Call for Scottish parents to be given £5,000 vouchers to avert collapse of private childcare sector

A think tank study follows Humza Yousaf’s programme for Government measures

A new report has called for parents to be put in charge of funding for childcare amid fears the Scottish Government's current policy is both "generous" and paving the way for the "collapse" of the sector.

The paper, published by the Reform Scotland think tank, proposed giving parents “vouchers” to the value of the funding, worth around £5,000 at age three and four.

The idea comes a few days after First Minister Humza Yousaf put childcare improvements at the heart of his programme for Government.

A preschool age child playing with plastic toy animals. Dominic Lipinski/PA Wire

The SNP leader announced a pilot for care from nine months to the end of primary school, as well as an acceleration of an expansion of funded childcare for two-year olds, and more scope for parents to personally manage the care they access.

The Government also said it would improve childminder recruitment and boost pay to a £12 per hour minimum from April.

Writing exclusively for Scotland on Sunday today, the Reform Scotland report author, Gordon Hector, welcomed some of the plans but said they should go “much further”.

The head of policy and strategy at Urban Foresight, who was an adviser to former Scottish Conservative leader Ruth Davidson, said the Government was essentially “working out how to undo some of the unintended consequences of its own well-intentioned policy”.

He added: “A better approach might be to put parents in charge in the first place.

"Childcare, after all, is a game of trade-offs: the many choices and balances between different options and purposes, between flexibility, affordability, and quality.

“Who best to make those choices – councils, ministers, providers – or parents?”

Funded childcare has been a flagship policy of the Scottish Government in recent years.

In August 2021, the number of hours that Scottish children were eligible for almost doubled, from 600 hours a year to 1,140 hours a year, or the equivalent of about 30 hours per week in school term-time.

It now covers all three and four-year-olds, as well as some two-year-olds, and the Scottish Government has been planning to roll it out further so it also benefits parents of one-year-olds and all two-year-olds as well.

But it was revealed recently that private nursery owners were considering taking legal action over the implementation of the policy, particularly the way funding is distributed via councils, which they say is unfair and is resulting in an escalating number of nursery closures.

The Government has admitted there are “real challenges” in the sector, with official data showing the number of private and third sector nurseries has fallen from 1,932 providers in 2018 to 1,712 in March this year.

Private sector nurseries increase flexibility for parents, with the vast majority open during school holidays, unlike council-run nurseries.

Previously published statistics have also confirmed a dramatic fall in the number of registered child-minders, from 5,333 to 3,462 – a decline 35 per cent.

In his report, Mr Hector highlighted a “paradox” of early learning and childcare funding in Scotland, in which it has “simultaneously created a generous system and created the risk of a systemic collapse”.

He reviewed six short-term options to avoid such a collapse, finding that the highest-scored one was to switch to simply giving parents vouchers of the value of the funding – a “Scottish Early Leaning and Childcare Payment” worth around £5,000 at age three and four.

The report said: “This would maintain the level of support parents receive, but clarify quality oversight, make it much easier to access different kinds of childcare, and enable future moves to more equal treatment of different ages – all without the Scottish Government spending any more.”

It added: “Scotland has invested heavily in early years. But it also accidentally made big choices about what kinds of care are valued and at what age. It is time to put parents in charge of those choices.”

Sharon Fairley, chief executive of the Scottish Private Nursery Association, said she would support a voucher system or something similar.

"I would definitely welcome it, or some kind of portal system like they have at the moment with tax-free credit vouchers. HMRC do some kind of online portal and can then release the money to the provider.

"There must be systems that can be done. The Government did a consultation on how they should distribute the money and there were several options.

“We would like to know what the other options were and why they took the decisions to do it in this way through the councils.”

She added: “It needs to be a separate account, away from the councils, and a centralised system being distributed by the choice of the parent.

"The voucher system was the old-fashioned way and it worked perfectly fine.”

A Scottish Government spokesperson said: “The Scottish Government consulted with childcare providers, local government and unions as part of a consultation on different funding models to support the delivery of funded early learning and childcare (ELC) prior to the expansion to 1,140 hours.

"The current funding system was identified as the preferred option.

"Independent research published in December last year found that 88 per cent of parents and carers who had a 3-5 year-old child in funded ELC were satisfied that they could access the support in a way that meets their family’s needs.

"As laid out in our programme for government, we will work with COSLA and other partners to develop the infrastructure needed to provide childcare from nine months to the end of primary school in six council areas.

"In these communities, we will empower parents, carers and children by designing services that meets their needs.

"We will also begin work on developing and testing digital services that will help families better manage their childcare.

“This is the next key step in our plan to expand access to funded childcare for 13,000 more children and families by the end of this parliament.”