Early learning and childcare providers - local authority funding and support: overview 2022 to 2023

Annex C

Summary of Approaches to Setting Sustainable Rates for 2022-23

• Local authorities were asked to provide details of how they had set sustainable rates in-line with the updated joint Scottish Government and COSLA guidance on setting sustainable rates which was published on 26 May 2022.
• Local authorities were also asked follow up questions on engagement with funded providers during the rate-setting process, and how they had ensured that the rate reflected up-to-date costs. This reflected the emphasis in the updated guidance on the need for local authorities to reflect the most up-to-date cost information in setting rates, which is particularly important for providers during the current costs crisis; and the importance of ongoing consultation and dialogue between local authorities and their local ELC providers.
• To further strengthen the evidence base and inform the process for setting sustainable rates, COSLA and local authorities commissioned Ipsos Mori to carry out an independent cost data collection exercise in 2022. This information has informed rate-setting for August 2022 alongside analysis of local market conditions.
• Table C1 sets out the information provided by local authorities in response to these survey questions. There is overlap between the three questions asked, and responses should be read in the whole.
• As set out in paragraphs 55 to 59 in the summary report, this information will be used be used to inform the Scottish Government and COSLA review of the overall process for setting sustainable rates in 2022-23. This is with the intention of learning lessons to identify where the process can be improved further to ensure that rates reflect the costs of delivering funded ELC and the payment of the real Living Wage to staff delivering funded ELC.

Table C1: Summary of Approaches by Local Authorities to Setting Sustainable Rates for 2022-23

Council / Summary of Approaches by Local Authorities to Setting Sustainable Rates for 2023-23

Aberdeen City

• The Improvement service commissioned Ipsos MORI in Spring 2022 to undertake an ELC cost collection exercise. However, due to limited uptake from Aberdeen City based funded providers Ipsos MORI did not secure sufficient sample size to undertake a cost analysis (greater than 9 responses) for this Council area.
• The Aberdeen City Early Years Team approached the Improvement Service to ask if the data that was submitted to Ipsos MORI could be anonymised and for the team to review a limited sample. However, only Ipsos MORI have access to this information.
• A 10p uplift has been recommended for 2022-23, taking into consideration cost pressures / cost of living and national average increase. In conversation with Funded Providers, the Council will then conduct a further review in April 2023, which will be able to take account of the funding package from Scottish Government for 2023-24.

Provider Engagement

• As part of the rate setting process, the Council encouraged Aberdeen based providers to engage with the Ipsos MORI survey, commissioned by the Improvement Service. Despite promotion and communications to providers, regrettably a sufficient number of participants was not achieved to meet the sample requirements. Regional Improvement Collaborative (RIC) information was shared with the Council but against this context it has limited value as the other Northern Alliance authorities are rural or island authorities with different cost pressures.
• Aberdeen City had individual meetings with a small number of Funded Providers.
• It is Aberdeen City's intention to start a further review of the rate in April 2023, to consider a secondary uplift for 2023-24, but that will be dependent on funding received for the forthcoming year. The funding settlement from the Scottish Government for 2023-24 has not yet been confirmed.

Meeting Current Costs

• The Council will seek to engage with ELC providers including understanding any barriers to participating in evidence-based cost surveys (reflected in low participation levels with Ipsos MORI) and how to improve engagement around this process going forward.
• The Council have taken into account the cost pressures of inflation/cost of living and the national average increase of 9 pence as well as Real Living Wage.
• The Real Living Wage will come into effect from May 2023. The Council will engage with Providers about their costs with a view to doing a secondary uplift in April 2023 for 2023-24.

Aberdeenshire

• Ipsos Mori data for Aberdeenshire was used to set the rate for 2021-22.
• Aberdeenshire have previously confirmed that when setting the rate in 2021, the process included the use of cost data from Ipsos Mori, and a working group which includes funded providers.

• The real living wage increase was applied to set the increase for 2022-23.

Provider Engagement

• There was a meeting in September with Funded Providers (PVI) to brief on the Ipsos mori data. There was also a meeting with the childminders to go through the current rate and the Ipsos mori data.
• A Microsoft Team space has been set up, which all funded providers have access to. The most recent Ipsos Mori data and technical guidance have been uploaded to the team space. There was a workshop which took place at the start of October to review the current rate in line with the Ipsos findings. Providers also had the opportunity to discuss any limitations to the Ipsos survey and how these may be overcome.
• There has also been two meetings with funded providers. The first to update them on the Ipsos mori information and the second to have a more detailed discussion on the matter. Another meeting was scheduled for 3^rd November. It is planned that there will be a regular cycle of meetings each year in order to review sustainable rate and other financial matters.

Meeting Current Costs

• Ipsos Mori data for Aberdeenshire was used to set the rate for 2021-22. The real living wage increase was applied to set the increase for 2022-23.
• Aberdeenshire Council is also taking into account the revised Ipsos Mori data. Part of the dialogue has been to encourage providers to identify where they believe that there are limitations with the Ipsos Mori data, so that these can be addressed.
• Aberdeenshire Council has also budgeted for a further increase, based on the latest Real Living Wage increase. A proposal will go to the Education and Children's services Committee prior to April 2023, to increase the sustainable rate again, in line with the latest RLW increase. This is a 10.1% increase on the previous RLW – increase from £9.90 to £10.90.

Angus

• Angus developed an approach to setting sustainable rates in 2020 based on guidance published by Scotland Excel in 2019. This used the Ipsos Mori 2016 survey of ELC provider costs as a starting point and, line by line, inflated each cost element to arrive at a total base cost per hour of ELC delivered in a private; not-for-profit; and childminder setting.
• Angus scheduled a review of the rate setting process in 2023 with a view to implementing changes for August 2023. However, a struggling economy and news that Ipsos Mori would repeat their survey in the early part of 2022 acted as a catalyst for bringing forward the review by 12 months. The rate setting process did not change significantly as a result of the review.

Provider Engagement

• For 2022-23 Angus invited all contracted providers to engage in the review of sustainable rate setting, advising that Ipsos Mori would repeat their survey of providers' costs in the early part of 2022. Angus encouraged providers to take part in the survey and achieved a 58% response rate. Four providers (one childminder) came forward to work with the Council. All had participated in the consultation on the rate setting process in 2019.
• Angus met individually with private and not-for-profit settings in June 2022. Feedback was in favour of the proposed rates. The decision to back pay the increase to 11 April 2022 was welcomed.
• Angus met with the childminder in July 2022. The Ipsos Mori 2022 survey of ELC costs in a childminder setting were not expected until the end of July 2022 which meant they could not be used in the review for 2022-23. Angus therefore continue to base childminder rates on the 2016 survey data, inflated for 2022 prices. Feedback was in favour of the proposed rates.
• As part of embedding the plans for expansion to 1140, Angus Council created a post dedicated to building and maintaining the relationship and an open dialogue with funded ELC providers. This post gives providers a single point of contact for all things related to their contract. The post holder represents the voice of the provider in key meetings and will recommend improvements to policy and practice with a view to achieving greater equity between internal and external provision.

Meeting Current Costs

• When calculating rates for 2022-23, Angus worked on the assumption that the Ipsos Mori 2022 data were representative of costs in January 2022 and added 3.1% to each cost element (excl. 'staff costs' and 'utilities') anticipating that CPIH (12 months) would reach 8%. 57% was added to the 'utilities' and 9.88% added to average 'staff costs' per hour of ELC to accommodate the real Living Wage rate at the time (£9.90).
• To ensure the rates paid are sustainable and reflect the cost of delivery, Angus has developed an innovative approach to setting rates that reflect the higher staff ratio required for eligible 2s, called the 'staff ratio adjustment'.
• The staff ratio adjustment is a way of redistributing the 'staff costs' element of the sustainable rate to reflect the higher staff ratio for eligible 2s.
• If Angus did not apply the 'staff ratio adjustment' and opted instead to pay a flat rate for all ages, the equivalent flat rate for Angus in 2022-23 would be £5.90.
• In 2020, Angus committed to increasing sustainable rates annually each August, incorporating the latest real Living Wage (RLW) rate and the CPIH (12 months) rate for May. In 2022 this was varied - back paying the August 2022 increase to April and agreeing to pay future annual increases each April thereafter.
• This is to ensure that rates in Angus reflect up to date costs, and to enable providers to pass on the real Living Wage increase within six months of its announcement.
• As part of a planned review of Fair Work Practices in 2023, fair pay and payment of the real Living Wage will be a priority for discussion with providers.

Argyll and Bute

• Data for the elements that make up the current costs paid were reviewed against the Ipsos MORI consultation report of May 2022, as a recent and thorough consultation exercise however, whilst Ipsos MORI data for Argyll & Bute Council gives a median cost of £4.71, the Council have taken the decision to use their original base figure of £5.35 per hour, given the current financial climate.
• Inflation from December 2021 to August 2022 (published in September 2022) was then applied.
• Staff costs were inflated by average weekly earnings in the first instance for rate to be applied from August 2022 (4.52%). For the future rate an adjustment for the real living wage increase (to £10.90 per hour) which has to be applied by May 2023 was also calculated (10.10%). Other costs were inflated in line with the Consumer Price Inflation index (6.19%), utilities were inflated in line with energy prices inflation (29.95%).
• The staff ratio was then reviewed (1:5 ratio for eligible 2s and 1:8 for 3-4). An additional £0.73 per hour for eligible 2s was applied (calculated by indexing the £0.70 currently paid in line with staff costs), which increases to £0.77 for the future rate once real living wage applied.
• A sustainable profit/surplus was then applied to the calculated cost per hour. Argyll & Bute have applied 8%, which in monetary terms equates to up to 53p for every hour of ELC delivered to eligible 2s and 47p for 3-4s.

Provider Engagement

• Argyll & Bute have used the Ipsos Mori rate setting consultation, which was carried out in recent months as the most recent consultation as they had a suitable number of respondents to enable them to deliver a rate.
• Argyll & Bute did not use this rate though, as they had conducted their own rate setting exercise in 2021-22 and this was higher. The Council decided to calculate this sessions rate based on the higher figure.

Meeting Current Costs

• Argyll & Bute included the new Real Living Wage figure of £10.90 per hour when calculating the rate this session.
• Argyll & Bute included the most recent inflationary measures in relation to fuel costs and staffing costs.

Clackmannanshire

• Sustainable rates were set in conjunction with the Regional Improvement Collaborative (RIC).
• The Council will further review rates to reflect the increase to the real living wage from April 2023
• In 2021, Clackmannanshire utilised a prices survey, and benchmarked against neighbouring authorities.

Provider Engagement

• Rates were set in conjunction with the RIC. This was communicated to partner providers. The process was discussed at a partner meeting.
• Agreement was had for a change to the review date from August to April with the next review April 2023 to take account of the increase to the real living wage.

Meeting Current Costs

• Rates are higher than partner settings charge parents.
• The rates will be further reviewed April 23 to reflect the increase to the Real Living Wage.

Dumfries and Galloway

• The information received from Ipsos Mori survey was used as a starting point for considering the setting of a sustainable rate. Dumfries and Galloway Council used the Regional Improvement Collaborative mean data as this reflected a better spread across different types of provider, the highest costs for providers and also the lowest salary.
• The salary when broken down to an hourly rate based on 37.5 hours per week over 52.14 weeks equated to 87% of the current living wage. Therefore to ensure providers could afford to pay staff the real living wage the staff cost per hours from the data return was uplifted by 13%.
• The total costs of delivery per hour was added to the staffing cost element and an 8% uplift - to reflect scope for reinvestment - was applied to this subtotal, providing the final rate for three to five year olds. The same overall percentage increase for three to five year olds (prior to the interim rate in January 2022) was applied to the two year old rate to determine the rate for August 2022.

Provider Engagement

• Due to the time constraints between publication of the Ipsos Mori data and Council Governance process timeline D&G were unable to consult with providers prior to the Committee process. However the process was shared with providers prior to Committee and as a result of this a representative group of funded providers are meeting with Council Officers in a collaborative forum to try to understand providers true costs locally with a view to agreeing a process for setting sustainable rates in the future.

Meeting Current Costs

• Going forward the staffing element of the rate will be uplifted in line with increases to the real living wage.
• The delivery costs will be increased in line with Consumer Price Index in November.
• The 8% reinvestment would then be applied to the sub total.
• Any future increases will be applied in April at the beginning of the financial year however would need to be affordable within the future funding quantum.

Dundee City

• Dundee considered the results of the survey carried out by Ipsos MORI Scotland, an independent research company. It was sent to all private and third sector funded partner childcare providers in Dundee.
• As a result of a low response rate and to protect confidentiality, Dundee data could not be provided. Therefore, having received data at a Regional Collaborative level, Dundee worked with Tayside colleagues to review the data available as the best available proxy to help inform the local decision- making process.
• Dundee sampled local funded providers current price schedule for a standard day and average rates charged over different sessions run throughout the day. This price information based on local market conditions provided benchmarking information regarding the average price charged
• Dundee considered the following:

The rate will be a rate that reflects the cost of delivery:

• The Tayside RIC data indicated 80% of Early Learning and Childcare (ELC) settings in that area had overall costs of less than the current rate for 3-5 year olds i.e. £5.31, leaving the majority of settings with a profit margin.

It will enable payment of the real Living Wage for those childcare workers delivering the funded entitlement:

• A survey by Dundee City Council indicated that all funded providers in Dundee are paying the Living Wage.
• The median early years practitioner (EYP) salary for the Tayside RIC which equates to an hourly rate is above the current Living Wage.

The rate will allow for investment in the setting – staff, resources and physical environment:

• An approach was adopted to maintain the existing profit margin to allow for investment in the setting to determine the sustainable rate for 3-5 year olds of £5.45. An identical set of calculations was carried out to determine the sustainable rate for 2 year olds of £5.75.

The rate must be sustainable for the Authority in terms of the budgets available:

• The quantum for ELC funding by Scottish Government for 2023 onwards has not yet been determined.
• The projected increase in numbers of children deferring entry to primary one following policy changes in August 2023
• The implications of any pay settlements for staff
• Any rate changes needed to be both affordable and sustainable and would not have a detrimental effect on the council'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 (see appendix D).

Provider Engagement

• Dundee encouraged providers to complete the survey carried out by Ipsos MORI Scotland, an independent research company, on behalf of each local authority. It was sent to all private and third sector funded partner childcare providers in Dundee. Childminders were sampled too. The survey was an opportunity for providers to work in partnership with Dundee Council to support the local sustainable rate review process and to inform decisions based on as accurate and up to date information as possible.
• Dundee held two briefing sessions for funded providers to discuss the process, emphasising the importance of completing the survey to ensure that as a local authority they had reliable and up to date understanding of the current costs to local private and third sector providers of delivering early learning and childcare. Dundee also sent regular reminders during the time the survey was live, encouraging anyone with questions to get in touch.
• Dundee engaged with a Funded Providers Forum and during Quality Improvement visits to individual settings.
• Informal feedback mainly indicated a level of confidence that the revised rate would support sustainability when considered along with the funding for healthy milk and snack, daily meal payments and on-going support from the Local Authority.

Meeting Current Costs

• Dundee analysed the most up to date cost of delivery information provided and considered inflation, staffing costs and the principal of re-investment. In determining costs, Dundee used the RIC's data which indicated the majority of settings were able to deliver for less than £5.31, and would have an existing profit margin.
• A survey by Dundee City Council indicated that all funded providers in Dundee are paying the Living Wage.
• In addition to considering the most up to date costs, Dundee also took account of the current ELC context in order to ensure the revised rate is both affordable and sustainable i.e.
  • The benefits of the Scottish Healthy Milk and Snack payment paid at a flat rate of 58.2p
  • The benefits of meal payments paid in addition to the sustainable rate
  • The benefits of in-kind training and support provided by the Local Authority
  • The quantum for ELC funding by Scottish Government for 2023 onwards has not yet been determined
  • The costs associated with a projected increase in numbers of children attending ELC from August 2023

East Ayrshire

• The Ipsos Mori national cost collection exercise took place in 2022, however the participation threshold was not reached for availability of data for East Ayrshire so the data provided was at the South West Regional Improvement Collaborative (RIC) level.
• East Ayrshire provided a copy of a paper to their cabinet detailing their rate review, which is conducted annually
• This review encompasses a survey of cost data via the Ipsos Mori survey, and finances via providers' financial accounts
• The full report is available online at: early learning and childcare - annual review of sustainable rate for providers and childminders.pdf

Provider Engagement

• East Ayrshire have engaged with their 7 funded providers and a sample group of the 42 childminders following receipt of their outputs from the Ipsos MORI survey, in order to help inform the rate setting process for August 2022.
• In some cases this has included sharing the outputs of the cost collection exercise with individual providers and discussing the further contextual information feeding into rate-setting, while being clear about the local political processes to be followed. East Ayrshire's Flexible Framework for funded ELC places sets out the commitment to an annual review of the sustainable rate and the relevant criteria of the National Standard rather than an inflationary uplift.

Meeting Current Costs

• An annual review of the hourly rate for this period of the contract demonstrates commitment from the Council and will support private and voluntary sector providers and childminders to have sustainable long term plans in place. Paying a sustainable rate protects jobs and enables staff working in the private and voluntary sector to be paid the Real Living Wage.
• Questionnaire issued to ELC funded providers seeking information in relation
  • Criteria 7 Business Sustainability
  • Criteria 8 Fair Work practices including payment of the real Living Wage and
  • Criteria 9 Payment Processes of the National Standard.
• On the basis of the information available i.e. the current hourly rate of £5.50 plus the payment of £3.00 per meal per day or provision of a meal and the Scottish Milk and Healthy Snack Scheme (SMHSS) rate of 58.2p per child per day, indicates that this meets funded providers delivery costs and for the majority allows for some reinvestment.

East Dunbartonshire

• The Ipsos Mori national cost collection exercise took place in 2022, however the participation threshold was not reached for availability of data for East Dunbartonshire.
• The East Dunbartonshire finance team then worked with other finance colleagues across the 8 local authorities in the West Partnership to look at similar methodologies based on the Regional Improvement Collaborative (RIC) rate. This would mean that while the RIC rate would be a starting point to inform the new sustainable rate, there would be autonomy in deciding local rates for East Dunbartonshire based on individual local circumstances.
• In the first instance, four options were costed based on seasonality, inflation and margin for re-investment. Initially, an option of £5.69 an hour was considered the most feasible choice as it would provide a sustainable rate but would also allow for seasonality, inflation as well as future investment.
• Rates were shared and discussed with the Funded Providers and their views sought.
• Council Officers then scoped additional funding options relating to the Real Living Wage increase, including an increase to the staffing uplift from 8% to 10%.
• The uplift agreed in November was £5.77 – 5% seasonality – staffing only; 10% inflation – staffing only and 5% margin for reinvestment – staffing and non-staffing.

Provider Engagement

• East Dunbartonshire Council (EDC) have a strategic funded provider group within East Dunbartonshire which meet on a regular basis. The group is made up of representatives from private, voluntary and independent establishments. The agenda is set by the group – it is viewed as their meeting and an opportunity to discuss issues pertinent to them and the wider Funded Provider body. The sustainable rate was a regular agenda item with the strategic group sharing their views on this topic.
• Once the work with finance officers across the West Partnership had been completed, the Early Years Service Manager and Early Years Quality Improvement Manager met with all funded providers to discuss four possible options regarding the sustainable rate. They also discussed how these different rates were calculated. In the absence of having a rate for East Dunbartonshire – it was decided to use the West Partnership rate as a starting point.
• It was explained that the preferred option was Option 3 – £5.69 which was the second highest of the rates offered. Funded Providers had time following the meeting to discuss with each other to see if they agreed with the rate proposed. They indicated that they did not accept this rate as they believed it did not provide enough funding for them to be sustainable.
• The paper was due to go to Education Committee on Thursday, 6th October. This was then withdrawn to allow officers to scope out further options. This work was carried out with a £5.77 proposed. The updated paper went to Council on Thursday, 3rd November 2022.

Meeting Current Costs

• In calculating options for the new rate, the starting point was the average salary paid by Funded Providers (across the West Partnership) when the information was gathered for the IPSOS Mori survey.
• Proposed rates have taken into account aspects such as inflation, margin for reinvestment and seasonality.
• In light of the recent uplift to the Real Living Wage EDC increased the percentage related to wage inflation from 8% to 10%.

East Lothian

• Proposed sustainable rate has been calculated taking account of
• Ipsos MORI data
• The average hourly rate charged by partner nursery providers
• Different ratios for 2 year olds and 3 – 5 year olds
• Bench marking against neighbouring authorities

Provider Engagement

• Staffing changes / vacancies within the central team impacted on availability to carry out in-depth consultation on individual cost collection.
• Discussions took place at partnership meeting.

Meeting Current Costs

• The calculation took account of the differentiation of ratios for 2 year olds and 3-5 year olds and applied different rates where previously one hourly rate was paid.
• This ensures 3-5 year olds hourly payments are not subsidising costs incurred to support 2 year olds.

East Renfrewshire

• East Renfrewshire Council has worked in partnership with colleagues across the West Partnership, with most authorities relying on the aggregated data provided from Ipsos-Mori in the absence of locally available returns.
• From the outset, authorities sought to take a consistent methodology, enabling collaboration in the process whilst also providing a clear, transparent process for funded providers having to work with multiple different authorities.
• Whilst East Renfrewshire took forward a similar methodology, they recognise that each authority has differing demographics and wider support packages which will understandably impact on the final rates across the region.
• The rate-setting approach has been informed by the national guidance, namely around ensuring appropriately inflationary uplifts for both staff costs (and payment of the Living Wage) and non-staff costs. In addition, East Renfrewshire sought to reflect seasonality in provision given the staggered entitlement dates as well as ensuring an appropriate level of margin to enable reinvestment. Appropriate percentage increases for each factor have been added to the costs of delivery (as provided by Ipsos-Mori) to determine the final rate to be paid to providers. This was consistent with most authorities across the West Partnership.
• In light of the financial outlook for local government, East Renfrewshire have sought to ensure throughout the process that the rate increase remains sustainable for the authority.
• Given the continuing economic uncertainty and the Scottish Government commitment to the annual financial health check, it has been agreed that the new revised rate will initially be in place for 1 year.

Provider Engagement

• East Renfrewshire Council has well established positive working relationships with funded providers and engage with them on an ongoing basis across all areas concerning the delivery of the statutory entitlement.
• The Council continued to meet with funded providers alongside local authority nurseries and family centres as part of their calendar of existing meetings. This provided an opportunity for any issues to be raised.
• In addition, a funded provider specific session was held to engage on the rate setting process. This provided funded providers with the opportunity to raise any issues or concerns with the Education Department, enabling the Council to raise these on a national basis.
• It should be noted that the Council worked with the Improvement Service to encourage participation in the cost collection exercise. Unfortunately, participation from local providers was low which impacted on locally available data.

Meeting Current Costs

• An inflationary uplift was added to both staff and non-staff costs. This was taken from the authority-wide figure shared by the Council Accountancy Service.

Edinburgh

• Edinburgh provided their report to the Education, Children and Families committee, which provides more detail relevant to this response.
• The report shows the Council utilised both a survey of price data; and the Ipsos Mori survey of cost data

Provider Engagement

• A Partners National Standard Group (PNSG) is well-established with representatives from across the sector. These reps then report back to their membership organisations e.g. NDNA. The Early Years finance team attend PNSG meetings and minutes are then sent to all partners. All partners were advised of the survey of prices in January and asked to ensure their own information was up to date when the Council redid the survey in April 2022.
• For the rate setting for session 2021-22, Edinburgh carried out a survey of prices, a survey of local authority rates and commissioned Scot Excel to carry out a survey of costs. There was a very low response to this and partners expressed concern about sharing their cost information.

Meeting Current Costs

• Edinburgh reviewed the existing hourly rate of £5.42 taking into account the increase in the real living wage (£9.90 per hour) and additional costs incurred by providers due to inflation at 7%.

Falkirk

• Cognisance taken of the IPSOS/MORI survey results.
• Discussions took place with RIC partners to assess commonality of approaches on how to set 22-23 rates. These meetings allowed alignment of some rates and appropriate percentage increases to be adopted.
• Consideration taken of the current reduction in grant funding for 2022-23, which significantly impacted on what increase could be afforded.
• Data gathered from private nurseries previously to internally assess sustainable rates also reviewed.
• Local charges made by private providers examined

Provider Engagement

• Meeting held with partner nursery providers to provide overview on assessment of new rate. Regular meeting held with private nursery partners.
• Engagement with SCMA re childminders.
• Meetings held with RIC partners to discuss matters.

Meeting Current Costs

• The new rates are favourable when compared to the information gathered from the IPSOS/MORI survey.
• Falkirk's rate was set before the real living wage increase was announced.
• Falkirk's current financial position (large reduction in grant funding) for the ELC sector severely limits the Council's ability to offer a significant rise in rates given the 10% + increase in the Real Living Wage. All decisions made must be affordable and must be funded within the current revenue grant funding provided.

Fife

• Fife's original contract with funded providers operated from August 2020 – August 2022.
• In April 2022 Fife wrote to funded providers asking if they wished to extend their contract to deliver funded ELC from August 2022.
• The rate change has been calculated from taking the rate within SG guidance as a sustainable rate for the introduction of ELC 1140 (from the original introduction date of Aug 2020) and increasing this in line with the percentage increase in the living wage over a two year consolidate period.

Provider Engagement

• Fife used information gathered from the IPSOS Mori survey findings to ensure that the increase (using the real living wage) was relevant.
• Moving forward with future increases, all Fife's partners were recently invited to attend an operational forum where rate setting was discussed. The guidance materials for setting rates was discussed and all four models of rate setting explained. Subsequently partners have been asked to rank in order of preference (using an MS Forms survey) which method of setting rate they would prefer:
  • Survey of costs
  • Cost Modelling
  • Working Group
  • Survey of prices
• Results, indicate that survey of costs would be the first choice of partners who took part in the survey (62 responses from 49 private nurseries and playgroups and 83 childminders)

Meeting Current Costs

• The increase of rate was based on the increase in line with the percentage increase in the living wage for 2020-21 and 2021-22. This is 6.45% (as it increased from £9.30 to £9.90 over the last 2 years), and applying that percentage increase to the hourly rate.
• Fife have looked at the percentage increase in living wage over the last 2 years is because no increase was given in the rate for year 2021-22.

Glasgow City

• The proposed rate was set using the available data from IPSOS MORI on unit costs for providers. Glasgow City Council (GCC) received both its own data and the aggregated data for the West Partnership RIC. The West Partnership data was chosen as it was more advantageous for the funded providers.
• The calculated costs from the data gathered directly from providers, showed that the figure to pay the SLW at February 2022 was £4.90 per hour per child based on West Partnership data and £4.73 per hour based on the specific to Glasgow data. The difference in the figures lies in the fact that GCC has much higher volumes of children than the other West Partnership local authorities which reduces the unit cost and also has more accurate data coming from its own providers as the figures are not aggregated.

Meeting Current Costs

• GCC read the data across the table to identify the percentile which allows providers to pay the living wage. This was the 72nd percentile and was a cost only figure which did not take account of seasonality (an adjustment required due to the timing of the data collection), wage inflation (the living wage rises annually so they predicted the February 2022 figure would increase) and re-investment in quality (i.e. margin).
• Reflecting the particular issues in the energy market, GCC also obtained the unit cost for the energy element of total costs and applied an inflationary uplift. Apart from wages and energy, they did not apply any other inflationary element as Council services do not receive inflation in budgets for anything other than wages.
• Adjustments reflecting seasonality, wage inflation and energy inflation were applied to the cost only figure. A margin was then applied to this rate. This allowed the calculation of the final rate.

Provider Engagement

• A communication was sent to all funded providers on 15^th July, sharing the Glasgow data outputs from Ipsos Mori along with the technical guidance and advising them of the delay that there would be in decisions being reached due to the timelines for Committees. A new Council had only been elected in May and Committee dates not yet set, therefore, GCC knew that it would not be possible to take anything to Committee prior to the summer recess.
• Only one response was received to that communication, thanking us for the update. No questions on the data or rate calculations were raised with us by any providers.
• Shortly after the start of term in August, GCC held two face to face engagement sessions with all funded providers to share the approach being taken to using the data to calculate the rate. Again, no questions were raised by the providers.
• The paper which went to Committee on 29^th September was published on 22^nd September and sent directly to every funded provider on that day. Three of the 130 funded providers contacted the Council directly with questions regarding the paper.
• At 29^th September the paper on proposed rates was remitted to a special meeting of the Education, Skills and Early Years Committee for further discussion. This discussion took place on 25^th October and was attended by invited senior representatives from the 3 membership organisations – Early Years Scotland, National Day Nurseries Association and Scottish Childminding Association. All Funded Providers in Glasgow are members of one or other organisation as the Council funds their membership fee to ensure that they have access to representation.

Highland

• A number of aspects to the approach in Highland is summarised below:-
  • A working group including partner representatives and Council officers.
  • Broader engagement with invites to meetings sent to all PVI partners.
  • Direct input by Council Chief Executive in some engagement sessions.
  • Review of Ipsos Mori data, and discussion with PVI partners.
  • Review of PVI partner financial sustainability.
  • Discussion of rate options with Partners.
  • Analysis of Council ELC budget and funding, and response to PVI partner queries.
  • Council financial context and briefing of PVI partners on that.
  • Council affordability and impact assessment.

Provider Engagement

• As noted above, a working group operated from 2021 through to summer 2022 which included PVI partner representation.
• In more recent times, and prior to final decisions being made by the Council, there have been meetings, led by the Council's Chief Executive, to which all PVI partners were invited. This was a hybrid of face to face plus virtual (teams) attendance.
• The Council heard from partners their own perspective on the review of rates, and sustainability. The sessions were also used to share information on the Ipsos Mori survey data, the Council's financial position and ELC budget/funding, and respond to PVI partner questions.
• Options on funding rates were discussed and developed via the engagement described above.

Meeting Current Costs

• Ipsos Mori data was analysed, and discussed with partners.
• As was high level and anonymised partner financial account information as another data source.
• Through engagement, partners also shared their perspective on costs of delivery and sustainable rate expectations. The rate options developed took on board feedback from the partner engagement sessions.
• In line with the Funding Follows the Child Guidance, the Council's own financial position, and affordability and sustainability to the Council's budgets were also key matters to consider, and were factored into the final recommendations.

Inverclyde

• Using the data provided by Ipsos Mori for the West Partnership, Inverclyde have used the guidance to ensure to set a rates which take account of:
  • Payment of the real living wage
  • Reinvestment margin to ensure investment in the setting – staff, resources and physical environment
  • Margins for Utilities
  • Margins for seasonality

Provider Engagement

• Inverclyde Council engaged with all partner providers throughout the rate setting process.
• Officers provided information regarding the Ipsos Mori data collection exercise and were available to answer any questions throughout this process.
• There were also a series of meetings, a bulletin and information sessions for providers to provide information on the methodology used to identify a sustainable rate.

Meeting Current Costs

• The information contained in the Ipsos Mori data identified in 72^nd percentile a rate of £4.90 was the actual cost of an hour of ELC across the West Partnership this was used as the initial base working rate.
• From this rate Inverclyde then applied and uplifts which for payment of the seasonality, RLW, inflation, reinvestment and payment of the RLW.
• 2% Seasonality (staffing only), 10.1% RLW, 10p per hour increase for utilities inflation and reinvestment, 4.5% staffing margin and 5 % non-staffing margin. This provided a proposed rate for Inverclyde of £5.69 per hour.
• The rate will be reviewed annually using information available from the annual Financial Sustainability Health Check.

Midlothian

• To set the rate Midlothian used the RIC level data from the IPSOS Mori survey.
• Using the mean Midlothian applied inflation to the costs (including an adjustment for the real Living Wage), then added 8% for return on investment (ROI). This provided the rate for the 3-5 year olds.
• After undertaking benchmarking analysis from neighbouring authorities, it was determined that the council was already providing a competitive rate for 2 year-olds, so this has been maintained.
• Midlothian had discussions with funded providers about the methodology prior to the report going to Council.

Provider Engagement

• There are regular partnership meetings between the council and funded providers, including representation from SCMA, and additionally regular meetings with a smaller collaborative group of providers to facilitate more discussion and setting the agenda for the wider group.
• Progress with the rate review, the potential rates and next steps in the decision making process have been discussed with providers at these meetings.
• All providers were invited to participate in the Ipsos MORI survey, both by Ipsos MORI themselves and the council. It was highlighted that the more providers who participated, the more accurately the findings would reflect the position in Midlothian.
• Unfortunately, however, while Ipsos MORI sent out 36 survey invitations in Midlothian, it only received 14 responses, and of these there were only five useable responses. This meant that the Ipsos MORI analysis was at RIC level.

Meeting Current Costs

• Midlothian applied inflationary adjustments to the costs established by the Ipsos-MORI survey and an allowance for ROI.

Moray

• Moray used the same method for calculating the rate as used in 2021
• The method takes account of the real living wage, and uses salary and total cost data from Ipsos Mori as a starting point.

Provider Engagement

• Moray have a financial sustainability work stream that meets, as a minimum, once a term. There is partner representation on this group along with ELC colleagues and Moray Council Head Financial Officer.
• Through Committee processes Moray agreed an approach to ensure all funded providers were given the opportunity to feedback. Moray also offered a consultation for all providers to feedback on the rate agreed, based on the financial work stream developments.
• On Tuesday 1^st November there is a further drop in session arranged for all funded providers in relation to no further uplift in this financial year.

Meeting Current Costs

• The Real Living Wage was factored into rate setting for 2021-2022.
• The decision for no further uplift was made prior to RLW being set in September 2022.
• Awaiting full council decision on 2 February 2023 about a potential 5% uplift following recommendation of the Education Committee on 14 December 2022.

North Ayrshire

• North Ayrshire meets regularly with providers and co-produced the process with them for the current review of rates.
• Three funded providers, as a representative group, volunteered to work with the local authority senior finance business partner to provide information relating to the costs of running their service. This work, based on an open book process, has recently concluded.
• Scottish Government guidance has been followed throughout this process.

Provider Engagement

• North Ayrshire invited Adam Hall, SG to a meeting with funded provider partners in August to present on the process undertaken by IPSOS MORI for the national survey on funded provider costs.
• A further meeting with all funded providers took place in September during which discussion took place around the challenges of rate setting in an environment of ever-increasing costs and reduction in funding from national government.

Meeting Current Costs

• Following a request for openness around funded provider costs to enable greater understanding of costs of delivery, three funded providers volunteered to share financial data with Finance Officers and Council Business Partners, relating to the costs of running their businesses. North Ayrshire have also considered inflation and propose a rise from the present rate.
• North Ayrshire have now concluded the cost analysis exercise with Funded Providers and will be seeking approval from Cabinet for a new proposed hourly rate early in 2023.

North Lanarkshire

• North Lanarkshire Council (NLC) used data gathered and reported by IPSOS MORI as the basis for the review and calculation of the sustainable rate.
• The data identified that the average unit cost to provide 1140 hours provision is £4.94. Applying the same logic to the figures for North Lanarkshire Council, the average unit cost to provide 1140 hours provision is £4.88.
• Working from this base average cost of £4.88 (£3.88 staff costs / £1.00 non staff costs) the rate was formulated in line with rationale and methodology utilised by Local Authorities across the Regional Improvement Collaborative and West Partnership.
• The rate is based on Based on a 10% increase to support the implementation of the SLW aligned to staff costs, an 8% inflation uplift and 1.44% reinvestment uplift aligned to both staff and non- staff costs.
• It is important to note the uplift aligned to reinvestment circa 1.5% takes into consideration that NLC previously applied an elevated level of uplift year on year (2019-2023) to support partners in supporting quality improvement to deliver 1140 hours.
• The rate paid for eligible 2s was previously £5.80, 4.5% more than the rate for 3-5-year-olds (£5.55). The same logic has been applied to the 3–5-year-old rate to determine the rate for eligible 2s. The rate for eligible 2s from August 2022 is £6.03.

Provider Engagement

• There are regular partnership meetings between the council and funded providers, including representation from SCMA. During September additional smaller engagement sessions took place to review the IPSOS MORI survey report and the data relating to NLC to facilitate discussion regarding the methodology used to review the rate.

Meeting Current Costs

• The decision to review the rate (which was previously set by NLC up to August 2023) was made in response to the announcement of the increase to the SLW in September 2022 and increase in inflation.
• IPSOS Mori survey information was used as base line data.
• Uplift all costs for an element of reinvestment.

Orkney Islands

• There are no private providers in Orkney so all of the funded providers are either local authority settings or 6 childminders offering split places.

Meeting Current Costs

• Orkney used the childminder information provided by the Scottish Government at the end of July 2022 for a guide to hourly costs nationally.
• Orkney also asked childminders in partnership how much they charged per hour. The £5 rate is above the amount they currently charge.
• Orkney's childminders they are reviewing their charges due to rises in fuel costs etc, at which point Orkney will review the rate.
• As childminders are the only non-LA providers, Orkney have tried to set the rate to support childminders but to avoid parents buying baby and toddler places being costed out of the market.

Provider Engagement

• Orkney do not have any funded providers other than a small group of childminders, therefore the process has been different.
• Orkney engaged with childminders in partnership by email and also through regular support and development meetings.

Perth and Kinross

• Survey costs method used - utilising most recent IPSOS Mori Survey
• Rate sustainable as laid out in paragraph 3 of guidance

Provider Engagement

• Funded Providers were informed of the increase through focus groups, and through normal communication channels.

Meeting Current Costs

• IPSOS Mori survey Tayside Regional Improvement Collaborative (RIC) information was used as base line data.
• Confirmed mean salary above predicted real Living Wage (RLW) and 38% paying all staff over RLW
• Uplift all costs for further inflation
• 8% Return on Investment (ROI) applied

Renfrewshire

• The data from the Ipsos MORI, national costs collection exercise which was commissioned by the Scottish Government and COSLA and carried out in early 2022, helped the Council to understand the actual cost to funded providers to deliver ELC.
• To establish a revised hourly rate, officers from the Council worked collaboratively with the West Regional Improvement Collaborative to streamline the approach and agree a methodology which took cognisance of inflationary increases, payment of the real Living Wage, seasonality and reinvestment, whilst at the same time ensuring the rate is reflective of the cost to deliver ELC.
• The Council agreed to using the Ipsos MORI data provided to the West Regional Improvement Collaborative, as the sample size was larger and the data in relation to cost to funded providers to deliver ELC was a higher starting point than the figures provided in the Renfrewshire Council data return. There were 113 usable responses across the West Regional Improvement Collaborative, which included 17 usable responses from Renfrewshire.
• All 38 funded provider nurseries from Renfrewshire were invited to participate in the Ipsos MORI consultation and were actively encouraged to do so throughout the period of consultation. A representative group of childminders contributed to the national childminding consultation exercise.

Provider Engagement

• Renfrewshire Council has well established positive working relationships with funded providers. The Ipsos MORI data collection exercise was the process in which the Council consulted with its funded providers to understand the actual cost to funded providers to deliver ELC to help the rate setting process. Funded providers were actively encouraged to participate in the data collection exercise, prior to the commencement of the exercise and throughout the consultation period. The subject of sustainability was on the agenda at each funded provider meeting, as requested by providers. The national rate setting guidance was shared and discussed with funded providers, including the expectation on Councils to take cognisance of inflationary increases, payment of the real Living Wage, seasonality and reinvestment, whilst at the same time ensuring the rate is reflective of the cost to deliver ELC.
• Funded providers were advised of the Council's intention to work collaboratively with the West Regional Improvement Collaborative to streamline the approach and agree a methodology and of the commitment to take cognisance of inflationary increases, payment of the real Living Wage, seasonality and reinvestment, whilst at the same time ensuring the rate is reflective of the cost to deliver ELC.
• Meetings were held with funded providers to share the recommended sustainable rate for session 2022-23 concurrently with the policy board report being published in the public domain.

Meeting Current Costs

• The Ipsos MORI data was used as the basis for the rate-setting process.
• Because the Renfrewshire Council sample represented a low sample (less than half of the providers within the Renfrewshire Council area submitted "usable responses"), the aggregated cost data for the West Regional Improvement Collaborative ("WRIC") was used (comprising Renfrewshire Council plus seven other neighbouring councils).
• Renfrewshire examined cost data at the percentile for which the salary rate paid matched the real Living Wage as at the time the data was surveyed (February / March 2022). Inflationary uplifts were then applied to staff costs to reflect the actual increase in real Living Wage between February / March 2022 and 22 September 2022. In addition, an inflationary uplift was applied to energy costs; to all costs for seasonality, and a further percentage increase to allow for reinvestment.

Scottish Borders

• Scottish Borders Council is dependent on the private and voluntary sector and childminders to fulfil its statutory duty to deliver funded ELC for eligible children and endeavours to ensure that there is sufficient range of provision to meet the needs of families and ensure that funding follows the child.
• During the phasing in of the expansion of hours, Scottish Borders Council increased the hourly rate paid to partners to £5.31 by August 2020 in line with previous IPSOS Mori findings.
• Significant financial support was given to funded providers during the time of COVID restrictions to ensure they were able to continue to provide childcare for children of key workers and so that they survived as businesses/organisations, retaining their staff for when restrictions lifted.
• As a result of this and of additional pressures on Council officers as a result of COVID, work was not undertaken to review the rate in time for August 2021. Work did take place to ascertain a sustainable rate and a paper was prepared for Council in January 2022 but providers asked that it was looked at again as they felt the methodology used didn't fully reflect their outgoings and wasn't fully representative of the sector.
• Subsequently, Finance Officers worked with a representative group of funded providers to develop robust methodology which has informed the current rate.
• From now on, the review of the rate will move from the academic year to the fiscal year and any increase will be recommended and considered as part of the Council's Fees and Charges process starting in February 2023

Provider Engagement

• As noted above – the methodology for identifying a sustainable rate was developed and agreed with a representation of partner providers – meetings were held virtually.

Meeting Current Costs

• Providers were asked to share details of their accounts, outgoings, income, staffing models, rate charged to parents through other childcare arrangements and profit. It is only through having access to this information that the Council can make a fair assessment of what a sustainable rate is.
• Scottish Borders are aware that there has been an increase in the Real Living Wage. This will be taken into account when proposing an increase in the hourly rate in February 2023, to be implemented in April 2023 which will allow providers to increase the rate paid to staff before the deadline of 14^th May 2023.

Shetland Islands

• Sustainable rates from August 2020 were developed using (1) survey costs method. The Terms and Conditions for the Council's Flexible Framework stated that an annual uplift would be applied in line with CPI increase. Sustainable rates have been increased using this method.
• The Flexible Framework covers a 5 year period. Shetland would look at carrying out a detailed cost survey again, ahead of renewing the Flexible Framework, in August 2025.

Provider Engagement

• Shetland Islands are in regular contact with funded providers.
• There has been no official consultation as part of the rate setting process for 2022-23. This is because there is an annual CPI linked increased rate.

Meeting Current Costs

• Shetland Islands set the sustainable rate based on CPI linked inflationary increase.

South Ayrshire

Note: South Ayrshire completed this part of the survey before 2022-23 rates had been confirmed at Council.

• South Ayrshire are currently progressing the rate setting process with funded providers. This process is aiming to establish a fair, affordable and sustainable solution.
• The rate is being reviewed in light of the increased costs taking account of the impact of inflation and the real living wage.
• The funded providers in South Ayrshire (with two exceptions) did not engage with the IPSOS MORI cost collection process.
• The current approach includes:
  • a review of the funded provider charges based on local market prices and data.
  • taking account of the impact of inflation and the real living wage
  • a review of the IPSOS Mori data (Regional Collaborative level)

Provider Engagement

• A series of meeting have taken place of both a small working group and the wider funded provider group.
• Following a meeting of all funded providers a small working group was formed. The group agreed a cost collection template.
• The wider funded providers did not agree to progress with this template.
• Subsequent meetings have looked at inflationary pressures and the real living wage.

Meeting Current Costs

• Rates still have to be confirmed
• The Council are conscious of the impact of the increase of the real living wage and inflationary pressures.
• In the absence of a cost collection data at local level, proposals currently being explored are looking at an uplift to take account of the a range of increasing pressures including Real Living Wage and inflationary increases as well as opportunities for reinvestment.

South Lanarkshire

• Following the publication of the Ipsos MORI data in May 2022, a baseline process was established across the West Partnership (WP) authorities to consider a consistent approach for setting the sustainable rate. Unfortunately, only 10 funded providers within South Lanarkshire shared information with Ipsos MORI and, therefore, localised data was not available. Data from across the West Partnership has been shared with the eight partner authorities and this informed the review of the sustainable rate.
• This approach was taken due to lack of specific local data but also to ensure that providers working across a number of authorities have similar methodology, enabling understanding as to how each local rate has been reached. Whilst WP authorities have looked to take a consistent approach, each authority has its own geography, demographics and wider financial considerations which results in the potential for different rates being paid.
• A number of key factors have been considered starting with the total hourly rate for those paying the real Living Wage (RLW) for an Early Years practitioner based on the Ipsos MORI dataset and using this as a starting point for costs, splitting for staffing and non-staffing and considering the variable elements for application in line with the guidance:
  • Support for payment of the Scottish Living Wage
  • Reflecting the cost pressures facing providers including utilities
  • Consideration of the seasonality of provision
  • Providing an appropriate margin to provide support for reinvestment
• The overall impact on the sustainable rate based on the data from the funded providers exercise and allowing for the variable elements for consideration, produced a recommended rate that aligns to SLC localised conditions and allows affordability to be applied. The new rates will be implemented from August 2022 in line with the terms and conditions of the contract for ELC and will be paid in the next appropriate payment run for each funded provided. This will be backdated to August 2022 from the date of approval, agreement and payment.

Provider Engagement

• An internal working group was set up to consider the SLC sustainable rate from August 2022. This comprised both Finance Services staff and Early Years staff. Members of the group have participated in various national workshops facilitated by the Government and the Improvement Service and also across the West Partnership and ADES joint ELC and Resources networks. Work undertaken has resulted in an options appraisal of various factors influencing the sustainable rate.
• Initial consultation took place with a small number of funded providers. The funded provider consultation group include representatives from a childminder, a voluntary sector provision, a rural provision, as well as a small and large urban located provider.
• The main issues raised for consideration related to the payment of the real living wage for staff, the impact of the rate of inflation, general operational increased costs and also the timeline for implementation associated to this review. These meetings were scheduled in July.
• In addition an information Bulletin was issued to all funded providers to ensure an on-going update of information was provided. All partner providers were provided with a copy of the Ipsos MORI SLC specific data as well as the technical report. Agreement is being sought across the West Partnership to release the full dataset to funded providers following approval of all authorities. This is expected to be in the next few weeks.
• In order to ensure full representation, 4 geographical area forums for all funded providers were held on 12 August 2022 with the main agenda highlighting the outcome of the Ipsos MORI cost collection survey, the subsequent methodology process currently being followed as well as presenting the opportunity for issues to be raised. Again the main issues raised related to payment of the real living wage for staff, the impact of the rate of inflation and general operational increased costs.
• A funded provider meeting was held on 7 September 2022 providing an update on progress towards a sustainable hourly rate, confirming announcement of the RLW on 22 September 2022 and again providing the opportunity for issues to be raised. Funded providers continue to be updated via the regular scheduled six weekly meetings and a meeting is scheduled in the coming weeks when final rate to be considered.

Meeting Current Costs

• The revised sustainable rate for SLC takes account of the RLW, as announced on 22 September 2022, by applying a +10.1% increase to the staffing element of costs as provided within the specific total hourly rate.
• The hourly rate increased from £9.90 to £10.90 and as such the SLC rate was increased by the same percentage to allow funded providers to support the payment of the RLW based on actual cost data provided as part of the Ipsos MORI data set.

Stirling

• In order to provide some financial assurance for partners, Stirling followed the previous guidance to allow them to increase the rate from the start of the financial year in April 2022, prior to the publication of the updated guidance.
• The timing of this also supported their procedure for making advance payments to ensure a smooth transition to the new rate and ensuring partners have sufficient cash flow.
• Stirling offered all private nurseries the opportunity to amend their contract to offer places for entitled 2 year olds from August 2022 at a rate of £6.51 per hour. 11 out of 13 partners took up this offer.
• The updated COSLA guidance was used in this process to ensure it was sustainable for both partners and the local authority.

Provider Engagement

• In order to ensure that the rate set for 2-3 years old covered the additional costs associated with provision for this age group, all funded partner nurseries were invited to join a working group to agree a sustainable rate. 3 partner providers joined this group, alongside the Early Years Workforce Development (WD) officer.
• This group enabled partners to share their challenges and highlight what needed to be considered when rate setting.
• As part of this work the WD officer worked with the service accountant to update and analyse previous cost collection information that had been gathered from partners. These costs were updated to allow for inflationary rises, the uplift to the real living wage and staff ratios for 2 year olds.
• Information from the working groups analysis was then shared with all partners, who were offered the opportunity to sign an amendment to their contract to enable them to provide funded places for eligible 2s at the uplifted rate of £6.51 per hour.
• Stirling Council analysis looked at the current funded rates for 2 year olds paid by local authorities across Scotland, the current charges across Stirling PVI for 2 year old places and the previous cost collection exercise carried out by the local authority when setting the funded rate for 3 and 4 year olds. The rate of £6.51 is based on projected costs for delivery, including the uplift to the real living wage and inflationary rises, and is based on 75% occupancy to ensure sustainability when not operating at full capacity.

Meeting Current Costs

• In addition to actions detailed above, Stirling benchmarked its rate against other local suthorities
• Partners were advised that, if required, Stirling would review the rate based on the findings from the Ipsos Mori Cost Collection Exercise. The results from this have subsequently suggested that the rate is fair and sustainable, as findings show that across Forth Valley and West Lothian Regional Improvement Collaborative (RIC) the median costs per hour for children age 0-5 is £4.45 and the mean is £5.23. For 2 year olds the average fee per hour across the RIC is £4.19 (median) and £4.49 (mean).
• Stirling are confident that the rate of £6.51 plus lunch is in line with all current guidance and within the scope of budget available.

West Dunbartonshire

• West Partnership Finance Group met to discuss findings of National Cost Collection Exercise, Sustainable Rate Setting; agree next steps and report back to individual Councils.
• To set an affordable rate within the quantum provided and to realign budgets, a sustainable hourly rate for Council to agree which represented an uplift of 6.78% was proposed. This new rate reflected the costs of ELC delivery (including inflationary increases), provided scope for reinvestment which reflected a measure of profit in a private sector setting and delivery of the Real Living Wage commitment for providers of ELC.
• The increase from £5.31 to £5.67 for 3-5 year olds captured the increase in the Scottish Living Wage since 2021 as well as an element for any increase in 2022-23, in addition it contained an uplift of just over 2% for future investment and development at each setting.
• The hourly rate for eligible 2 year olds was increased from £5.31 to £5.84. The 10% uplift in the hourly rate for this age group reflected the higher staff ratio required for this age group and subsequent increased costs of the numbers of funded eligible 2 year olds attending those services (approx. 50).

Provider Engagement

• 2021-22 - discussion and engagement at a monthly Provider Forum to set and agree a sustainable rate for 2022-23. This resulted in agreement with providers that this should align with the principles of Funding Follows the Child Operating Guidance i.e. high quality ELC, cost of delivery, investment in service and payment of the Living Wage.
• Provider Forum working group proposal for increased hourly rate to £5.84 for 2-5 year olds, identified the following factors influencing their proposed increase: gap in salaries in the private and public sector, increases in the RLW, increase in National Insurance, Fair Work Practices, cost of Covid, increased cost of energy, food, insurance and resources.
• As a result of the proposal the hourly rate for eligible 2 year olds was increased from £5.31 to £5.84 in April 2022.
• WDC encouraged all providers to return the National Cost Collection Exercise in May 2022. This resulted in 8 returns from 11 providers. In order to preserve confidentiality RIC level information was provided but not local authority level data. As a result the data could be not be used to help set the local sustainable rates for 2022-23.
• An average rate for the West Partnership Regional Improvement Collaborative (RIC) was provided from May 2022, the West Partnership Finance Group met to discuss the findings of the National Cost Collection Exercise, Sustainable Rate Setting and next steps. Thereafter, a working party was established with finance representatives from each of the eight Local Authorities which comprise the West Partnership to study the data and to review rates. Although the West Partnership rate has informed the review, there will not be the same sustainable rate across the RIC, this was to ensure that local contexts are taken into account.
• Engagement with a Provider Forum regarding the proposed increased rate. Note, scope to provide the data they did for the Cost collection exercise was not an option at this point in the process.
• Proposal to Education Services Committee which was agreed based on increased costs ELC provision.

Meeting Current Costs

• In setting the rate, WDC sought to establish a process which is data informed, consistent and fair. To support this process, WDC collaborated with colleagues across the West Partnership to streamline the approach. The aim was to ensure that those providers working across a number of authorities do not have to engage with significantly different methodologies in understanding how each local rate has been reached.
• Colleagues in finance engaged with the West Partnership Finance Group to streamline the approach to rate setting. Although they looked at this collectively through the finance group, it was recognised that each local authority has its own geography, demographics and political oversight so whilst the methodology may be the same the eventual local rate for each area as expected had some differences.
• The external factors influencing the sustainability of the hourly rates paid to contracted providers that WDC considered were:
  • rising costs and wages including payment of the real Living Wage for those delivering the funded entitlement;
  • rising cost pressures;
  • delivery of a high quality ELC experience for all children;
  • an increase that reflected the cost of delivery, including the delivery of national policy objectives;
  • an increase that allowed for investment in the setting – staff, resources and physical environment.

West Lothian

• No rate change, as rate considered to be sustainable and fair.
• When setting the current rate in 2021, West Lothian reported the process included meetings and consultation with private partner providers, a short term working group (consisting of partner providers, Finance and Education), a survey of current costs and charges, and cost modelling.

Provider Engagement

• The rate set and paid from April 2020 was set following extensive consultation with partner providers. The process commenced with an in person meeting with partner providers in the Civic Centre. Livingston to outline and agree the process (following the Scottish Government guidance on setting sustainable rate).
• Providers were then asked to complete a financial template to return to Education Services which outlined current costs/charges with an estimate of future costs/rates. Individual meetings were held with each provider to discuss their situation. In addition, a small working group was formed attended by 3 partner providers, officers from Education Services and Finance Services.
• Please note that the hourly rate set includes sum for ELC meal and milk/snack, as set before the roll out of the separate payment for SHMSS effective from August 2021.
• Regular meetings are scheduled with Partner Providers and Childminder throughout the year. Sustainable rates are benchmarked with other local authorities and the information is shared with partner providers. Rates are compared with Regional Improvement Collaborative (RIC) authorities (Forth Valley and West Lothian) and again these rates are shared with partner providers.

Meeting Current Costs

• The financial information used estimates for future costs, inflation and potential increases to the real living wage (Scottish Living Wage Rates).

Western Isles

• Western Isles carried out an extensive costing exercise with funded providers and from the information received calculated a proposed rate for funded 2's and funded 3- & 4-year-olds.
• This was informed with the information gathered from each individual setting and incorporated taking into account the key aspects of Funding Follows the Child which included 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
  • it will enable payment of the real Living Wage for those childcare workers delivering the funded entitlement.

Provider Engagement

• The Council emailed out to funded providers asking for the following information to ascertain the sustainable rate going forward:
  • An overall cost of staffing (including admin, janitorial and maintenance), if the setting was full to capacity and staffed accordingly.
  • Capacity for funded 2's and 3–5-year-olds
  • Current attendance numbers for funded 2's and 3–5-year-olds
  • Overheads for Building and utility costs
  • Overheads for materials and equipment
  • Allowance for 'investment and development'.

Meeting Current Costs

• Western Isles approach was to undertake an extensive costing exercise in collaboration with the partner provider. This was informed with the information gathered from each individual setting, as detailed in section 3 (b) and incorporated taking into account the key aspect of Funding Follows the Child which included 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
  • it will enable payment of the real Living Wage for those childcare workers delivering the funded entitlement.