Government asks Competition and Markets Authority to look at nursery charges
Bridget Phillipson, Secretary of State for Education has written to the Competition and Markets Authority (CMA) asking them to look into the way nurseries operate, in particular regarding deposits and “additional charges”.
NDNA has told journalists that the Government has at least realised that the system does not work for parents or providers. CEO Tim McLachlan also stressed that NDNA had been asking the CMA to look into the impact of Government funding on the childcare sector for years. NDNA worked with the CMA during Covid pandemic lockdowns to make sure it understood the pressures the sector was under.
In her letter the Secretary of State says that this request to the CMA is part of their childcare review:
“..we must ensure that the childcare market is functioning optimally for the benefit of children and parents and enables providers to operate sustainably”
A CMA review could she suggests:
“..provide the evidence and analysis necessary to assess how far the childcare market operates in a way that meets these objectives within our current system and provide independent insights we can use to inform the government’s Childcare Review and future system delivery.”
These are the following areas she recommends the CMA looks at:
- The impact of market practices, such as private paid hours/fees on parents and providers; restrictions on the use of government-funded hours; consumables practice; and waiting list fees/deposits
- Supply side dynamics, including accessibility in cold spot areas; cross-subsidy dynamics and the role these play in ensuring provider sustainability and growth (both across age groups and across different settings within a chain/corporate group); the role of different types of provision in the market
- How the demand side is able to drive positive outcomes in the market, including for children with a range of characteristics, such as age, SEND and disadvantage; the role of LAs and MCAs in market management; the role of different system actors, including different types of providers; transparency and the information parents have to inform their purchasing choices.
The CMA is an independent organisation and will review the Secretary of State’s request before setting out whether and how it may review the childcare market. In their initial response they have said “The CMA has been monitoring developments in the childcare sector and considering further work in this area for some time… Building on our work to date, and informed by recent engagement with your officials, we will be developing a specific proposal to put to our Board next month.”
Tim McLachlan, Chief Executive of National Day Nurseries Association (NDNA) said: “The Government has finally recognised the fact that the early education and care sector is not working for families or providers in the market. We have been urging the Competition and Markets Authority to look at the impact of Government funded childcare on our sector for years.
“The system is not working because the offer can never be ‘free’ when so much of what the Government is promising is underfunded or unfunded.
“It is underfunded because 87% of our members surveyed say the hourly rates they get do not cover their costs. Underfunding also happens when the Government increases NICs and minimum wages well above the rates it pays providers.
“We also say it is unfunded because the Government does not cover the cost of meals, snacks, nappies and other consumables while expecting parents or providers to pay for these. It is also unfunded when the system is so complex it requires a huge amount of admin for nurseries and local authorities, none of which is factored into the rates providers receive.
“Any CMA investigation must look at all these factors. The Government and local authorities are in a dominant market position because they are the biggest purchaser of childcare hours. They set the rules and the prices for almost everything nurseries now do. When the biggest purchaser is not paying a fair price, everyone else is left to pick up the tab.”
The Minister asked for a report by Spring 2027 if possible.
The CMA works across the UK so there is the potential for the review to include childcare markets across England, Scotland, Wales and Northern Ireland. With local authorities in Scotland setting their own ‘sustainable’ funding rates while also delivering around 60% of funded childcare in their own settings, NDNA Scotland is urging the CMA to include Scottish nurseries in the scope of any possible investigation.
With the new Welsh Government setting out plans to expand funded childcare within its first 100 days, NDNA Cymru is also encouraging the CMA to review the current funded childcare policy to ensure it is working fairly before further expansion.
Read the letter from the Secretary of State here
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