Sustainable Rates Review Implementation Working Group Minutes: April 2025

Attendees and apologies

• Care and Learning Alliance (CALA)
• Early Years Scotland (EYS)
• National Day Nurseries Association (NDNA) Scotland
• Association of Directors of Education in Scotland (ADES) Early Years
• Association of Directors of Education in Scotland (ADES) Resources
• Directors of Finance Network
• Improvement Service
• Scottish Government (SG) (Chair)
• Convention of Scottish Local Authorities (COSLA) (Chair)

Apologies

Apologies were received from the Scottish Childminding Association (SCMA) and from some members representing the Association of Directors of Education in Scotland (ADES) Early Years and the Association of Directors of Education in Scotland (ADES) Resources.

 

Items and actions

Minutes and actions of previous meeting

The Chair thanked members for joining the call and provided notification that he is due to leave his current role at the Convention of Scottish Local Authorities (COSLA) on 1 May. Succession arrangements are ongoing for a COSLA Chair and members will be advised of any staff changes in advance.

Members provided no comments on the minutes of the previous meeting or the action tracker. There were no outstanding actions. 

Reflections on 2025 to 2026 sustainable rate setting guidance

A Scottish Government representative shared an overview of the key messages in the 2025 to 2026 sustainable rate setting guidance which had been published in February. This guidance sets out how an additional £9.7 million will be provided to local authorities in 2025 to 2026 to support an increase in the pay of childcare workers in the private and third sector delivering funded early learning and childcare (ELC) so that they can be paid at least the real living wage from April 2025. It confirms that the additional funding will be passed to all funded ELC providers (including childminders) in 2025 to 2026 through a minimum 3.75% increase in sustainable rates. It also makes clear that local authorities are responsible for finalising sustainable rates beyond the agreed minimum uplifts and that uplifts to sustainable rates in 2025 to 2026 will be backdated to 1 April 2025 if rates are confirmed later in the year.

The guidance reflects the recommendations of the Scottish Government and COSLA sustainable rates review – in particular to introduce greater standardisation, ahead of fully embedding within the rate setting process from 2026 to 2027 onwards, including:

• bringing rates paid to childminders in line with other types of provision
• a higher rate for 2 year old provision, recognising the different staffing ratio requirements for this age group
• a separate payment rate for the free meal commitment to improve clarity and transparency for funded providers

It was noted that, to support this, a further update to the sustainable rates setting guidance will be published in early 2026 to reflect the outputs of the cost collection exercise.

The Scottish Government and COSLA jointly published the 2024 to 2025 sustainable rates data collection report on Monday 31 March (paper 4.01). The Scottish Government extended their thanks to local authorities for their continued support and collaboration on this exercise. 

The report includes findings that average rates for eligible two year olds and 3-5 year olds increased by 8.5% and 8.4%, respectively between 2023 to 2024 and 2024 to 2025. The variance in rates across local authorities, which is measured as the gap between the highest and lowest rates, also narrowed across all types of rates. 

Communications were issued to the sector on Wednesday 2 April, providing notification of the report’s publication in addition to a link to His Majesty's Revenue and Customs (HMRC) guidance regarding childcare providers’ eligibility for the employment allowance. 

Members welcomed the publication of the 2024 to 2025 sustainable rates data collection report and were encouraged by the progress made by Local Authorities. However, concerns were raised that despite the rate increases in 2024 to 2025, providers may not feel any improvement in their situation due to the range of cost pressures they face.

Cost collection exercise

Paper SRRIWG 4.02 included the latest draft of the survey developed by the Diffley Partnership, to be used to collect data on costs of delivering sustainable ELC in private, third sector and childminding settings. Members had been asked to provide feedback on this in advance of the meeting. 

A Diffley Partnership representative thanked members for their ongoing support and participation. 

The sustainable rates review implementation working group (SSRIWG) had been asked to consider the following points in particular and discussion on these is outlined below;

• To reflect differences across different types of providers, it is proposed that three separate surveys will be used for individual private and third sector providers, childminding services, and for chain providers (those providers with two or more services)
• Feedback on the survey indicated that it was important to be clear about which providers would be asked which questions. It was acknowledged that the routing for three provider types should address this
• Should self-employed childminders and/or daycare of children business owners be asked to include contributions to personal pensions as part of their costs 
• There was consensus that pension contributions should be included in the costs incurred for self-employed childminders and daycare of children business owners
• Would adding a category of ‘administration’ enable non-contact time to be captured?
• The group noted that the term ‘non-contact time’ was not commonly used in funded ELC settings and that instead, it would be more helpful to include categories for continuous professional learning, planning and other administrative tasks
• While it is useful to obtain information on anticipated future costs, the final results of this survey will rely primarily on actual costs. How can we frame the wording in this section to manage providers’ expectations? 
• In capturing views on anticipated costs, it was agreed that the accompanying guidance should be clear on how the responses to this section will be used. It was noted that projected costs can be based on actual costs combined with inflation and the answers to this section can help to provide additional context 
• It was suggested that this section be reframed to ask providers about specific costs that they anticipate will change beyond inflation, as opposed to asking for their view on every cost line
• It was agreed that while asking for projected costs would be welcomed by the sector, and this intelligence would be useful, it will be important to ensure participants are clear that actual cost data will be used as a baseline to model potential future scenarios, which will be informed by the projected cost changes provided through the survey
• There was consensus that the approach to this should be tested during the pilot phase, with providers being asked their views on sharing projected costs, line by line, or by exception where these are expected to change beyond inflation 
• There was a general concern that response rates may be poor due to survey fatigue and it was agreed that the guidance should indicate how long the survey will take.
• It was noted that feedback from a previous survey indicated that it was too long and required excessive time from providers to complete
• The group noted the risks and benefits of a detailed survey and agreed to review in light of the pilot findings. It may be possible to identify a ‘core’ set of questions within the survey for participants who are unable to commit time to the full survey

Members had provided written feedback on the wording and the inclusion of specific questions in reviewing the draft ahead of the meeting. While some of this pertained to the framing and presentation of questions, other, more fundamental, points had been raised:  

• It was noted that it may be challenging for providers to apportion costs to specific age groups and that it may be more useful to apply a consistent 'overheads' costs. It was agreed that this would be taken into consideration ahead of the pilot
• It was noted that if the question remains unchanged for the pilot, that providers will have the opportunity to share what they have considered in providing these costs and it was acknowledged that providers may welcome a further optional question to allow them to share contextual information
• It was suggested that providers may wish to provide data in a spreadsheet, allowing them to input costs line by line to generate an hourly rate, although it was noted that this would increase the length of time required to complete the survey
• Concern had been raised regarding asking providers about their spending plans for reinvestment.
• It was noted that the outputs of the exercise would be used to inform guidance from 2026 to 2027 onwards and that understanding what a reasonable assumption on investment should look like would help to shape this. It was agreed that this should be tested during the pilot phase

Pilot phase

A Diffley Partnership representative advised that the providers already engaged in designing the survey have been included in the sample for the pilot phase and that the remaining sample has been selected from the Care Inspectorate register to ensure a mix of key variables, with childminders identified through Scottish Childminding Association (SCMA). The pilot was anticipated to take place over a two week period on 7 April 2025, provided participants do not request additional time.

The SRRIWG agreed that a 45 minute meeting to review and comment on the revisions following the pilot would be useful. The SRRIWG secretariat will put a hold in diaries for this, on the understanding that this may be cancelled, depending on the outputs of the pilot.  

Actions

• Secretariat to place a hold in diaries for a meeting following the pilot phase, to allow the Diffley Partnership to share reflections and amendments to survey following the pilot

Support for participants & communications

The Diffley Partnership advised that providers will receive accompanying guidance to support them in completing the survey. This guidance will include an explanation for the inclusion of each question in the survey, along with detailed instructions for some of the more complex questions. Additionally, a webinar will be recorded and made available for sharing. Members are asked to provide any questions they believe should be included in the Frequently Asked Questions (FAQs).

Key points from discussion that followed: 

• The Diffley Partnership are working on creating a branded flyer to support the promotion of this exercise
• It was suggested that LinkedIn is considered a good channel for reaching members and promoting the survey, in particular for National Day Nurseries Assocation (NDNA) members 
• It was suggested that the communications should be kept short, focusing on key messages: what's in it for the participant, what’s different from previous surveys, the expected outcome, and how long it will take to complete. A short promotional video may be more useful than a webinar
• It was noted that there may be low uptake, due to competing priorities as well as scepticism regarding the likelihood of real change 
• Scottish Government (SG) representatives will work with COSLA and the Diffley Partnership to agree an approach to communications, to be released once the survey is launched

Actions

• Members to provide any suggested frequently asked questions (FAQ's) to be included in accompanying guidance
• Scottish Government representatives will work with COSLA and the Diffley Partnership to agree an approach to communications, to be released once the survey is launched

Forward look to agenda for next meeting and any other business (AOB)

Members raised concerns about the impact of the increases to employers national insurance on providers. The Scottish Government advised that the current position has not changed but highlighted recent HMRC guidance on the employer allowance specifically for childcare providers that members may wish to share with their colleagues/funded providers.  

The Chair thanked members for attending and participating.

SG and COSLA will consider the schedule for upcoming meetings, based on project milestones. 

Actions

• Secretariat to circulate a link to the HMRC guidance for childcare providers on the employment allowance to the group 
• Secretariat to consider the schedule for upcoming meetings, based on project milestones and communicate this to members