Expansion of funded childcare hailed but watchdog warns sector left ‘fragile’

The Scottish Government and councils have done well to implement the flagship childcare expansion policy, a watchdog has said.

Audit Scotland said the majority of infrastructure projects and recruitment required to implement the 1,140-hour expansion for three and four-year-olds and eligible two-year-olds has been successfully completed.

But a new report released on Thursday warned the expansion has left the sector “fragile”, with private nurseries and childminders facing “budget pressures and risks around workforce”, while councils have spent more than £100 million over planned budgets on capital projects to facilitate it.

The report said: “The Scottish Government and councils did well to put in place 1,140 hours of funded early learning and childcare (ELC) by August 2021, during the Covid‑19 pandemic.

“Councils completed most of the infrastructure projects and had significantly expanded the workforce.

“Take-up among three and four-year-olds remains high and most parents are happy with the flexibility available.

“More two‑year-olds are now receiving funded ELC, but many more are estimated to be eligible. The Scottish Government and partners have made progress with data-sharing arrangements to allow councils to identify eligible two-year-olds.

“This is a flagship policy which underpins broader ambitions to reduce child poverty and to support economic transformation. Around £1 billion is invested in it annually. But the sector is fragile.

“Budget pressures and risks around workforce and the sustainability of funded providers, such as private nurseries and childminders, risk limiting flexibility and choice for families, which are important to achieving the intended policy outcomes.”

Last week, the Scottish Childminding Association gave a stark warning to the Social Justice and Social Security Committee at Holyrood about the future of the private childcare sector.

The body’s chief executive Graeme McAllister said: “We have some very serious concerns about the manner in which the expansion was implemented – there have been a series of unintended consequences.”

He said there has been a drop of 34% in the childminding workforce, while almost 2,000 childminding businesses have closed, meaning more than 11,000 places have been lost, and he warned that trend could potentially double by 2026.

Audit Scotland urged the Scottish Government to work with councils and private providers to develop “long-term workforce plans”, which the report described as “crucial to inform future decisions on funding and workforce which are key risks to the sustainability of the sector”.

The expansion, which went live in August 2021 after delays, required a substantial capital investment from councils, funded by £496 million from Government.

But projections, as of August 2022, place the final cost at £598 million to councils – a more than £100 million overspend.

Councils reported overspends were caused by the pandemic, rising constructions costs, delays and contractor errors.

The report also claimed the number of eligible two-year-olds had increased since the last audit, but there were still likely many more who could take up the free ELC offering.

Audit Scotland found 14% of eligible two-year-olds were registered for funded ELC in 2022, compared to 11% in 2019, but the watchdog urged the Scottish Government and councils to improve their data sharing protocols to ensure provision can be better targeted.

Children and young people minister Natalie Don said: “High-quality early learning and childcare that is flexible, accessible and affordable is critical to giving children the best possible start to their lives.

“Despite the significant challenges of the pandemic, this report by Audit Scotland shows what we can achieve when we work closely with our partners to deliver for Scotland’s children and families.

“It builds on recent independent polling showing 97% of parents with a three to five-year-old have accessed funded ELC places since August 2021 and that, of those, 97% are satisfied with the quality of provision.

“I would like to thank Audit Scotland for this detailed report.

“The Scottish Government will consider the findings carefully and work closely with every part of the childcare sector to understand and address the challenges currently facing providers as a result of the cost-of-living crisis and workforce pressures.”

Scottish Conservative deputy leader Meghan Gallacher said the report “emphasises how fragile Scotland’s early learning and childcare sector is under the SNP”, adding that there were “clear concerns” about budgets, staffing and sustainability.

Scottish Labour education spokeswoman Pam Duncan-Glancy said the report exposed “just how much work that the SNP government still needs to do to meet their child care targets”.

Lib Dem MSP Willie Rennie said the findings should act as a “kick up the behind for the government”.