Good morning, convener, and members of the committee. As you are aware, a key issue for private nurseries is balancing the books, so that they can deliver high-quality childcare while remaining sustainable and keeping fees affordable for parents.
Business rate rises have placed a huge burden on nurseries, which are already facing severe financial pressure from increasing payroll costs associated with the national living wage, pension auto-enrolment and the uncertainties about the provision of 1,140 hours of free early learning and childcare.
Many private nurseries are experiencing financial crises as a result of the recent business rates revaluation. Coupled with the chronic funding shortfalls experienced by private nurseries regarding the current 600 hours and the free provision for eligible two, three and four-year-olds, urgent reform is needed to ensure the sustainability of the sector.
A 2017 NDNA survey identified an average shortfall in the local authority funding rate for private nurseries of about £1,000 a child a year. Nurseries were also asked—again, in 2017—what they will do. They are having to increase their fees substantially to try to offset that shortfall.
The Government’s “A Blueprint for 2020: The Expansion of Early Learning and Childcare in Scotland” talks about private nurseries giving the Scottish living wage, which is another increase they are facing. It will lead to higher payroll increases, which will lead to private nurseries asking whether they want to be in partnership with the local authorities to deliver the 1,140 hours. At a time when the Scottish Government wants us to be at the forefront of early years education, giving the best and providing increased hours for children, we in the private sector are there and able to deliver those hours in the many high-quality private nurseries, so it is such a shame that more and more financial constraints are being put on us, making it difficult for businesses to run.
Following the business relief rate changes, we have been revalued. Most private nurseries are above the new rate. Therefore, if, for example, there are two nurseries under a group, they would not qualify for relief, so that support has been wiped out.
The highest rate increase has been 215 per cent for one nursery in Renfrewshire. A poll by Lambert Smith Hampton found that there were not that many increases in Glasgow—the costs stayed roughly the same as in 2010. However, in Dundee, there were quite big increases, some of which were up to 50 per cent. In Aberdeen, the increases were mostly 50 per cent, but some were as high as 178 per cent. In Edinburgh, the increases were generally more than 70 per cent, with the highest being 147 per cent.
I am the NDNA chair for East and Midlothian, which is a voluntary position. I went out to different members asking for case studies on how their businesses are being affected. A nursery in Paisley, which is not in our area, was, prior to 2017, valued at £16,500 a year, which allowed it to receive relief, so it did well. Unfortunately, the nursery was revalued at £40,000 a year. Therefore, instead of having to pay £588 a month, it has to pay £1,800.87. That is a huge increase for a small business to cope with.
It has just come to light that, on top of the business rates going up, the property drainage and water rates have increased. That nursery is now having to pay those extra costs, too, which is taking the costs up to about £14,000 a year more than it had previously paid. That is the cost of a member of staff in a nursery who is working about 30 hours a week. That is where we are at.
A new nursery that has just opened in West Lothian is paying £50,000 in business rates while the dentist next door is paying £30,000. When the owner inquired as to why that was happening and what the rateable values were based on, she was told that there are four rates for nurseries. A nursery that is not well maintained and whose building is not great will be on the lowest rate. A nursery that is a conversion might be on one of the middle two rates. Someone who has invested in an all-singing, all-dancing, purpose-built nursery—it might be that they do not have a lot of money, but they have invested in it—is being penalised for that and is paying the highest rate.
Nurseries in lovely purpose-built buildings that give children the best care, which is ultimately what this is all about, are being penalised. They will not get any relief because they are above a certain level. That is frustrating people. It seems that people with poor buildings are getting relief and people who are investing are getting none. That is unfair.
The business rates for our nursery in Haddington in East Lothian have gone up by 100 per cent and the business rates for our nursery in Dunblane have gone up by 50 per cent, so the average increase between the two is 75 per cent.