whether or not a nursery is a funded provider will influence how any future changes to NDR reliefs may impact their organisation. This will be discussed in more detail in section 4.



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