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Yes. The Scottish Government carried out a financial health check last August. Eleanor Passmore might be able to give you a bit more detail about what was asked of the sector.

Are you talking specifically about access for eligible two-year-olds or more generally?

We have certainly been working very co-operatively with them. We hope that, now that they have the feedback to their consultation, they will work at pace on the matter.

Thank you convener. Good morning to you and the committee.

This amending order will increase the income thresholds for families with a two-year-old who is eligible for funded early learning and childcare—ELC—because they get a joint working tax credit and child tax credit or a universal credit award.

The relevant order currently specifies that a two-year-old is eligible for funded ELC if: their parent is in receipt of child tax credit and working tax credits, with an annual income that does not exceed £7,500; or their parent is in receipt of universal credit, with a monthly income that does not exceed £625 per month.

The amending order will increase the income threshold to £7,920 per year for households in receipt of both child tax credit and working tax credit. The universal credit income threshold will increase to £660 per month—the equivalent of £7,920 per year.

We are making the change to reflect changes at the United Kingdom level. The UK Government has increased the national living wage from £8.91 per hour to £9.50 per hour. That means that household income would exceed the current thresholds if they remained the same.

The purpose of the order is to protect eligibility for two-year-olds whom we would expect to be eligible for funded ELC as a result of their parents or carers being in receipt of the affected qualifying benefits. If we choose not to make changes to the income thresholds, we estimate that around 1,000 eligible two-year-olds would no longer be eligible, despite there being no significant difference in their families’ household circumstances.

It is important to be clear that no two-year-old who is currently receiving funded ELC will be affected by the changes. Once a child has met the eligibility criteria, they remain eligible despite any subsequent change in circumstances.

As the purpose of the amendment is to maintain eligibility, we do not anticipate a significant increase in the number of two-year-olds who become newly eligible for the provision, and we do not expect a significant impact on local authorities’ ability to fund the provision within the current financial settlement.

There is no evidence that additional funding is required to support implementation of the amendment. However, the impact on uptake will be closely monitored by the Scottish Government and the Convention of Scottish Local Authorities through the appropriate mechanism—the ELC finance working group—and appropriate arrangements will be made if uptake is significantly above the level expected and local authority costs increase as a result.

As I mentioned on my previous visit to the committee to amend the thresholds, we will monitor future increases to the national living wage and we will uprate thresholds when required, to keep pace with changes. COSLA agrees that the approach is necessary to maintain a similar profile of eligible children.

I am happy to respond to any questions that the committee has.

Yes, Mr Rennie. I know that we have looked at the issue before. You have rightly stated that, according to the latest figures, which are for September 2021, the uptake was 13 per cent, but I should point out that we are talking about the total population of two-year-olds. In order to increase the accuracy of the data on the children who are eligible to access the offer to two-year-olds, we have been working closely with UK Government colleagues on improving data sharing and developing a legal data gateway and an agreed data flow between the Department for Work and Pensions, Her Majesty’s Revenue and Customs and local authorities. The UK Government’s consultation on the secondary legislation that will be required to put the gateway and data sharing in place closed last week—on Friday, I believe. We will be looking at the outcome of that consultation with UK Government officials and colleagues and requesting that they work quickly with us to get the data-sharing mechanism in place.

We have been working closely with the UK Government. It is aware of the issues that we have with the data sharing and that we are keen to access that data so that we can promote the ELC offer for two-year-olds to some families who might not be aware that they are eligible.

Yes, and the changes in child tax credit and working tax credit rates.

I am certainly aware of the private, voluntary and independent early years sector’s concerns about staffing and the movement of staff between different settings. The issue has been raised with me and my officials in our meetings with the sector and we are alive to it. We have taken steps to support the sector and I am more than happy to write to the committee to outline those steps in more detail.

That is the barrier with regard to the data sharing. As we wait for that data, we have also been working to ensure that parents and carers are aware of eligibility and, obviously, aware of the advantages of accessing quality ELC for eligible two-year-olds. In that respect, we have been working very closely with our local government colleagues, health colleagues on the health visiting pathway, family nurse practitioners and the third sector to promote the ELC funding offer to eligible two-year-olds.

Absolutely.