Parents must not pay mandatory extra charges to access free childcare, government says

Published

5 months ago

February 21, 2025

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Parents who are entitled to hours of free childcare should not have to pay mandatory extra charges to secure their nursery place, the government has said.

Updated guidance from the Department for Education states that while nurseries are entitled to ask parents to pay for extras – including meals, snacks, nappies or sun cream – these charges must be voluntary rather than mandatory.

The guidance, which comes amid concerns that parents have faced high additional charges on top of the funded hours, also states that local councils should intervene if a childcare provider seeks to make additional charges a condition for parents accessing their hours.

Since September last year, parents and carers with children aged nine months and older have been entitled to 15 hours of government-funded childcare a week, rising to 30 hours for three to four year-olds.

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From this September, the 30 hours of care will be made available to all families – a rollout that was first introduced under the previous Conservative government.

However, there have been concerns that in order to subsidise shortfalls in funding, nurseries have charged parents extra for essentials that would normally have been included in fees.

Under the new guidance, nurseries will be now obliged to clearly set out any additional costs parents will have to pay, including on their websites.

It says invoices should be itemised so parents can see a breakdown of the free entitlement hours, additional private paid hours and all the additional charges.

‘Fundamental financial challenges facing the sector’

Representatives of childcare providers welcomed the announcement but pointed out the financial stress that many nurseries were under.

Neil Leitch, chief executive of the Early Years Alliance, said: “While we fully agree that families should be able to access early entitlement hours without incurring additional costs, in reality, years of underfunding have made it impossible for the vast majority of settings to keep their doors open without relying on some form of additional fees or charges.

“As such, while it is absolutely right that providers should be transparent with parents on any optional additional fees, today’s guidance does absolutely nothing to address – or even acknowledge – the fundamental financial challenges facing the sector.”

He added: “Given that from September, government will control the price of around 80% of early years provision, it has never been more important for that funding to genuinely reflect the true cost of delivering places.

“And yet we know in many areas, this year’s rate increases won’t come close to mitigating the impact April’s National Insurance and wage rises, meaning that costs for both providers and families are likely to spiral.”

In last year’s budget, Chancellor Rachel Reeves announced that the amount businesses will pay on their employees’ national insurance contributions will increase from 13.8% to 15% from April this year.

She also lowered the current £9,100 threshold employers start paying national insurance on employees’ earnings to £5,000, in what she called a “difficult choice” to make.

Last month a survey from the National Day Nurseries Association (NDNA) found that cost increases from April will force nurseries to raise fees by an average of 10%.

Analysis by Anjum Peerbacos, education reporter

This could be welcome news for working parents as they approach the end of another half term break during which they will have incurred childcare costs.

But this money would not affect school age children.

It is dedicated to very young children, aged two or below and is targeting parents, predominantly mothers, that want to return to work.

Previously after doing the sums and factoring in childcare costs, many mums would have felt that it wasn’t worth it.

And so, if these funds are easily accessible on a local level it could make a real difference to those wanting to get back to work.

The survey, covering nurseries in England, revealed that staffing costs will increase by an average of 15%, with respondents saying that more than half of the increase was due to the national insurance decision in the budget.

Purnima Tanuku CBE, chief executive of the NDNA, said “taking away the flexibility for providers around charges could seriously threaten sustainability”.

“The funding government pays to providers has never been about paying for meals, snacks or consumables, it is to provide early education and care,” she said.

“Childcare places have historically been underfunded with the gap widening year on year.

“From April, the operating costs for the average nursery will go up by around £47,000 once statutory minimum wages and changes to national insurance contributions are implemented. NIC changes have not been factored into the latest funding rates, further widening the underfunding gap.”

The Department for Education said its offer to parents meant they could save up to £7,500 on average when using the full 30 hours a week of government-funded childcare support, compared to if they were paying for it themselves.

In December, the government also announced that a £75m expansion grant would be distributed to nurseries and childminders to help increase places ahead of the full rollout of funded childcare. 

Local authority allocations for the expansion grant will be confirmed before the end of February. Some of the largest areas could be provided with funding of up to £2.1m.

Business

UK economy figures not as bad as they look despite GDP fall, analysts say

Published

19 hours ago

July 11, 2025

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UK economy figures not as bad as they look despite GDP fall, analysts say

The UK economy unexpectedly shrank in May, even after the worst of Donald Trump’s tariffs were paused, official figures showed.

A standard measure of economic growth, gross domestic product (GDP), contracted 0.1% in May, according to the Office for National Statistics (ONS).

Rather than a fall being anticipated, growth of 0.1% was forecast by economists polled by Reuters as big falls in production and construction were seen.

It followed a 0.3% contraction in April, when Mr Trump announced his country-specific tariffs and sparked a global trade war.

A 90-day pause on these import taxes, which has been extended, allowed more normality to resume.

This was borne out by other figures released by the ONS on Friday.

Exports to the United States rose £300m but “remained relatively low” following a “substantial decrease” in April, the data said.

Overall, there was a “large rise in goods imports and a fall in goods exports”.

A ‘disappointing’ but mixed picture

It’s “disappointing” news, Chancellor Rachel Reeves said. She and the government as a whole have repeatedly said growing the economy was their number one priority.

“I am determined to kickstart economic growth and deliver on that promise”, she added.

But the picture was not all bad.

Growth recorded in March was revised upwards, further indicating that companies invested to prepare for tariffs. Rather than GDP of 0.2%, the ONS said on Friday the figure was actually 0.4%.

It showed businesses moved forward activity to be ready for the extra taxes. Businesses were hit with higher employer national insurance contributions in April.

The expansion in March means the economy still grew when the three months are looked at together.

While an interest rate cut in August had already been expected, investors upped their bets of a 0.25 percentage point fall in the Bank of England’s base interest rate.

Such a cut would bring down the rate to 4% and make borrowing cheaper.

Analysts from economic research firm Pantheon Macro said the data was not as bad as it looked.

“The size of the manufacturing drop looks erratic to us and should partly unwind… There are signs that GDP growth can rebound in June”, said Pantheon’s chief UK economist, Rob Wood.

Why did the economy shrink?

The drops in manufacturing came mostly due to slowed car-making, less oil and gas extraction and the pharmaceutical industry.

The fall was not larger because the services industry – the largest part of the economy – expanded, with law firms and computer programmers having a good month.

It made up for a “very weak” month for retailers, the ONS said.

Business

UK economy remains fragile – and there are risks and traps lurking around the corner

Published

19 hours ago

July 11, 2025

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UK economy remains fragile - and there are risks and traps lurking around the corner

Monthly Gross Domestic Product (GDP) figures are volatile and, on their own, don’t tell us much.

However, the picture emerging a year since the election of the Labour government is not hugely comforting.

This is a government that promised to turbocharge economic growth, the key to improving livelihoods and the public finances. Instead, the economy is mainly flatlining.

Output shrank in May by 0.1%. That followed a 0.3% drop in April.

Ministers were celebrating a few months ago as data showed the economy grew by 0.7% in the first quarter.

Hangover from artificial growth

However, the subsequent data has shown us that much of that growth was artificial, with businesses racing to get orders out of the door to beat the possible introduction of tariffs. Property transactions were also brought forward to beat stamp duty changes.

In April, we experienced the hangover as orders and industrial output dropped. Services also struggled as demand for legal and conveyancing services dropped after the stamp duty changes.

Many of those distortions have now been smoothed out, but the manufacturing sector still struggled in May.

Signs of recovery

Manufacturing output fell by 1% in May, but more up-to-date data suggests the sector is recovering.

“We expect both cars and pharma output to improve as the UK-US trade deal comes into force and the volatility unwinds,” economists at Pantheon Macroeconomics said.

Meanwhile, the services sector eked out growth of 0.1%.

A 2.7% month-to-month fall in retail sales suppressed growth in the sector, but that should improve with hot weather likely to boost demand at restaurants and pubs.

Struggles ahead

It is unlikely, however, to massively shift the dial for the economy, the kind of shift the Labour government has promised and needs in order to give it some breathing room against its fiscal rules.

The economy remains fragile, and there are risks and traps lurking around the corner.

Concerns that the chancellor, Rachel Reeves, is considering tax hikes could weigh on consumer confidence, at a time when businesses are already scaling back hiring because of national insurance tax hikes.

Inflation is also expected to climb in the second half of the year, further weighing on consumers and businesses.

Business

Government to announce new scheme as it ramps up AI adoption with backing from Facebook owner Meta

Published

1 day ago

July 11, 2025

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Government to announce new scheme as it ramps up AI adoption with backing from Facebook owner Meta

The government is speeding up its adoption of AI to try and encourage economic growth – with backing from Facebook parent Meta.

It will today announce a $1m (£740,000) scheme to hire up to 10 AI “experts” to help with the adoption of the technology.

Sir Keir Starmer has spoken repeatedly about wanting to use the developing technology as part of his “plan for change” to improve the UK – with claims it could produce tens of billions in savings and efficiencies.

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The government is hoping the new hires could help with problems like translating classified documents en masse, speeding up planning applications or help with emergency responses when power or internet outages occur.

The funding for the roles is coming from Meta, through the Alan Turing Institute. Adverts will go live next week, with the new fellowships expected to start at the beginning of 2026.

Technology Secretary Peter Kyle said: “This fellowship is the best of AI in action – open, practical, and built for public good. It’s about delivery, not just ideas – creating real tools that help government work better for people.”

He added: “The fellowship will help scale that kind of impact across government, and develop sovereign capabilities where the UK must lead, like national security and critical infrastructure.”

The projects will all be based on open source models, meaning there will be a minimal cost for the government when it comes to licensing.

Meta describes its own AI model, Llama, as open source, although there are questions around whether it truly qualifies for that title due to parts of its code base not being published.

The owner of Facebook has also sponsored several studies into the benefits of government adopting more open source AI tools.

Mr Kyle’s Department for Science and Technology has been working on its mission to increase the uptake of AI within government, including through the artificial intelligence “incubator”, under which these fellowships will fall.

The secretary of state has pointed to the success of Caddy – a tool that helps call centre workers search for answers in official documents faster – and its expanding use across government as an example of an AI success story.

He said the tool, developed with Citizens Advice, shows how AI can “boost productivity, improve decision-making, and support frontline staff”. A trial suggested it could cut waiting times for calls in half.

My Kyle also recently announced a deal with Google to provide tech support to government and assist with modernisation of data.

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Joel Kaplan, the chief global affairs officer from Meta, said: “Open-source AI models are helping researchers and developers make major scientific and medical breakthroughs, and they have the potential to transform the delivery of public services too.

“This partnership with ATI will help the government access some of the brightest minds and the technology they need to solve big challenges – and to do it openly and in the public interest.”

Jean Innes, the head of the Alan Turing Institute, said: “These fellowships will offer an innovative way to match AI experts with the real world challenges our public services are facing.”