Funded childcare: debate over charging


Case of nursery imposing extra charges highlights challenges for councils and early years providers in meeting free entitlement rules.

A ruling by the local government watchdog has reignited the debate over how nurseries charge parents for “consumables” under the government-funded childcare scheme and how local authorities monitor such practices.

Last month, the Local Government and Social Care Ombudsman (LGO) criticised Nottinghamshire County Council for failures to properly oversee fees charged by a local nursery for “consumables” such as nappies and food in a case brought by a mother.

Additional charge

In the case, the nursery had imposed an additional charge of £1.81 per hour for a free early education place since the child had been eligible for the 30-hour entitlement at the start of 2020 and that she was given no option but to pay the fee.

In August 2021, the mother complained to the council that the place was not “free” and that the nursery’s invoices were not “clear, transparant nor itemised”. She said she had been overcharged for 20 months.

After investigating, the council advised the mother to resolve the issue directly with the nursery, which updated its terms of business to show the additional charges were voluntary. However, two months later the mother contacted the council to say the provider’s invoicing was still unclear, but the council said it was satisfied the nursery had taken action to comply with the provider agreement and that the issue was now closed.

The ombudsman found that the nursery’s invoicing was not “clear or transparent” and the council should have done more to tackle charges faced by local parents. It “did not do enough to get to the bottom of the problem”, the ombudsman ruled.

The council was also criticised for failing to ensure the problems around charging are not repeated. It was ordered to repay half the additional charges the mother paid and pay her £200 compensation for the “time, trouble and distress felt”.

The case has similarities to a ruling in January 2021 in which the LGO criticised Leicestershire nursery Kiddi Caru for charging parents the difference between the amount they were being paid by Leicestershire County Council for the places and the amount they charged private customers. Again, the council was rebuked for not having “sufficient oversight” of nursery charging practices and were reminded by the ombudsman that “free must mean free” regarding the early years entitlements.

However, childcare consultant James Hempsall explains that the Nottinghamshire and Leicestershire cases highlight how a providers’ legal right to charge for extras under the funded childcare scheme can sometimes clash with a local authority’s terms and conditions to deliver the “free” entitlements (see expert view).

The confusion among providers over what can be charged is illustrated in another recent LGO ruling involving a pre-school provider who complained about his local council requiring him to change his terms and conditions in order to continue receiving free entitlement funding. He claimed the viabiality of the business was threatened by the council’s request to change his notice period and not allowing him to impose a mandatory charge for children accessing both morning and afternoon sessions. The LGO ruled the council was not at fault.

But early years groups say providers are being placed “between a rock and a hard place” due to confusing guidance and the chronic underfunding of the free entitlements.

“Continued underfunding has put countless providers in completely unsustainable financial situations, and for many, additional fees paid by parents for lunch and trips are a critical source of income,” says Neil Leitch, chief executive of the Early Years Alliance.

“It’s clear that if the ‘free’ childcare offer was properly funded providers would not need to charge parents extra.

“We would recommend that providers continue to make it clear to parents that any additional charges are optional, as well as highlighting how these charges are different from the ‘free’ hours to which their child is entitled.”

Leitch’s views are echoed by Purnima Tanuku, chief executive of National Day Nurseries Association (NDNA). “The majority of childcare businesses need to charge consumable fees to make the funded hours work but the system is very complicated leading to instances like this [latest case],” she says. “It’s important for settings to check that they are itemising everything they charge for so that it is clear what hours are covered by the funding and what additional charges are for.”

Ruling from

Expert view: Good links with providers key to councils navigating ‘tricky’ funded childcare scheme 

James Hempsall, director, Hempsall’s Consultancy

The Childcare Act 2006 (as amended) placed a duty on councils to secure a sufficiency of the universal entitlement for 15 hours a week of pre-school learning for all three- and four-year-olds, and the extended entitlement (up to 30 hours childcare) for eligible working families. Legislation determines this provision is delivered for free.

When 30 hours childcare was introduced in 2016, we saw how it required all providers to take a hard look at their provision, their practice, and their funded places alongside their paid-for offers as many families purchased additional hours to support their working lives.

Commonly, settings had been providing things like snacks and meals for free. The new funding meant this needed to change as funding does not cover those, or consumables not considered essential to deliver early learning or childcare. That was hard for everyone to change and to understand. Six years later and providers are also grappling with multiple financial demands in the form of high wage inflation, rising costs of living, and the effects of the pandemic. It is a perfect storm. Parents are also assiduously seeking out childcare services that are funded so their cost burden is lessened.

So, what can be done? The ombudsman is right in that providers can charge for non-funded elements. But they must follow contracted terms and conditions as issued by the local authority, which can be tricky when working with chain providers operating in multiple local areas. Nevertheless, all providers should be fully transparent about their charging policies and practices with parents and their funding local authorities.

Councils, via their information services, need to inform parents of their entitlements at the same time. This helps everyone to be properly held to account. Then authorities have a better chance of identifying if something is awry and can work with providers and parents to support agreeable resolutions.

It is imperative that authorities enact their other legal duty in the management of the childcare market, and its sufficiency duty. This means they should forge effective partnerships and working relationships with the sector through engaging business training and development support. This enables everyone to reconcile funding rates, understand market demand and need, review business models and sustainability, and to identify when things need to be remodelled.

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