September marks the arrival of the much-publicised 30 hours of so-called ‘free childcare.’ For parents, this announcement often brings relief. For childcare providers, it’s more likely to bring a deep sigh of dread. The reality behind the headline offer involves endless unpaid administration—paperwork, forms, funding codes—and difficult conversations. Providers must repeatedly explain that the offer is term-time only, or in some cases works out as just 22 hours a week when spread over the year. They must also point out that the funding rate fails to cover actual running costs.

The hardest part is the dishonesty they are expected to maintain. They cannot call it a ‘top-up,’ even though that’s exactly what it is and exactly what’s required. The truth is unavoidable: this ‘free childcare’ is not free. It is subsidised.

The Government claims it will increase funding by £4.1 billion annually to extend the offer to all children aged nine months to three years. But a closer look at the numbers tells a different story.

In 2020, Statista reported that there were 3.78 million children aged 0–4 in the UK. Dividing this evenly between the four year-groups gives roughly 945,000 children per age group. Discounting the 3–4-year-olds from this calculation, and adjusting for the fact that only nine months of the first year are covered, leaves about 236,250 children aged 9–12 months. Adding the 1–2 and 2–3-year-olds results in a total of around 2,126,250 eligible children.

When £4.1 billion is divided among this group, it works out at £1,928 per child per year. The Government has promised 30 hours a week over 38 weeks—1,140 hours per year—which equals just £1.69 per hour.

That figure is a far cry from the real cost of childcare for this age group, which ranges from £9–£12 per hour, and more in areas like the South East.

Yet Government rhetoric continues to talk of ‘unprecedented spending,’ ‘vastly increasing funding,’ and ‘investment.’ Officials also point to the £204 million Early Years Support Grant awarded to providers this year. But when this grant is broken down, the impact is negligible.

For the 945,000 children aged 3–4, this grant equates to £215 per child per year—less than 19p per hour if each child accessed the full 30 hours. In practice, some children use fewer hours, but the difference is minimal. Many providers saw around 23p per hour from this grant—a figure the Government repeatedly references as though it solves the escalating financial pressures.

While the Government makes its announcements, a record number of early years settings are closing. The uncomfortable truth is that the funding has to be stretched across an enormous number of children, and the promise of ‘free childcare’ is financially unworkable.

Parents are slowly realising that Government funding is insufficient to keep nurseries running—let alone provide a high-quality early education. One provider in the South East charges £96 per day, which is average for the area. This covers a team that includes graduates and postgraduates, and facilities such as a four-acre woodland, an art studio with a resident artist, and a Montessori classroom with a trained teacher. Even at £96, the setting is barely covering costs, and parents can’t afford to pay more.

Meanwhile, the base funding rate in that area is £5.21 per hour—just £52 per day—a huge gap. Recruitment is increasingly difficult because talented, qualified staff are leaving for better-paid careers. Over the past nine years, the National Minimum Wage has risen by 92%, alongside additional costs for employers such as National Insurance contributions and pension auto-enrolment. The cost of employing staff has doubled, yet Government funding has increased by only 36% in the same period.

This mismatch—created and maintained by Government policy—makes the sector financially unsustainable. Despite this, settings are told that top-ups are not permitted and that any extra charges must be voluntary.

The tension is beginning to spill over. Parents are becoming frustrated that their ‘free childcare’ isn’t truly free, and some are taking legal action. In one case in the south of England, a father complained to his Local Authority about fees. When the LA confirmed the charges were lawful, he took the case to the Local Government Ombudsman, and eventually to the High Court. The outcome? The LA was ordered to repay him £1,173 because the law states that if something must be free, it must be free.

Here lies the crux of the problem. The Department for Education’s primary legislation places responsibility on Local Authorities to provide enough childcare and early education places for the children in their area. But the Government does not provide enough funding for them to achieve this. Still, the law demands they do it.

In turn, LAs insist on everything being ‘free’ to avoid legal challenges from parents, even when they know the funding is inadequate. In doing so, they protect themselves but leave early years settings to bear the brunt—forcing many into closure.

The treatment of the Early Years sector is not only economically damaging but deeply patronising. Many feel the Government sees childcare as a vocation that should be done out of goodwill rather than as a professional service worth proper investment. It is a sector dominated by women, and the lack of respect for their work is telling.

One Local Authority officer even suggested that a long-standing private provider become a not-for-profit organisation—despite the fact the business had been running successfully for 27 years.

In any other industry, the idea of imposing costs—such as staffing ratios, wages, and business rates—while capping income below those costs would be considered absurd. Yet this is exactly the situation forced upon early years providers. Unless something changes soon, the system will reach breaking point.