The Competition and Markets Authority's (CMA) forthcoming review of childcare charges is unlikely to uncover a sector riddled with profiteering. Instead, I suspect it will reveal something more uncomfortable: a childcare system that has become increasingly dependent upon additional charges, optional extras and complex fee structures to bridge the gap between government funding and the actual price providers want to charge for resourcing and delivering high-quality early education.
The review was commissioned following concerns about non-refundable deposits, compulsory consumable charges, restrictions attached to funded places, and requirements for parents to purchase additional hours in order to access government-funded entitlements.The parent-pocket-focused political narrative suggests hidden fees may be preventing parents from accessing the government's expanded childcare offer. While there will undoubtedly be examples of poor practice, I believe the CMA's analysis will ultimately find that the overwhelming majority of providers are responding to structural financial pressures rather than seeking to exploit families, and believe they are operating within the requirements of funding contracts with local authorities.
One of the most likely findings is that many so-called "hidden" fees are not hidden at all.Parents frequently receive detailed fee schedules covering meals, snacks, nappies, outings, enrichment activities, registration fees and deposits. The issue is often not transparency but expectation. Government messaging around free childcare can create an understandable assumption parents should face no additional costs whatsoever. When additional charges emerge, families understandably feel confused first, and frustrated second.
The CMA may conclude that terminology such as free childcare, embedded in legislation, sits uneasily alongside a system in which providers are permitted to charge for certain consumables and optional services. The result is confusion, inconsistency and distrust.
More significantly, the review is likely to conclude many additional charges exist because funding rates do not fully reflect what providers say they need and want to deliver on the government’s promise.For years, providers have argued government-funded hours are funded below the level required to deliver them sustainably. As staffing costs, energy bills, food prices, training requirements, national minimum wage, and regulatory expectations have increased, many settings have had to find alternative ways to remain financially viable.
In practical terms, this means charging for meals, asking for voluntary contributions, charging for enrichment activities, or relying upon parents who purchase additional paid hours.The tensions there are for lower income families for whom such charges are out of reach, even though they remain optional, and for working parents with many demands on their pockets and arguably more consumer power.
The CMA may therefore find that eliminating all additional charges without addressing underlying funding levels would risk reducing capacity, increasing closures, reducing sufficiency, and ultimately harming parental choice.
That said, the review is unlikely to give the sector a completely clean bill of health.The government's concerns centre on reports of compulsory add-ons, non-refundable waiting-list deposits and requirements to purchase extra hours to gain access to funded places. Something at odds with giving disadvantaged families the hand-up they need and want to benefit from this investment. Where providers make funded places available only alongside mandatory paid services, the CMA may identify consumer protection concerns. Likewise, practices that make fee structures difficult to compare across providers could be criticised for reducing effective competition.
The regulator has traditionally focused on transparency, informed consumer choice and fair market operation. Its conclusions may therefore target specific unfair practices rather than the broader charging model itself. The government has also invited the CMA to consider the role of private equity and different ownership models within childcare provision. This is timely and politically significant. Large nursery groups backed by investment funds are an increasingly visible feature of the market. However, I would be surprised if the CMA concludes that ownership structure alone is responsible for rising costs or fee complexity.
The evidence is more likely to show that for-profit, charitable, school-based and independent providers all face similar financial pressures. The differences may lie in how those pressures are managed rather than in whether they exist. However, let’s acknowledge there is far from a level playing field across the sector, and some providers are advantaged and disadvantaged by these disparities.
Ultimately, I believe the CMA will conclude that the greatest challenge facing childcare is not hidden fees but sustainability, and will build a view on the extent to which delivery of funded entitlements matches the political and legal promise.
My prediction is the CMA will recommend greater transparency, clearer fee disclosures, standardised information for parents and tighter scrutiny of compulsory charges. It may also call for improvements in how funded entitlements are communicated to families.However, I do not think it will find widespread profiteering or deliberate misconduct across the sector.Instead, it is likely to conclude that many of the practices now described as "hidden” fees are symptoms of a deeper challenge: a childcare market attempting to reconcile ambitious government entitlements with the economic realities of delivering high-quality early education.If that proves to be the case, the most important outcome of the review may not be new rules on fees. It may be a more honest national conversation about what childcare really costs, who should pay for it, and how we create a system that is fair for both families and providers.The CMA may begin by investigating hidden charges. It may end by exposing not-so-hidden truths about childcare funding itself.
Implications for local authorities
Local authorities may find themselves drawn more directly into the debate about the sustainability of the childcare market. Although the review is ostensibly focused on charging practices and consumer protection, it could ultimately raise important questions about funding arrangements and the role councils play in administering and assuring funded entitlements.
One likely consequence is increased scrutiny of local authority funding agreements and the mechanisms through which government funding reaches providers. Providers may look more closely at local funding methodologies and challenge whether they accurately reflect the realities of operating provision. This could intensify discussions between local authorities, providers and central government about the cost of delivering funded places.
The review may also create pressure for greater consistency in how councils oversee charging practices. Many authorities already issue guidance on consumables, meals, enrichment activities and voluntary contributions, but a CMA recommendation for greater transparency could require councils to revisit provider agreements, strengthen monitoring arrangements and offer clearer guidance on what constitutes an optional versus a compulsory charge. Such changes would inevitably increase expectations on early years teams.
There is also the possibility that local authorities will be expected to play a more active role in enforcement. Should the CMA identify practices that undermine informed parental choice, such as compulsory add-ons or restrictions attached to funded places, councils may face greater expectations to investigate complaints, monitor provider compliance and intervene where funding agreement conditions are not being met. While this could improve consumer confidence, it would also increase administrative responsibilities and potentially create more complex relationships between councils and providers.
Perhaps the most significant implication relates to childcare sufficiency. This article argues that many of the charges currently under scrutiny have evolved as a response to financial pressures rather than excessive profit-making. If policymakers seek to remove or severely restrict such charges without addressing underlying funding levels, some providers may struggle to remain viable. For local authorities, which retain statutory responsibilities for ensuring sufficient childcare provision, this would create a significant risk. Any reduction in capacity, increase in closures or decline in the availability of funded places could make it more difficult to meet local sufficiency duties and to support the successful implementation of the expanded childcare entitlements.
The review may also highlight the need for more sophisticated local market intelligence. If affordability and sustainability emerge as central themes, councils could be expected to develop a stronger understanding of provider financial health, local market dynamics and emerging risks to capacity. This may strengthen the case for more regular engagement with providers and for a clearer evidence base when advising government on the effectiveness of current funding arrangements.
Finally, the CMA's work could expose a growing communications challenge. As the article observes, many parents understandably interpret "free childcare" to mean that no costs should be incurred. Where additional charges are permitted, this can generate confusion and frustration even when providers have been transparent. Local authorities may therefore find themselves under pressure to provide clearer explanations of funded entitlements, improve the information available through family information services, and help parents better understand what is included within government-funded offers and what may involve additional costs.
Considerations for local authorities
Taken together, the issues raised by the article suggest that local authorities should view the CMA review not simply as a question of fee transparency but as part of a broader debate about the sustainability of the childcare system. Councils may need to balance the legitimate objective of protecting families from unfair charging practices with the equally important challenge of maintaining a diverse and financially sustainable childcare market.
If the review concludes that funding tensions sit at the root of many contested charging practices, local authorities could find themselves at the centre of future policy discussions about how childcare is funded, how entitlements are communicated, and how access can be protected for disadvantaged families. The strategic challenge will be to ensure that any measures designed to improve transparency or reduce costs for parents do not inadvertently undermine provider viability, reduce parental choice or diminish the availability of places for the children who stand to benefit most from early education.
