3	The options
Option 1 – Do nothing
If we do nothing, we believe that those supplying milk at a higher cost will continue to increase both their market share and the price per pint they charge, resulting in on-going increases in public expenditure.
Figure 1: Past and future costs of the Nursery Milk Scheme

Consultation questions for option 1	
For all	
Q1.1	Do you think that paying 92p for a pint of milk is a good use of public money?	
Yes		
No		
Q1.1a	If yes, please say why.	
     	
Q1.1b	If no, what do you think would be a reasonable price for the taxpayer to pay for a pint of milk?	
     	
Option 2 – Capping the price that can be claimed for milk
In its current form, the legislation governing the scheme provides for full reimbursement of the cost of milk. While childcare providers are encouraged to seek value for money, there is no set limit on the price that can be claimed.
Under this option, an upper limit on the price that could be claimed for milk would be introduced.
Data from the Family Food Survey suggest little regional variation in milk prices, with the three-year (2007–2009) average price per pint of milk standing at 36p for England and Scotland, and 35p for Wales. In special circumstances, where significant local variations exist, arrangements would be put in place to vary the cap for childcare providers who, perhaps due to geographical isolation, do not have access to milk priced at the normal market rate.
Consultation questions for option 2	
For all	
Q2.1	In what range should the maximum price be set? (tick only one).
Please note, the average price of milk in 2011 was 45p per pint.	
Below 25p per pint			
25 to 29p per pint			
30 to 34p per pint			
35 to 39p per pint			
40 to 44p per pint			
45 to 49p per pint			
50 to 54p per pint			
55 to 59p per pint			
60 to 64p per pint			
65 to 69p per pint			
Above 70p per pint			
Below average price per pint		
Average price to average price + 5p per pint		
Average price + 5p to average price + 10p per pint		
Average price + 10p to average price + 20p per pint				

Q2.2	What circumstances other than geographical isolation would affect childcare providers’ ability to purchase milk at the normal market rate? (tick all that apply).	
Lack of transport			
Small number of children looked after		
A long way from nearest shops		
Special milk required for religious or cultural reasons, e.g. Kosher			
Require single-serve packaging		
Other – please specify	
     	
Q2.3	Is there a risk that introducing a cap, even with the facility to vary the cap in special circumstances, would disadvantage specific population groups? If yes, which population groups do you think would be disadvantaged and why?	
     	
Q2.3a	If yes, can you suggest how such risks could be mitigated?	
     	
Option 3 – Issuing e-vouchers cards with economy incentives
Under this option, childcare providers would no longer have to pay for milk and then claim reimbursement from the Nursery Milk Reimbursement Unit. On joining the scheme, childcare providers would indicate how many children would normally be attending for two hours or more per day. They would then be credited with a prospective monthly payment equal to the number of pints required multiplied by a fixed reimbursement rate, which we would set at an average market price per pint. For stand-alone nurseries, crèches and childminders, this would be credited to an e-voucher card which could only be spent on milk and would be topped up electronically each month. We would aim to have a wide range of producers, suppliers, distributors and retailers accept the e-voucher card, in all parts of GB.
For local authorities with a number of nurseries, who may wish to take advantage of economies of scale by entering into a bulk contract to supply all of their nurseries, monthly payments could be made to a special account that would be ring-fenced for the purchase of milk only. For example, a local authority may contract with one or more suppliers to deliver milk to all the nurseries in its area.
Childcare providers would have to inform the Nursery Milk Reimbursement Unit if the number of children in attendance changed, and reconfirm their details annually.
Consultation questions for option 3	
For all	
Q3.1	Is there a risk that introducing an e-voucher card would disadvantage specific population groups? If yes, which population groups do you think would be disadvantaged and why?	
     	
Q3.1a	If yes, can you suggest how such risks could be mitigated?	
     	
Q3.2	A childcare provider who sought very good value for money may end up with a small positive balance on the e-voucher card at the end of the year. What should happen to this money? (tick one)	
The money should be returned to the Nursery Milk Scheme			
The childcare provider should be allowed to keep the money – in order to use the money to buy extra milk for children in their care (which they could use, for example, in preparing the children’s meals)			
Other – please specify	
     	
Q3.3	A local authority who sought very good value for money may end up with a small positive balance in the ring-fenced account at the end of the year. What should happen to this money? (tick one)	
The money should be returned to the Nursery Milk Scheme			
The local authority should be allowed to keep the money – in order to use it to buy extra milk for children in their care (which they could use, for example, in preparing the children’s meals)		
Other – please specify	
     	

For childcare providers	
Q3.4	Would you feel comfortable using an e-voucher card which was updated electronically every month? 	
Yes		
No		
For suppliers, distributors and retailers of milk	
Q3.5	Do you think there would be a risk of the voucher card being used inappropriately?	
Yes		
No		
Q3.5a	If yes, what measures could be put in place to avoid this risk?	
     	
Option 4 – Direct supply
Under this option, the Department of Health would contract with a company or companies, or a consortium or consortia of companies (which could include a variety of small local suppliers), for the direct supply and delivery of milk to all childcare providers registered with the scheme at an agreed price per pint supplied and delivered. Our aim would be for the best supplier to be chosen for every local area, to meet local needs under the scheme and offer value for money. Childcare providers would simply register, indicating the number of children in attendance, and then receive the appropriate amount of milk, delivered directly to the doorstep.
It is likely to cost the contractor or contractors slightly more to deliver to childminders with only one or two children in attendance, but the cost per pint to deliver to large nurseries will be very much less. We therefore believe that, by letting a single contract for the delivery of over 1.75 million pints of milk a week, we will be able to achieve both a simple effective system and a very competitive overall price, with the lowest possible burdens on childcare settings.
Indeed, for childcare providers there would be no financial outlay and no need to claim reimbursement or keep receipts. This option would be similar to the way the school fruit and vegetable scheme is run, with fruit and vegetables delivered daily to schools under a central contract.

Consultation questions for option 4	
For all	
Q4.1	Is there a risk that introducing a direct supply and delivery of milk would disadvantage specific population groups? If yes, which population groups do you think would be disadvantaged, and why?	
     	
Q4.1a	If yes, can you suggest how such risks could be mitigated?	
     	
For producers, suppliers, distributors and retailers of milk	
Q4.2	Would you be interested in participating in the direct supply of milk to childcare providers, either to supply the whole country yourselves or as part of a consortium?	
Yes		
No		
Q4.3	Are there any parts of the country that you think would be difficult to supply under this model?	
Yes		
No		
Q4.3a	If yes, please state where.	
     	
Q4.4	Are there any types of childcare provider that you think would be difficult to supply under this model?	
Yes		
No		
Q4.4a	If yes, please state what types.	
     	
Q4.5	What do you think is an appropriate price per pint to charge for supply and delivery of milk?	
     	

Q4.6	What ideas do you have for ways the scheme could operate more efficiently in the future, including supply chain options?	
     	
4	Further simplification
Under all four options, including option 1 (do nothing), we will continue with work currently underway to make minor changes to improve the way the scheme operates. For example, in parallel with this consultation, we will be asking childcare providers currently registered with the scheme to confirm their details to ensure that our database is completely up to date. We will also be:
•	making a minor change to the online claim form to make claiming easier;
•	encouraging as many childcare providers as possible to claim online and get paid more quickly;
•	changing the reimbursement process slightly to fix a problem that sometimes occurs when childcare providers change suppliers in the middle of a month;
•	asking childcare providers to complete a simple survey to find out more about how the scheme works for them now.
We would also like to change the time limit for making a claim (relevant to options 1 and 2 only). Childcare providers currently have up to two years to make a claim for milk supplied under the scheme. While the majority of childcare providers claim promptly each month, some do not. This complicates administration of the scheme and makes it hard to plan and forecast expenditure. We would like to reduce the time limit from two years to six months.
Consultation questions on time limit for making a claim	
For childcare providers	
Q5.1	Is six months a sufficient time period within which to claim reimbursement?	
Yes		
No		
Q5.2	If no, what time period would be sufficient?	
     	

5	What is the best way forward for Nursery Milk?
The four proposed options offer different advantages and disadvantages for simplifying the current scheme.
Under option 1, do nothing, the responsibility for buying milk and claiming reimbursement remain with the childcare provider or local authority, though they may use an agent to claim on their behalf.
Under option 2, capping, childcare providers retain the flexibility to buy from any supplier they choose, provided the price is below the maximum capped rate, but may still have to pay for milk themselves and claim for reimbursement. They could also choose to receive milk from an agent who would claim reimbursement on their behalf, provided that this could be done within the maximum capped rate.
Option 2 would help improve value for money but we would need to look at special cases where milk could not be obtained at the normal market rate.
Under option 3, e-vouchers, childcare providers again retain the flexibility to choose their supplier. They can even choose to pay high prices for milk provided they seek lower-priced milk often enough to stay within the overall amount loaded onto their e-voucher card. For example, a childminder might generally buy milk from a supermarket that is driving distance away but may appreciate the flexibility to occasionally buy from a shop which is closer and more convenient but also more expensive.
Under option 4, direct supply and delivery, childcare providers would lose the flexibility of choosing their own supplier, but would incur no financial outlay and be guaranteed a high-quality service, direct to their doorstep.
Options 3 and 4 would relieve childcare providers of the need to pay for milk themselves and then claim reimbursement. Option 4 has the lowest burden for childcare providers and would improve the value for money of the scheme.
Consultation questions on the way forward	
For all	
Q6.1	Which of the three options for change do you prefer? Please rank the options in order of preference (1–3), with 1 indicating the most preferred.	
Option 2 – Capping the price that can be claimed for milk	 	
Option 3 – Issuing e-vouchers with economy incentives	 	
Option 4 – Direct supply		 	

For childcare providers and local authorities	
Q6.2	Do you currently buy your milk from a milk roundsman, specialist supplier (agent) or through any other arrangement where you contract in advance for milk to be supplied?	
Yes		
No		
Q6.2a	If option 2, 3 or 4 were to be introduced, which resulted in your needing to change or end your current arrangements, how much notice would you need to give your current milk supplier?	
None			
1 month		
2 months		
3 months		
4 months		
5 months		
6 months		
More than 6 months		
Other – please specify	
     	
Q6.3	Do you have any ideas for suitable options which have not been mentioned in this consultation document?