New research predicts shortfall of nurseries offering extended free hours in Scotland

Responses to the National Day Nurseries Association’s (NDNA) annual survey reveal that just 51 per cent of the 221 nurseries that responded are either very likely or likely to offer the extended free hours, which are being rolled out by 2020, and a quarter are very unlikely or unlikely to.

The survey was carried out in January and February, receiving responses from 221 nurseries, 23 per cent of the total number of private and third sector nurseries in Scotland.

The majority had negative feelings about the 1,140 hours mainly driven by fears that funding rates will fall short of delivery costs.

Mandatory additional charges to parents to cover shortfalls, settling session times and exemption from business rates were cited as the most popular measures to enable sustainable delivery of the extended entitlement.

The NDNA warns that many families might not be able to access their funded entitlement as inadequate funding could mean nurseries opting out of the 1,140 hours. Meanwhile, those who try to deliver it could accrue large losses and push up fees to balance their books.

However, it says the policy can be a success if the Government listens to nurseries and acts now to put more money into the scheme.

Current entitlement

The survey found that a large majority of respondents, 84 per cent, are delivering the 600 hours for three and four-year-olds, with 5 per cent opting out.

However, the hourly rate from the local authority does not cover costs for 85 per cent of respondents, up from 77 per cent last year.

Responses show that the average hourly funding rate has only marginally increased from an average rate of £3.56 in 2016 to an average of £3.64 this year. But, for the majority of respondents, 70 per cent, there has been no increase to their funding. Just 17 per cent reported a rise, down from 25 per cent in last year’s survey.

Providers reported an average shortfall of £1.70 per hour, equivalent to an annual loss of £1,020 per child, per year.

The NDNA warns that doubling the free childcare offer to working parents could lead to much bigger losses for nurseries.

Staffing and business costs

Findings from the survey suggest that increases in the national minimum and national living wage rates are putting pressure on nurseries’ staffing costs, with respondents reporting average total increases in payroll costs of 8 per cent.

More nurseries than last year foresee changes to their staffing age and qualification mix, with concerns voiced by many that they will have to employ increasing numbers of younger and less experienced staff.

Losing staff to local authority nurseries or schools is an increasing problem with 46 per cent citing this as ‘challenging’ or ‘very challenging’. The average loss was 2.6 staff members.

Business rates are also an issue. More than half of respondents said their rateable values have increased, with rises of over 100 per cent for some.

Three-quarters of nurseries said they planned to put up their fees, an increase on last year, with rises averaging 4.2 per cent.

Business confidence

The survey indicates that confidence among nurseries is continuing to decline with fewer feeling confident about their business performance over the next 12 months.

More nurseries expect to make a loss or break even than make a profit or surplus.

Solutions

The NDNA has put together a list of solutions to overcome the key issues nurseries are facing, including:

• Adequately funding the extended entitlement;
• The introduction of a parent-held account for all childcare funding to allow families to pay their choice of provider directly, as proposed in the Scottish Government’s Early Learning and Childcare Blueprint consultation;
• Including private and third sector nurseries in the trials for the 1,140 hours;
• Giving all childcare provision, including the private sector, 100 per cent relief on business rates;
• Making VAT on childcare zero-rated to keep fees down and stimulate capital investment in nurseries;
• Giving long-term commitment for the development of the early years workforce with clear progression pathways that predict the skills gaps for the next five – ten years.

Purnima Tanuku, chief executive of the NDNA, said, ‘We are calling on the Scottish Government to be innovative and lead the way with their ambitious plans to overhaul the early years sector.

'The Early Learning and Childcare Policy Blueprint included some great ideas which could transform the landscape for families with pre-school children, including an online Early Learning and Childcare Account. This would enable parents to pay their chosen provider directly, supporting parental choice and reducing administration.

‘With full roll-out (of the 1,140 hours) not due until 2020, there is still time for the Government to get this right for providers and families. Getting enough people into the sector to create more childcare places is vital and better pay is a key factor here. We welcome Ms Sturgeon’s announcement about additional funding to uplift the pay of private sector nursery staff, but the whole policy needs to be scrutinised and thoroughly costed to ensure enough money does reach nurseries to pay staff the Scottish Living Wage.’

She added, ‘We want the Scottish Government to take note of this research and our recommendations which will make a massive difference to families and enable many more parents to work or study.’

‘As we expect the Government’s response today to the ELC Blueprint Policy, NDNA believes this is the perfect opportunity to get this right and put children at the heart of their policy-making. A lot of progress has already been made in Scotland, but adequate funding must reach the frontline nurseries to make these forward-thinking proposals a reality’

A Scottish Government spokesperson said, 'There are few more important jobs than caring for our youngest children. As announced by the First Minister at the weekend, our expansion plans will be built on a foundation of fairness and equity for the workforce. We will invest £50 million to extend payment of the living wage to all childcare staff delivering funded entitlement in private and third sector nurseries by the end of this parliament. Staff employed in NDNA member nurseries will be among those to benefit.”
 
'The Minister for Childcare will make a significant statement to Parliament today, setting out the next phase of delivery of our ambitious plans to transform and expand provision of free early learning and childcare by 2020. Quality will be at the heart of a new policy framework and service model, which will seek to ensure financial sustainability across the sector.'