Bridget Phillipson, the education secretary, is ordering a competition review of hidden childcare charges amid concerns parents are being hit with extra charges, despite the government’s flagship expansion of funded childcare hours.
Phillipson has written to the Competition and Markets Authority (CMA) asking it to examine practices including non-refundable deposits, compulsory add-ons and restrictions attached to government-funded childcare places.
Ministers said too many parents were still being asked to pay extra costs to secure places for their children in nurseries, including upfront deposits, additional paid hours and charges for basics including nappies, meals and suncream.
Phillipson’s intervention came as Keir Starmer’s government looks for ways to ease pressure on household budgets amid the continuing impact of the Iran war on prices across the world, with ministers concerned if families are actually feeling the benefits of government support packages.
On Thursday, the chancellor, Rachel Reeves, announced a “Great Summer Savings” scheme, with measures including free bus travel for children in August and the removal of tariffs on staples including biscuits, chocolates and dried fruits. The government also extended the temporary 5p cut to fuel duty.
While the summer savings scheme is worth £300m, thinktanks including the Resolution Foundation suggested richer households would enjoy a larger share of the benefits of the government’s interventions than poorer ones.
The government said eligible families were now saving an average of £8,000 for each child a year through funded childcare hours, with more than 500,000 families benefitting from the scheme.
But polling from Ipsos, commissioned by the Department for Education, revealed nearly three-quarters of parents were dipping into their savings to cover additional childcare costs. More than a quarter told the survey affordability remained the biggest barrier to accessing the childcare they needed.
Phillipson said: “I grew up in a family that knew what it meant to count every penny. I am so proud of the crucial difference that 30-hours funded childcare makes to family finances, saving £8,000 a year per child on average.
“The vast majority of nurseries and childminders have been brilliant in helping us deliver, but I will not accept the small minority letting families down and stopping them get what they were promised.”
The CMA has also been asked to assess the role of ownership models, including private equity and whether they are contributing to rising costs or creating risks for families who rely on local nursery provision.
The watchdog is expected to look at wider market pressures including accessibility in childcare, “cold spot” areas, cross-subsidy models used by providers and how transparent information is for parents trying to use the system.
Labour has continued rolling out the expansion of free childcare first announced under Rishi Sunak’s government, and later extended to eligible working parents from the moment a child turns nine months old until they start school. The policy costs around £9bn a year.
Ministers are also launching a new online cost-of-living tool aimed to help parents understand what childcare support they are entitled to, and how they can estimate costs and find local providers.
A childcare map is being piloted in north-east Somerset, Bath, Bristol and South Gloucestershire before a wider national rollout later this year.
