As Highland Council continues discussions around nursery funding, some providers say it’s time for a rethink on the whole sector.
In recent weeks, a bitter row has emerged between independent early learning and childcare (ELC) providers and Highland Council.
The issue is how much the council pays its partner ELCs. Up until recently, their hourly rate was just £5.43. Yet ELCs have to pay staff the Real Living Wage of £7.25 per hour.
The shortfall in ELC funding left many saying they may have to close down or charge parents the difference.
After sustained pressure, Highland Council last month agreed to boost the rate to £5.75, and provide more money for children’s meals.
Some ELCs say this will help for now – but talks must continue to arrive at a fair, long-term agreement.
However, Stramash Outdoor Nurseries – which has facilities in Inverness, Elgin, Fort William and Oban – say the council is not treating ELCs fairly, and the power dynamic must change.
Meanwhile, Conservative councillors say the Scottish Government should step in and change the funding arrangement for the entire sector.
Council budget challenges branded ‘a cop-out’
Highland Council has repeatedly said that it can’t afford to pay nurseries a higher rate, citing its own budget problems.
While a report by Ipsos Mori for the Scottish Government proposes a rate of £7.25, the council leader warned “every penny we spend that we can’t afford puts services at risk”.
Council education bosses say the national guidance is clear that councils need to set a rate that’s sustainable for their own budget position. This year, Highland Council faces a £40m budget gap.
However, Kenny Forsyth, CEO of Stramash Outdoor Nurseries, branded their position a “cop out”.
“Highland Council is openly breaking national policy now,” he says. “The Scottish Government has already handed over the money to deliver 1140 hours childcare. The council diverted £10m of that away from the sector and spent it elsewhere.”
Row over £10m ELC funding gap prompts meeting walk-out
Mr Forsyth’s allegations relate to a figure of £42 million which Highland Council had previously quoted as their Scottish Government ELC funding.
In a financial report to the last meeting of Highland Council, that figure had shrunk to £32 million.
Mr Forsyth told the P&J he raised the matter at a meeting of ELC providers in the council chamber. “Chief executive Donna Manson told me I was making a very serious allegation, and I should be quiet or leave. So I stood up and left the meeting.”
The missing £10 million is specifically referenced in the report to council.
It states: “It is correct that the council did, some years ago, and importantly, pre-dating the rollout of 1140 hours and the allocation of Scottish Government funding for that, estimate that the all-in costs of all aspects of ELC delivery could be £42m.”
Instead, the report says: “It is a statement of fact that the current budget for ELC is £31.6m in 2022/23 and only part of which represents ring-fenced Scottish Government funding.”
Mr Forsyth remains convinced that the council has diverted the funding to other budget lines, telling the P&J: “They took the money they were meant to be paying us, and spent it elsewhere.”
Council is banker and competitor
At the heart of the problem, says Mr Forsyth, is an unworkable contradiction.
“Highland Council is our banker and our competitor, and that can simply never work,” he says.
His comments reflect a fiery political debate in the chamber last month. Highland Council had agreed in September to effectively freeze the hourly rate at £5.43.
However, Conservative councillor Helen Crawford took the unusual step of filing a notice of requisition. This forced the council to reconvene for an emergency discussion on ELC rates. At this meeting, both the Liberal Democrat opposition and the Tories lobbied hard for the sector.
The administration came prepared, with a proposal to temporarily increase the hourly rate by 32p for three to five-year-olds and 53p for two-year-olds. They also increased the amount council pays ELCs for nursery meals from £2.30 to £3.
Both increases will be backdated from August 2022 and run until the end of the current financial year.
The changes didn’t go far enough for some providers, who signed a joint letter to councillors lobbying for more.
Calls for Scottish Government ELC funding review
Highland education chairman John Finlayson stressed the need to work in partnership, and remember the context of the council’s budget challenges.
Yet opposition councillors accused the council of asking the impossible. Andrew Jarvie said the council couldn’t run its own ELC services on the funding settlement it offers to partners.
Speaking after the meeting, councillor Crawford said: “A fundamental flaw is that councils are both the funder and the competitor and that’s never going to work without better regulation.
“That’s why many ELC nurseries say they recruit and train up staff, only to see them move across to the council-run nurseries for better pay. The ELC policy must be reviewed and findings published as a matter of urgency.”
Ms Crawford is appealing to Clare Haughey MSP, Minister for Children and Young People, to “grasp the nettle” on ELC funding.
Stop playing politics, says education chairman
Mr Finlayson hit back at the increasingly political tone of the debate.
“Given all the engagement that has taken place it was disappointing that some partners, despite our engagement with them and participation in the development of the funding recommendations, chose at the eleventh hour to not support the recommendations in the report,” he said.
“It is also disappointing to see the political element at play from some members, when the realities of the real financial crisis we all face is so clear to everyone.”
Mr Finlayson said a huge amount of engagement has gone on between council officers and ELC providers. He urged all the council’s third sector partners to work together.
“It is important that with our partners, not just ELC, we collaborate on actions to address the financial crisis. This includes working together to redesign services. The scale of the financial challenge we all face is such that these actions are vital to ensure sustainability going forward.”
In response to allegations of funding being diverted elsewhere, he said the council had already provided written responses to ELC providers on the issue, which included “transparent budget information”.
He added: “I am very disappointed that one individual provider is persisting with a line of questioning that the council has already responded to on multiple occasions.
“The council has been clear that its use of ELC ring-fenced and un-ringfenced funding is entirely appropriate.”
Cala calls on council and sector to focus on next steps
Jaci Douglas, chief executive of the Care and Learning Alliance (Cala), also said it’s time to draw a line under the row and move on.
“I think it’s important to focus now on next steps,” she said. “That includes how we have a transparent and open dialogue, working in partnership to ensure a fair and sustainable rate from April 2023 onwards.
“The whole debate has highlighted how important partner providers are in Highland. Only by working in partnership where everyone’s voice is heard, can we ensure children and families across Highland are able to access the very best services and we have a thriving and diverse sector.”
Ms Douglas also referred to a central review of the 1140 nursery hours, and how it’s funded. This, she said, would meet the needs of Highland families and the ELC sector in a “fair and sustainable way”.
For now, Highland Council’s temporary rates rise has bought it some time.
But the next hurdle still lies ahead, and it’s a big one: setting funding at a rate that supports Highland nurseries, without breaking the bank.
For Mr Forsyth, positive progress requires a reboot of the relationship. “The trust is broken,” he says. “The dynamic is that Highland Council has all the power and can do what it likes. That leaves us powerless to do anything but fight, and it’s an appalling thing to have to do.”
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