Bridget Phillipson, the education secretary, has ordered a competition review of hidden childcare charges amid concerns that parents are being hit with extra costs despite the government's expansion of funded childcare hours. Phillipson has written to the Competition and Markets Authority (CMA) asking it to examine practices including non-refundable deposits and compulsory add-ons.
Government seeks to ease household budgets
Ministers stated that too many parents are still being asked to pay extra costs to secure nursery places for their children, including upfront deposits, additional paid hours, and charges for basics such as nappies, meals, and sun cream. Phillipson's intervention, first reported by the Financial Times, comes as Keir Starmer's government looks for ways to ease pressure on household budgets amid the continuing impact of global price pressures. Ministers are concerned whether families are actually feeling the benefits of government support packages.
Summer savings scheme announced
On Thursday, Chancellor Rachel Reeves announced a "Great British summer savings" scheme with measures including free bus travel for children in August and the removal of tariffs on staples like biscuits, chocolates, and dried fruits. The government also extended the temporary 5p cut to fuel duty and cut the VAT rate from 20% to 5% over the summer holidays on tickets for theme parks, zoos, and museums. While the summer savings scheme is worth £300 million, thinktanks including the Resolution Foundation suggested that richer households would enjoy a larger share of the benefits than poorer ones.
The government said eligible families are now saving an average of £8,000 for each child per year through funded childcare hours, with more than 500,000 families benefiting from the scheme.
CMA's role in childcare sector
Tom Smith, former legal director of the CMA, told the Financial Times that the regulator is focused on sectors representing significant household spending. "They've recently investigated the vets sector, they're currently investigating private dentistry, and now childcare is next," he said. "The CMA's goal will be to assess whether the private childcare sector is working well for consumers." The watchdog has "very wide powers to impose changes on the sector, including divestments and structural measures, and significant changes to business practices," he added. "It often also makes recommendations for legislative changes."
The CMA has also been asked to assess the role of ownership models, including private equity, and whether they are contributing to rising costs. 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 about £9 billion per year.
