Essential Learning Points

  • Recent case law and updated statutory guidance has made it extremely clear that if a child is in receipt of the Free Early Education Entitlement, this place must be available to parents without any additional mandatory payments.
  • Nurseries can charge extra for the following:
    – Consumables such as nappies or sun cream
    – Meals and snacks consumed by the child
    – Extra optional activities such as events, celebrations, specialist tuition (for example music classes or foreign language lessons) or other activities that are not directly related or necessary for the effective delivery of the EYFS statutory framework
  • Nurseries cannot charge for the following:
    – Top-up fees
    – Supply or use of materials such as craft materials, crayons, paper, books, instruments, toys etc
    – Business running costs
    – Registration fees as a condition of taking up a free place
    – Non-refundable deposits as a condition of taking up a free place
    – General charges such as non-itemised enrichment charges, sustainability charges, business continuity charges, additional charges, enhanced ratios, hourly rates or any other supplementary charges on top of the free hours.
  • By January 2026, providers must ensure that clear and up to date information about costs are displayed to parents on their website. Additionally they must send itemised invoices to parents.
  • It is likely that upcoming changes including the expansion of the funding will throw up a whole host of issues for providers. We are experienced at assisting providers to navigate complex situations and relationships with local authorities and Ofsted.

It is undeniable that these are difficult times for Nursery and Pre-School Providers. Back in November 2024, the Department for Education published ‘Providers’ finances: Evidence from the 2023 Survey of Childcare and Early Years Providers’ Research Report’. It was based upon a survey carried out in 2023 and concluded that “In 2023, only around half of providers received enough income to cover their
costs”. It goes on to say that “it is important to note the persistent and significant gap in 2023 between hourly entitlement funding rates and hourly parent-paid fees”. This funding gap persists.

Additionally, the National Day Nurseries Association found that 199 nurseries were forced to close between September 2023 and September 2024 and of those 38% were located in the most deprived areas of the country.

Since 2023, there has been a significant change to the eligibility of parents for funding widening the scope to help working parents. To compound the situation from September 2025, eligible working parents will be able to access 30 hours of funded childcare a week, for 38 weeks of the year, starting from the term after their child turns nine months old until they begin school. This will double the amount of funding they are entitled to. With additional costs from increased minimum wages and National Insurance contributions, providers are feeling increasingly squeezed and are understandably seriously considering the future viability of their services.

High Court Judicial Review decision 7 February 2025

In the recent matter of The King (On the Application of Bournemouth, Poole and Christchurch Council) v Local Government and Social Care Ombudsman (“Judicial Review”) heard on 22 October 2024 and 29 January 2025 with a decision handed down on Friday 7 February 2025, the High Court Judge Mr David Lock KC found in favour of the Ombudsman.

This case revolved around a parent who complained to the council because they had a child who was in receipt of the Government’s Free Early Education Entitlement (“FEEE”) scheme and they were being asked to pay additional charges for some of the hours when their child was provided with care by the Nursery. The parent sought reimbursement for the additional fees on the basis that the state funded childcare was supposed to be free of charge to parents and he should not have been charged a ‘top up’ fee. Their complaint was not upheld by the Council who informed them that the nursery had not charged ‘top up fees’ but ‘general extras’. They also highlighted the commercial realities and the necessity of the additional costs in order to deliver the high standard of care being provided at the nursery.

The parent then complained to the Local Government and Social Care Ombudsman (“LGO”) who upheld his complaint. That decision was then challenged by the Council who brought a judicial review claim to the High Court on the basis that the LGO had made errors of law in misunderstanding how the FEEE statutory scheme operates. During the proceedings, the LGO confirmed that she had adjudicated on a
number of complaints of this ilk and had made inconsistent decisions concerning complaints of this nature. The practicalities of the situation make this an extremely difficult area for councils and providers to navigate.

The wider significance of this issue and the context was acknowledged in the judgment. At paragraph 6 of the judgment, it says “Childcare in the UK consumes a significant proportion of budgets of parents of young children, particularly in the years before they attend schools. Parents on medium to low incomes can find themselves having to pay a significant proportion of their earnings to meet childcare costs”. It also highlights the statutory duty to secure Early Years Provision free of charge which is imposed on Local Authorities. It refers to Section 6(1) of the Childcare Act 2006 and The Local Authority (Duty to Secure Early Years Provision Free of Charge) Regulations 2014. This duty requires local authorities to ensure that there is sufficient state funded childcare available in their area to meet the needs of all eligible children.

It was acknowledged that “local authorities have a real concern that taking a hard line on top-up charges could lead to a diminution in the availability of FEEE childcare in their area.” This is clearly a genuine concern and one that local authorities continue to face.

Of primary importance in this case was whether mandatory additional charges could be imposed on parents participating in the FEEE scheme. At paragraph 66 of the judgment it makes it very clear that “both the statutory scheme and the Guidance provides that the duty on local authorities is required to ensure that, if a nursery is taking part in the state funded FEEE scheme, parents must be able to access FEEE funded childcare without making additional payments. That means the arrangements between the nursery and the parents have to be structured so that parents are able to refuse to pay any proposed charges for additional goods or services.”

The challenge was dismissed on all six grounds of challenge and the high court found in favour of the Ombudsman.

Updated Early Education and Childcare guidance

Following the Judicial Review, in February 2025 the Department for Education wrote to nurseries making it clear that parents should be able to opt out of additional charges.

The statutory Early Education and Childcare Guidance (‘the Guidance’) was also updated on 21 February 2025, following the Judicial Review. It continues to have a specific section about charging and makes it very clear at paragraph A1.32 that “There must not be any mandatory charges for parents in relation to the free hours. Government funding is not intended to cover the costs of meals, other consumables, additional hours or additional services”.

Voluntary charges

The statutory guidance goes on to say

“A1.33 Local authorities should ensure that providers are aware that they can charge parents for the following extras in connection with the free hours, but these charges must be voluntary for the parent:

  • Consumables to be used by the child, such as nappies or sun cream
  • Meals and snacks consumed by the child
  • Extra optional activities such as events, celebrations, specialist tuition (for example music classes or foreign language) or other activities that are not directly related or necessary for the effective delivery of the Early Years Foundation Stage (EYFS) statutory framework.

Providers can also charge parents for any additional, private paid hours according to their usual terms and conditions provided taking up private paid hours is not a condition of accessing a free place”

This paragraph was considered in depth during the Judicial Review and the judge agreed that although the paragraph starts with a ‘should’ obligation for the council, the paragraph is very clear that “these charges must be voluntary for the parent”.

What is considered a ‘consumable’ remains vague and was not considered in depth in the Judicial Review, therefore it is likely to be the subject of debate going forwards and it is important for providers to stay abreast of any updates.

Displaying costs online

A1.35 makes it very clear that costs of chargeable extras must be published on the provider website and they should be “clear, up-to-date and easily accessible to parents, to enable parents to make an informed choice of provider”.

These should set out the amounts charged for all chargeable extras listed and the pattern of hours that parents can take the entitlements.

The guidance makes it clear that “This should be fully implemented by January 2026 at the latest”. Alongside the guidance, the Department for Education have set out a template to use when publishing details about chargeable extras. For providers, it will be worthwhile to ensure that they are up to date with this guidance and the necessary measures have been implemented in good time as local authorities are already starting to look into this to ensure that it will be in place by January.

Itemised invoices

Additionally, going forwards from January 2026, local authorities have an obligation to ensure that itemised invoices are in place. These invoices should be broken down as follows:

  • The free entitlement hours
  • Additional private paid hours
  • Food charges
  • Non-food consumables charges
  • Activities charges

Again we would urge providers to look into the implementation of this sooner rather than later to avoid being caught out.

Opt-Out
Parents must be allowed to opt out of paying for chargeable extras and local authorities should be checking that children who do not participate in optional activities are still receiving a provision that complies with the EYFS. Additionally at paragraph A1.39 the guidance makes it clear that “A local authority should intervene if a provider seeks to make additional hours, optional services or consumables a mandatory condition of taking up a free place”. This poses a real problem for providers navigating the situation as it is commercially important for them to ensure that the local authorities continues to fund places as the funding is of great importance to many parents.

What can’t providers charge for under the guidance?

  • Top-up fees
  • Supply or use of materials such as craft materials, crayons, paper, books, instruments, toys etc
  • Business running costs
  • Registration fees as a condition of taking up a free place
  • Non-refundable deposits as a condition of taking up a free place
  • General charges such as non-itemised enrichment charges, sustainability charges, business continuity charges, additional charges, enhanced ratios, hourly rates or any other supplementary charges on top of the free hours.

Top up fees are defined in the Guidance as “any difference between a provider’s normal charge to parents and the funding they receive from the local authority to deliver free places”.

In addition to the updated guidance, the Department for Education has published information for local authorities to include in their agreements with providers and additional templates including a parental declaration form.

Uncertainty and Inconsistencies

Research from the National Day Nurseries Association has recently highlighted the inconsistent approaches being taken by local authorities when it comes to implementing the guidance on delivering funded childcare hours.

This has led to real uncertainty for providers who don’t know how the guidance will be applied in their areas. According to the research reported in May 2025, 45% providers asked said that they required new agreements in order to comply with the guidance. In some areas, providers were not given adequate time to review agreements and take adequate legal advice as necessary indeed some providers have signed up to agreements with obligations beyond the scope of the statutory guidance.

Ofsted

It is important that Ofsted listens to the sector when regulating nurseries and pre-schools. Since the tragic death of Ruth Perry in January 2023, the Coroner’s findings and the Ofsted’s Big Listen in response, Ofsted have sought to consult with the sector on various reforms including the new ‘report card’ reports. We are awaiting a response for the results of the recent consultation later this year and note that there is an ongoing consultation about the EYFS Space requirements. We would urge providers to engage with Ofsted and help them to understand the realities facing the sector.

A core principle of the EYFS is promoting “Equality of opportunity and anti-discriminatory practice, ensuring that every child is included and supported”. It will be interesting to see how Ofsted enforces this requirement. Anecdotally we have heard of recent Ofsted inspections where the providers have been found non-complaint for allegedly discriminatory practice in how they are applying the statutory guidance on charging for their services. The sector will need to give careful consideration to the
fairness and reasonable of Ofsted judgements about how providers charge families for the services they provide to children given the potentially serious implications for the viability of nursery businesses.

It will be essential for Ofsted to take a pragmatic approach when inspecting services and in the event that problems arise, it will be important to make sure that the provider’s position is protected with proper representation.

Conclusion

These changes and clarifications to the law are going to prove incredibly challenging for nurseries and pre-schools operating over the course of the next few months and many providers will be forced to consider whether to set limits on funded hours and whether to participate in the FEEE scheme in any event. It is hard to get away from the fact that there remains a stark gap between the rates being paid by local authorities to providers and the actual cost of running their nurseries which is only likely to worsen in September with the expansion of the scheme.

It is likely that this will throw up a whole host of issues for providers. We are experienced at assisting providers to navigate complex situations and relationships with local authorities and Ofsted.

Please do not hesitate to contact us at Gordons Partnership on 01483 451900 if you think we might be able to assist you with any queries you might have.

About the Author

Lucy Bowker

Lucy Bowker

Associate

Tel: 01483 451 900

Email: Lucy@gordonsols.co.uk