UK watchdog to probe hidden childcare fees as parents face extra costs

Bridget Phillipson, the UK Education Secretary, has directed the Competition and Markets Authority (CMA) to conduct a competition review into hidden charges within the childcare sector. The investigation will examine practices such as non-refundable deposits, compulsory add-ons, and fees for essentials including nappies, meals, and suncream. Ministers argue these costs are eroding the financial benefits of the government’s flagship funded childcare expansion, with too many parents still required to pay extra to secure nursery places.

The intervention comes as the Starmer government seeks to alleviate pressure on household budgets amidst global economic instability, including the impact of the Iran war on prices. While the government states that eligible families save an average of £8,000 per child annually through the scheme, polling commissioned by the Department for Education from Ipsos indicates that nearly three-quarters of parents are dipping into savings to cover additional childcare costs. More than a quarter of respondents cited affordability as the primary barrier to accessing needed care.

Phillipson emphasised the government’s commitment to ensuring families receive the promised support. She stated that while the vast majority of nurseries and childminders have delivered effectively, she would not accept a small minority letting families down. The Education Secretary highlighted her own background, noting that her family knew what it meant to count every penny, and stressed the crucial difference that 30 hours of funded childcare makes to family finances.

The CMA’s review will also assess the role of ownership models, specifically private equity, to determine if they contribute to rising costs or create risks for families relying on local provision. The watchdog is expected to investigate wider market pressures, including accessibility in "cold spot" areas, cross-subsidy models used by providers, and the transparency of information available to parents navigating the system.

This policy expansion, originally announced under former Prime Minister Rishi Sunak and extended by the current Labour government, costs approximately £9bn a year. To assist families, the government is launching a new online cost-of-living tool to help parents estimate costs and find providers. A childcare map is currently being piloted in north-east Somerset, Bath, Bristol, and South Gloucestershire, with a wider national rollout planned later this year.

Chancellor Rachel Reeves recently announced a £300m "Great Summer Savings" scheme, which includes free bus travel for children in August, the removal of tariffs on staples, and an extension of the 5p fuel duty cut. However, thinktanks such as the Resolution Foundation have suggested that richer households may enjoy a larger share of the benefits from these government interventions compared to poorer ones.