Bridget Phillipson, the education secretary, is ordering a competition review of hidden childcare charges amid concerns parents are being hit with extra charges, despite the government’s expansion of funded childcare hours.
Phillipson has written to the Competition and Markets Authority (CMA) asking it to examine practices including nonrefundable deposits and compulsory add-ons.
Ministers said too many parents were still being asked to pay extra costs to secure places for their children in nurseries, including upfront deposits, additional paid hours and charges for basics including nappies, meals and sun cream.
Phillipson’s intervention – first reported by the Financial Times – came as Keir Starmer’s government looks for ways to ease pressure on household budgets amid the continuing impact of the Iran war on prices across the world, with ministers concerned if families are actually feeling the benefits of government support packages.
On Thursday, the chancellor, Rachel Reeves, announced a “Great British summer savings” scheme with measures including free bus travel for children in August and the removal of tariffs on staples including biscuits, chocolates and dried fruits.
The government also extended the temporary 5p cut to fuel duty and cut the rate of VAT from 20% to 5% over the summer holidays on tickets for theme parks, zoos and museums.
While the summer savings scheme is worth £300m, thinktanks including the Resolution Foundation suggested richer households would enjoy a larger share of the benefits of the government’s interventions than poorer ones.
The government said eligible families were now saving an average of £8,000 for each child a year through funded childcare hours, with more than 500,000 families benefiting from the scheme.
Tom Smith, former legal director of the CMA, told the Financial Times that the regulator was focused on sectors representing significant household spending.
“They’ve recently investigated the vets sector, they’re currently investigating private dentistry, and now childcare is next,” he said. “The CMA’s goal will be to assess whether the private childcare sector is working well for consumers.”
The watchdog had “very wide powers to impose changes on the sector, including divestments and structural measures, and significant changes to business practices”, he added. “It often also makes recommendations for legislative changes.”
The CMA has also been asked to assess the role of ownership models, including private equity, and whether they are contributing to rising costs.
Labour has continued rolling out the expansion of free childcare first announced under Rishi Sunak’s government, and later extended to eligible working parents from the moment a child turns nine months old until they start school. The policy costs about £9bn a year.
