Campaigners report DfE to competitions authority over childcare 'price fixing'

Members of the Champagne Nurseries on Lemonade Funding (CNLF) campaign group wrote to the Competition and Markets Authority (CMA) complaining many childcare providers will be forced to close because the money offered by the government for the 30 hours of care is not enough to cover the true cost.

They claim the government has abused its legislative powers by regulating the childcare market, stating the "price fixing of both the purchase and sales price is an abuse of market control".

From September 2017, the government plans to extend the 15 hours of free childcare it currently funds for all three- and four-year-olds to 30 hours for children of the same age whose parents are in-work. 

But CNLF, which claims to have 7,000 members, believes the cost of providing the extra hours will not be met by the funding the government has announced.  

A spokesperson for the group said the 30 hours extension brings "the real threat of closure for some settings who simply can't absorb or manage further losses".

"It is a consequence of a policy which the government has not funded properly and which childcare providers cannot afford to subsidise, but know that they run the risk of being forced out of the market if they do not offer the funded hours," they said.

The group quoted National Day Nurseries Association research from 2016 that showed only 51 per cent of nurseries in England were expecting to make a profit in 2016, with the average nursery losing £957 per child, per year on the 15 hour offer. 

They added: "This level of loss on 15 hours of funding means that the increase to 30 hours is simply untenable for the whole sector at the current funding rates, the only way to ensure the ongoing viability of the whole sector is to remove the word free and allow the funding to be used as a subsidy."

CNLF's complaint follows research published by the Family and Childcare Trust, which found 44 per cent of councils in England believed the plans to double the childcare entitlement would result in reduced financial sustainability for some settings. 

In December 2016 the government announced each council would receive a minimum funding rate of £4.30 an hour to cover the cost of free childcare places.

A DfE spokeswoman said: "We disagree with this campaign group. We are increasing spending on childcare to a record £6bn per year by 2020.

"This includes an additional £1bn each year for the early years entitlements of which £300m is to increase the funding rates paid to nurseries, pre-schools and childminders that choose to deliver them.

"Together with our new funding formula, the vast majority of providers will see an increase in their hourly rates.

"We're already trialling the 30 hour offer in a number of areas across the country and saw demand from both providers and local authorities to take part."