Free childcare hours are at risk as almost nine in 10 early years settings have said they are considering introducing or increasing charges for optional extras – such as meals, consumables and trips.

In the study, by 87 per cent said they were thinking of adding extra fees for funded hours, while round three in five (61 per cent) said they were likely to introduce or increase restrictions on when early entitlement funding can be claimed.

The report comes as many childcare providers look to increase fees for parents following national insurance and minimum wage rises, according to the Early Years Alliance (EYA).

The main tax rise in the budget last month was a change to employers’ national insurance (NI) contributions, which is expected to raise more than £25 billion for the Treasury.

 

The national living wage will increase by 6.7% for employees aged 21 or older – from £11.44 an hour to £12.21 – from April.

A poll of 1,007 senior staff in nurseries, preschools and childminders in England found that 95% said their setting was likely to raise fees for non-government funded hours if cost pressures from NI and minimum wage rises were not adequately funded or addressed by the Government.

Working parents of children older than nine months are now able to access 15 hours of funded childcare, before the full rollout of 30 hours a week to all eligible families in September 2025.

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The EYA survey – carried out online between November 5-10 – found that 52% of staff are likely to reduce the number of early entitlement places on offer at their setting, and 39% are likely to withdraw from some or all early entitlement offers entirely without Government support.

The expansion of funded childcare for working parents began being rolled out in England in April.

Government guidance says top-up fees - the difference between the nursery's normal fee and funding received from the local authority - cannot be charged for.

But nurseries are allowed to ask parents to bring in nappies, wipes, food and extra-curricular activities such as a music class or yoga - or to charge for them.

(Image: Lucy North/PA)Department for Education data shows more than 300,000 extra children are benefiting from government-funded hours since the scheme was expanded  to offer 15 hours to those aged nine months and above.

Two in five (40%) said permanent closure of the early years setting was likely, the poll found. The charity is calling for the Government to either commit to funding the NI rises in full for early years settings or exempt the sector from the changes entirely as a matter of urgency.

Neil Leitch, chief executive of the EYA, says: “We are in the middle of the biggest expansion in the history of the early years sector, one that the government says is key to supporting parents to work and in turn, boosting the economy.”

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Among the third of survey respondents who calculated the impact of the NI hike on their provider, the poll suggested that the changes will result in additional costs of over £18,600 per setting per year on average.

“The financial pressure created by the sharp increases in the minimum wage announced at Budget alone would have been cause for significant concern in the sector given that, despite government claims to the contrary, funding increases have never actually reflected the need for settings to maintain wage differentials between different staff when increasing wages," says Mr Leitch.

“But add to this the huge rises in National Insurance costs – which the government doesn’t seem to have factored into next year’s early years funding rates at all – and you have a recipe for total disaster.”

Last week, Education Secretary Bridget Phillipson told MPs in the House of Commons that the Government would announce whether early years funding rates for age groups would change to reflect the national insurance hike.

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A government spokesperson said: “This government has a clear mission to break the unfair link between background and opportunity, which starts with a reformed and sustainable early years system that gives every child the best start in life.

“We have taken tough decisions to fix the foundations, so that next year total spending on childcare will reach over £8 billion.

“We also take the concerns of the sector seriously and will continue to work with them and across government to ensure that funding arrangements give as much certainty and confidence as possible to deliver on the promises made to parents.”

The report comes on the back of other research which suggests that it has become “common practice” for early years settings in England to ask families to pay additional charges on top of funded childcare hours they are entitled to, particularly for the hours given to two-year-olds from poorer backgrounds. 

The research, funded by the Nuffield Foundation, said some children in settings who access only funded hours may be kept in separate rooms from children of the same age whose families pay more, or they may not have access to facilities such as the setting’s forest school.

Disadvantaged two-year-olds in England have been entitled to 15 hours of Government-funded childcare for a decade, but a “substantial minority” of children are still missing out, the paper said.

It said: “While some providers make inclusive free provision a priority, it now appears common practice (although not universal) for settings to constrain the number and structure of funded places offered and to ask families to pay additional charges for their entitlement.”