The Reality of ‘Free’ Childcare: What Does It Mean for Early Years Settings?

This week’s announcement about the new guidance on early years funding has been met with mixed reactions. On the one hand, it’s brilliant news for working families - access to significantly reduced childcare fees means more parents can afford high-quality early education for their little ones, and many who previously couldn’t afford to return to work will now have that option. That’s a huge win for families, and as early years providers, we want to support parents in giving their children the best start in life.

But there’s another side to this story, one that isn’t being talked about enough.

The Strain on Early Years Settings

For years now, early years providers have been expected to deliver ‘free’ childcare places, even though the government funding we receive to cover these hours often falls far short of the true cost of delivering high-quality care and education. This is particularly true for three- and four-year-old funding, where the rates set by the government are significantly lower than the actual hourly cost of running a setting.

Many providers, in an attempt to remain sustainable, have introduced small additional fees to help bridge this funding gap - covering essentials like meals, snacks, resources, or even just a contribution towards the true cost of running the setting. These are not excessive ‘top-up’ fees designed to take advantage of parents; they are a necessity to keep settings open and able to provide the quality care children deserve.

However, under the new rules, settings will no longer be able to charge mandatory fees to supplement these funded hours. While the intention behind this is to ensure families are not paying extra for what is meant to be ‘free’ childcare, the reality is that it places even more financial strain on an already struggling sector.

Are We Still Independent Businesses?

For many of us in early years, this raises an uncomfortable question: Are we still independent business owners, or are we now effectively being employed by the government?

With the government dictating how much we can charge per hour, it feels as though we have less and less control over our own businesses. The majority of early years settings are not large corporations, they are small, independently run businesses, often led by passionate early years professionals who care deeply about supporting children and families.

But passion alone doesn’t pay the bills.

The Harsh Reality: Closures on the Horizon?

The early years sector is already under immense pressure. Staff costs have risen dramatically, recruitment is increasingly difficult, and the gap between funding and actual costs continues to grow. Many settings are already operating at a loss, just trying to keep their doors open.

This new restriction could push many over the edge. If providers can no longer charge a small fee to help cover the shortfall, where does that leave them? The sad truth is that many settings will be forced to close. And if more early years settings shut down, parents will be left with fewer options, longer waiting lists, and, ironically - less access to childcare than before.

Is This Really the Right Solution?

The government keeps trying to tackle the issue of childcare costs for families, and of course, that’s a positive step. But instead of placing even more pressure on struggling early years providers, shouldn’t the focus be on properly funding these ‘free’ places in the first place?

We all know there have been some cases where providers have charged unreasonable fees, and yes, those situations needed addressing. But the vast majority of us charge what we need to in order to keep our settings running, provide high-quality learning experiences, and go above and beyond for the children in our care. Trips to the zoo, enriching learning experiences, high-quality resources - these things all cost money, and they directly benefit the children.

If the government truly wants these hours to be free, then surely the answer is to properly fund them? That means calculating the real cost of delivering high-quality early years education, including staff wages, resources, utilities, and everything else that goes into running a setting, and ensuring the funding rates actually reflect this.

That way, settings wouldn’t need to charge additional fees. And instead of creating more financial pressure on providers, we could focus on what we want to do - supporting children and families to the best of our ability.

A Sector That Wants to Help...But Needs Help Too

Early years providers are not the enemy. We are not against free childcare. In fact, we are the ones delivering it every single day, doing our best to make it work despite the challenges.

But the government’s latest move feels like yet another decision made without properly consulting the people on the ground, those of us who know what it takes to run a sustainable early years setting. If we truly want a system that benefits both parents and providers, then it’s time to stop placing all the burden on struggling settings and start addressing the real issue: chronic underfunding.

Because without proper support, there may not be enough settings left to deliver the free places the government is promising. And that helps no one.