SCOTS nurseries could go out of business as it emerged nearly half of councils in Scotland are yet to decide on the hourly rates they will pay childcare providers when the academic year starts next week.

A freedom of information request by the National Day Nurseries Association (NDNA) has revealed that 15 out of 32 local authorities are still to reach a decision on the funding rates to be received from August.

Responses were received from 27 councils.

Only one in five councils has plans in place to increase rates at partner provider nurseries despite the cost-of-living crisis, inflation and a new real living wage, NDNA found, while just two areas have plans to keep pace with the current rate of inflation of 9.4% – Angus (9.6%) and Stirling (12.9%).

The group reported four councils will keep the same hourly rates as last year, and it said this means the nurseries are facing real-term cuts for funded places.

It was acknowledged that Highland Council responded to the request but NDNA had no previous data for the area, while Orkney also issued a response but has no partner providers.

NDNA said the increases in funding rates range from 4.3% in Aberdeenshire to 17% in Stirling, with the average increase for rates for two-year-olds being 8.68% and three to-five-year-olds 7.8%.

The NDNA said that low or static rates principally meant a real time cut in funding for settings and threatens the existence of some nurseries.

"The rates given are not sustainable since they are not keeping up with inflation, but also with rising economic and living costs. Nurseries are finding it more and more difficult to meet the cost of delivery which could result in the potential loss of smaller settings," said an NDNA source.

"For parents, this can leading to a lack of parental choice which goes directly against the ethos of the 1140 hours policy of provider neutral/parental choice."

The NDNA said that the late notice of funding rates could cause short term cash flow problems for settings.

Scots nurseries 'face going bust' over failures over council payments

The SNP's policy provides parents with 1140 hours of free childcare which can be used in either council nurseries or with a private childcare provider, but there are fears taht unequal funding means public-sector nurseries can pay staff 30 to 50% more than private nurseries.

As a result, some private childcare providers have lost more than half their staff as they look for jobs in council nurseries.

Purnima Tanuku, NDNA Scotland chief executive, said: “Every year we work to help providers understand what the sustainable rate will be in their area but we have never seen a picture with this much uncertainty.“Early learning and childcare settings are facing a really challenging time supporting children with their post-pandemic recovery, workforce challenges, and the cost of delivery rising month on month.

“The responses from councils show that the majority of nurseries and other providers are being expected to deliver the Government’s funded childcare offer without knowing how much they will be getting to do this.

“With new children joining from next week but many having to wait until next month to know how each child will be funded, it makes it impossible to plan ahead."

Care Inspectorate figures show that 84 per cent of private nurseries offer early morning service compared to 39 per cent of council nurseries and 92 per cent offer after school hours cover compared to 42 per cent of local authority nurseries.

Ms Tanuku added: “Local government officials cannot ignore that costs are spiralling for providers, so we need to see new rates that accurately reflect the financial strains settings are facing. In areas where rates have yet to be set we want to see councils reflect this.

“With rising costs these rates are nowhere near sustainable and the sector cannot be expected to deliver places at a loss.”

Scottish Conservative children and young people spokesman Meghan Gallacher added: “The stark findings show how nurseries in Scotland are being left in limbo.

“It is unacceptable that so many of our local authorities are in the dark over the hourly rates they will be paying to childcare providers so close to the new school year starting again.

“Given the huge impact of the cost-of-living crisis and the SNP’s continued savage cuts to local authority budgets, this is the last thing they need at this time.”