How the new free childcare scheme could push up nursery fees

The expansion of free childcare schemes could inadvertently push up the price of already sky-high nursery fees, according to a new report.

From this month, families in England will be entitled to 30 hours of government-funded childcare per week for children as young as nine months.

However, staffing shortages and insufficient funding mean some parents may be left without spaces or paying over the odds.

A report by the University of Bath Institute for Policy Research found that free childcare schemes are failing to keep pace with nursery fees – and could make them even more expensive.

Funding for three and four-year olds is lower than the average hourly fee, which has pushed nurseries to charge more for younger children.

The average cost of full-time nursery (50 hours a week) for a child under two in England is £12,425 in 2025.

The study found that London remains the most expensive region for childcare, followed by the South East and South West, while the North East is cheapest.

Rising prices: Nursery fees are expected to rise again following the expansion of free childcare

Areas with the lowest government funding have seen nursery fees rise the fastest over the past 18 months, according to the report.

These so-called ‘childcare deserts’ have three or more children compete for a single place, pushing up prices.

Lead researcher Dr Joanna Clifton-Sprigg from the University of Bath, said: ‘Free childcare is a bold and welcome move but without funding that reflects real costs, it risks falling short. 

‘Where funding is lower, we’re seeing faster price rises for the hours parents pay for – a pattern that could deepen regional inequalities.’

Nurseries have warned that staff shortages and rising demand have contributed to higher costs. 

‘The increase in employer National Insurance contributions in April and an increase in the national minimum wage is also affecting the sector.

Co-author of the study Professor Kerry Papps from the University of Bradford, added: ‘Unless funding keeps pace with nursery fees, the policy could backfire. In childcare deserts, the extra demand may push up prices for unfunded hours, wiping out savings for families who need them most.’

Who is eligible for free childcare?

In England, all parents of three and four-year-olds are eligible for 15 hours of free childcare, regardless of their working status.

From this month, parents of children aged between nine months and four years old can make use of up to 30 hours’ funded childcare.

To qualify, the majority of parents must earn more than £9,518 but less than £100,000 per year. Those on certain benefits can get 15 hours of free childcare for two-year-olds.

Parents who do not work may still be eligible if their partner works, or they’re on maternity or paternity leave.

Parents can apply from when their child is 23 weeks old but the funding starts at the beginning of the term- either in September, January or April – after the child reaches nine months.

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