Parents are paying thousands of pounds a year in extra charges for nursery consumables such as food, nappies and sun cream, as providers pass on the shortfall from government underfunding of “free” childcare hours, campaigners have warned. One father, Rick Kelsey, reported being billed up to £16 a day on top of standard fees – a sum that mounts into thousands annually for a full-time child – a figure Neil Leitch, chief executive of the Early Years Alliance, acknowledged was not simply the cost of lunch but “a cross-subsidy” to keep nurseries afloat.
Nearly three-quarters of parents with children in formal childcare told an Ipsos survey conducted in May and June last year that they had to pay for extras including meals, drinks, snacks, nappies, sun cream and one-off activities such as special outings. More than a quarter of the 2,000 parents of children up to four years old said the cost of childcare was the “primary barrier” to accessing their preferred option.
Eligible working parents in England are entitled to 30 hours a week of government-funded childcare for children aged between nine months and four years old. But the Department for Education (DfE) has acknowledged that “too many” parents report being asked to pay more to secure a funded place, through waiting-list deposits, compulsory add-ons and additional hours.
Watchdog investigation launched
Education Secretary Bridget Phillipson has responded by asking the Competition and Markets Authority (CMA) to investigate hidden extra charges that families encounter when trying to access government-funded childcare. In a letter to the regulator she requested details on the impact of such charges on both parents and providers. The CMA said it welcomed the request and would develop a “specific proposal” for its board, adding that it had already been “monitoring developments and exploring the merits of work in this area.” The investigation will also examine the role of private equity companies in the early years sector and whether they are contributing to rising costs.
Phillipson wrote in the Guardian on Monday that “too many parents are still not feeling the full benefit” of the government-funded hours. “The vast majority of nurseries and childminders are doing a brilliant job – but we have to ask hard questions every time we hear stories of families hit with hidden charges, restricted hours or excessive deposits that bear no relation to what parents are actually paying. That is not what this investment was meant to deliver.”
The mechanics of ‘cross‑subsidy’
Underpinning the extra charges is what the sector calls a “cross-subsidy”, a term Leitch explained on BBC Radio 4’s Today programme. The government funds providers at a fixed hourly rate for the 15 or 30 “free” hours, but that rate often falls well short of the real cost of delivering care. To stay open, nurseries effectively transfer costs onto parents by charging compulsory fees for items that are nominally optional – meals, nappies, wipes – or by requiring parents to buy additional hours at a higher rate.
The scale of the shortfall is stark. The funding rate for private, voluntary and independent (PVI) providers in 2024–25 averaged £5.63 per hour for three- and four-year-olds, compared with £5.80 for primary school nursery classes and £8.82 for maintained nursery schools. A survey by the National Day Nurseries Association (NDNA) found an average shortfall of £2.36 per hour per child for a 15-hour place – meaning nurseries cannot cover even basic costs like nappies and meals from the government payment. The Early Years Alliance warned that years of underfunding had left many providers with no choice but to introduce extra charges or raise fees.
Analysis by the Women’s Budget Group (WBG), based on DfE’s own forecast costs from 2015 uprated for inflation and wage costs, suggests a funding gap of £5 billion a year in the government’s expanded childcare offer from 2025/26. The early years sector receives substantially less public money per child – about £4,200 – compared with £5,800 for primary pupils and £6,600 for secondary students.
New guidance, effective from 1 April 2025, attempts to curb the practice by making additional charges for funded childcare “voluntary”. Providers must not demand mandatory fees for meals, snacks, consumables or optional activities as a condition of accessing a free place. From April 2025, providers (other than childminders) must display information about charges on their websites, and by January 2026 invoices and receipts must be itemised, breaking down charges separately.
A High Court judgment has reaffirmed that the 15- or 30-hour entitlement must be accessible free of charge, with no mandatory charges for parents. The CMA has previously ruled that childcare provider contracts must be fair and reasonable, and it is generally unreasonable to charge if a provider cannot deliver services through no fault of the parent. In 2023 the Local Government and Social Care Ombudsman directed a council to partially reimburse a father who was charged fees of more than £13 a day for consumables by a nursery that failed to provide transparent invoices.
Impact on families and providers
The financial pressure is not evenly felt. The WBG analysis indicates that working families on £34,000 a year spend more than 11% of their gross earnings on childcare, compared with 3% for families earning £124,000. Richer households therefore benefit more from the childcare expansion than disadvantaged families.
Providers themselves are stretched to breaking point. In an Early Years Alliance survey, 76% of providers reported receiving a funding rate less than the cost of delivering the new hours, and a quarter said they feared closure within the next 12 months because of financial pressures. Staffing shortages compound the problem: 78% of providers found it difficult to recruit staff, 61% reported staff leaving the sector entirely over six months, and 82% noticed an increase in departures compared with two years ago. The shortages have led to reduced opening hours, limits on taking new children and concerns about permanent closure, particularly in economically disadvantaged areas where private fees cannot compensate for low funding rates.
To help families navigate the system, the government has launched a digital map of childcare providers in Bristol, South Gloucestershire, Bath and North East Somerset, with a nationwide rollout planned later in the year. The tool is available via the Best Start in Life website. The government is also doubling expected spending on childcare to around £8 billion annually, with the phased rollout meaning eligible working parents of two-year-olds can now access 15 hours, extending to parents of nine-month-olds from September 2024. By September 2025, working parents will be able to claim 30 hours of funded care per week from nine months up to school age.
Writing in the Guardian, Phillipson said the government wanted to ensure families feel the full benefit of that investment. A CMA spokesperson added: “This is an important sector that needs to work well for families, and we will be developing a specific proposal to put to our board.”
