Childcare Risks

The Audit Scotland report on childcare will not be a fun read for Nicola Sturgeon. It is an even more difficult read for parents expecting to get 1140 hours of free childcare in two years time. “Significant risks” is strong language from Audit Scotland. It is clear that this policy is in trouble.

UNISON has been highlighting these issues for some time. It was clear that government made the announcement about the extra hours without any real information about how the current system was working and what would be needed to meet the expansion.

The report details just how much is still to be done. The key issue as ever is adequate funding. The Scottish government says it will cost £840m a year but councils, who are currently delivering the service put costs at £1 billion. That’s a substantial gap.

This is not the end of the problems. The whole “funding follows the child” commitment means that councils are being asked to plan for a service when they will have no way of knowing how parents will spend the money. How can they possible design a service under these conditions?

While the Audit Scotland report does highlight the need for 12,000 extra FTE staff, I fear it underestimates the numbers. This is a largely female workforce and many will want to work part-time as they have their own caring responsibilities. Worse there isn’t anything in place to ensure that even the 12,000 workers will be available in time.

High quality early learning depends on highly skilled and qualified staff. If the service is to meet the stated aim of improving children’s outcomes and closing the attainment gap then there needs to be not only initial training for new staff but ongoing professional development for all staff.

Pay is also a problem: while the government is looking at ways to guarantee the living wage, this is far too low to reflect the skills and qualifications for the job. The report shows just how complex using procurement will be to guarantee that rate. As there is no detail on how the “funding will follow the child” yet it is also unclear how that will link into checking rates of pay for staff. If, as the report points out, the government funding will cover that rate of pay for the 1140 hours how will the rest of their working week/year be funded at that rate?
There is so little detail or data that it is hard to see how the government is going to deliver on time.
As I have said before expanding childcare is a great plan. There is widespread support. The government needs to put in a lot more effort and funding to ensure that it works. There is no time to waste.

Council funding - a step forward, but not out of the woods

The Scottish Budget dance has taken another swirl as the Bill passes its first stage. Let’s have a look at what the changes mean for local government and pay.

First a quick recap. The draft budget proposed no cash increase for local government, which meant a ‘real terms’ cut in council budgets of around £153m. This was in a year when the Scottish Government had a cash increase in its own budget from Westminster of £188m. They also announced a new pay policy, but allocated nothing in the budget to pay for it.

After the Finance Settlement was published with details of individual local authority allocations, councils spotted an ‘accounting error’, which after the government correction resulted in a number of winners and losers.

On the day of the Stage 1 debate this week, the Government announced that an agreement had been reached with the Greens to support the budget, in return for an additional £159.5m of revenue funding. No repeat of last year’s padding the numbers by mixing capital and revenue. They also improved the pay policy by extending the 3% band to those earning up to £36,500. It remains at 2% for those earning above that.

Dealing first with the revenue funding, this roughly means that councils are now getting a standstill budget in ‘real terms’. However, that does not mean there won’t be more cuts in the coming year. 

That’s because ‘real terms’ means an assumption that inflation will be 1.4% next year. No one really believes this will happen, certainly not a prudent council finance director. The OBR has forecast that the CPI will be 2.4% next year and the RPI 3.3%. Pay alone, which is 55% of the budget, will be around double the government’s inflation assumption according to the pay policy.

Then there will be the usual round of ‘unavoidable commitments’. These include demographic change, which IJBs alone calculate at 2% per annum. Most IJBs are already reporting big shortfalls in their planned budgets for next year and will be looking for additional financial support. Not helped by the £66m allocated for the living wage and other new care duties only being ‘support’, not the full cost.

COSLA calculated all these demands at 2.6%, plus 3% for a realistic inflation estimate. That’s where their £545m figure comes from, which was the basis for Scottish Labour’s budget proposal.

That leaves pay. Does the revised budget meet the Scottish Government pay policy, let alone the trade union side claim?

A 3% pay increase costs councils around £210m. As pay makes up around 55% of the revenue budget, £88m of the new money is for pay. Then councils can increase the council tax by 3% raising £77m, which by the same proportions is £42m for pay. That’s a total of £130m, or a shortfall of £80m. They could of course meet the cost by spending almost all the new money on pay, but that leaves almost nothing for inflation and those unavoidable commitments.

Councils also have less flexibility in other areas. They can increase charges again, but the income is dropping off every year they do this, quite apart from the regressive nature of many charges. Councils took £79m from their reserves last year, not something they can continue to do.

In summary, the extra money is very welcome and makes a significant contribution to the draft budget shortfall. It also means that local government is suffering as badly, but not much worse (this year at least), as other departments outwith the protected spending areas. However, it still means an underfunded pay policy and service cuts.