What price is free?

A major expansion of free childcare entitlement in England is currently underway. The policy has significantly expanded the number of parents who are eligible to receive childcare, as well as the number of free hours they are able to receive per week. However, this policy is likely to significantly increase demand for nursery places and, through increased competition, to drive up the prices charged for unfunded hours of childcare. There is a risk that the overall cost parents face may fall by less than the policy promises. Furthermore, these unintended outcomes may be unevenly spread across the country.

Dr Joanna Clifton-Sprigg, Professor Kerry Papps and Sara Linjawi draw on monthly price data from a large nursery chain to show how prices have changed over the first two phases of the reform. They also compare these prices against prices reported by the providers in the 2024 Childcare and Early Years Provider Survey, as well as those charged by other providers in the neighbouring areas. They find that government funding is likely to cover the costs for children under two in most parts of England, but that funding for three- and four-year-olds fails to cover costs in many places. They find that after the second phase of the reforms, the prices charged for unfunded hours rose fastest at nurseries in local authorities with the least generous funding rates.