Government asks CMA to investigate nursery charges
Education secretary calls for investigation on hidden nursery costs
Education Secretary Bridget Phillipson has written to the Competition and Markets Authority (CMA) asking it to examine how the childcare market operates, with particular focus on deposits, waiting list fees and "additional charges" levied by nurseries.
The request forms part of the Government's wider Childcare Review, announced in the Autumn 2025 Budget. In her letter, Phillipson said the aim is to ensure "the childcare market is functioning optimally for the benefit of children and parents and enables providers to operate sustainably," and that a CMA review could provide independent evidence to inform future policy.
She has asked the CMA to examine three areas: market practices such as private fees, restrictions on funded hours, consumables charges and deposits; supply-side dynamics including provision in "cold spot" areas and cross-subsidy between age groups and settings; and how the demand side can drive better outcomes, including transparency for parents and the role of local authorities.
The CMA said it has been monitoring the sector "for some time" and will bring a proposal to its Board next month. A final report has been requested by Spring 2027.
Sector reaction
NDNA Chief Executive Tim McLachlan welcomed the move but said his organisation has urged the CMA to act for years. He argued the system fails because funding doesn't cover real costs: 87% of NDNA members say hourly rates fall short, while rising National Insurance and minimum wage costs aren't reflected in funding rates. He also pointed to unfunded costs like meals, nappies and admin, and argued Government and local authorities hold a "dominant market position" as the largest purchaser of childcare hours, setting prices that don't reflect true delivery costs.
NDNA's Scotland and Cymru branches are pushing for the review to cover their nations too, citing Scottish councils' dual role as funder and provider, and Wales's plans to expand funded childcare.
Sarah Ronan of the Early Education and Childcare Coalition cautioned against "pitting parents and providers against each other," arguing Government is "the broker of a deal" purchasing roughly 80% of childcare at rates below true cost while marketing it as free. She called for scrutiny of both provider ownership models and the Government's own role as market steward.
Early Years Alliance Chief Executive, Neil Leitch echoed concerns that underfunding, not provider greed, is driving extra charges, warning the review must avoid becoming "a blame game" and offering the Alliance's help to ensure any investigation is "balanced, well-informed and reflects the true realities facing the sector."
The review comes amid Government scrutiny of "hidden fees" and the growing role of private equity in nursery ownership.
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