According to an investigation by National Day Nurseries Association (NDNA) Scotland, only two local authorities have reported they will be increasing their early learning and childcare entitlement funding at the same rate as providers’ rising costs.

Childcare businesses in around a third of local authority areas begin the new academic year without knowing how much they are being paid for funded places.

A Freedom of Information (FOI) request to all Scottish local authorities has discovered that 59% (19 councils) are increasing their funding rates. However, this ranges from a 1.3% uplift in Falkirk to 15% rise in Clackmannanshire. The average increase in hourly rates is only 45 pence per hour for children over three.

In its Financial Sustainability Health Check of the Childcare Sector in Scotland published earlier this month, the Scottish Government found that providers costs were going up by 14% this year. However, only two local authorities reported that their ‘sustainable rates’ will increase by a similar amount, Clackmannanshire (15%) and Fife (14.4%).

Three areas, Dumfries & Galloway, Angus and South Lanarkshire, are offering at least 10% more than last year and a further twelve councils will be giving between 5% and 10% more.

Despite inflation still running at just below 7%, four local authorities will not be increasing their funding rates up for providers, these include Edinburgh City Council. This means a real terms cut in funding for partner nurseries in these areas.

Purnima Tanuku OBE, chief executive of National Day Nurseries Association (NDNA), said: “Apart from in a small number of local authorities, the vast majority of nurseries in Scotland will not see the increase in funding for ELC places that they need to remain sustainable.

“This is an appalling situation considering that private and voluntary providers are delivering funded ELC places on behalf of their local authority. Parents rightly want the choice of high-quality childcare with the flexibility that meets their needs but if funding doesn’t cover the costs of places then this won’t be possible.

“Childcare businesses have been facing their own cost of living crisis with costs, including wages, energy and food all adding up to a 14% increase. With some councils offering single digit increases it’s clear that the numbers won’t stack up. For others trying to plan, they are left not knowing what their council will pay partner providers for their sessions. This does not happen in any other sector and undermines the vital work that happens in supporting and nurturing our youngest children. Nurseries need to be able to plan ahead so they can understand the fee structures needed outside the funded hours to be able to communicate this to parents.

“We would urge the Scottish Government to make sure that the funding they provide to councils covers the full cost of delivery and that councils pay their partner providers a truly sustainable rate. If this does not happen there won’t be sufficient capacity to increase funded places to younger children.”

Three local authorities, East Dunbartonshire, East Renfrewshire and Renfrewshire provided their ‘current rates’ with any new rates still to be agreed by the council.

All partner providers have to pay staff delivering funded ELC the Real Living Wage which will be announced in October for April 2024. This is expected to rise in line with the cost of living.

The funding rates which NDNA has received from local authorities can be found attached.