Early years funding changes

A result of the significant High Court decision of THE KING (on the application of Bournemouth, Poole and Christchurch Council) v Local Government and Social Care Ombudsman and Tops Day Nurseries Ltd is that the landscape of the 'Free Early Education Entitlement' (FEEE) has significantly moved, adding further fuel to the debate regarding fair funding for early years.

The government’s mandate is to enable parents to return to work by facilitating funded early education and childcare hours under the FEEE regime, in which the government funds 570 early education and childcare hours for no fewer than 38 weeks in any year, to any eligible child.

This funding specifics are quite complicated, with local authorities obliged to consider the legislation while following the early education and childcare statutory guidance (which will hereafter be referred to as local authority guidance).

In 2024, this local authority guidance stated that settings were unable to include top-up and registration fees in the government-funded 15 or 30 hours: “not intended to cover the costs of meals, other consumables, additional hours or additional services.”

As such, the widening gap between the amount of government funding, compared to the cost incurred in providing quality FEEE provision, has led to periodic scrutiny regarding what charges are permitted for FEEE children.

In the Tops Day Nurseries case, a parent enrolled their child with the nursery for the funded hours and was required to pay additional charges. The nursery’s terms and conditions allowed them to charge an extra hourly rate during their core hours, reflecting the cost of consumables and additional activities.

The parent raised a complaint with their local funding authority in January 2021, who, after investigating, determined that the fees charged to the parent were not prohibited fees described under the local authority guidance.

The parent then complained to the Local Government Ombudsman, who ruled that the local authority interpreted their guidance incorrectly and that the hourly rate was not permissible. The local council challenged that decision in the High Court, and the case was finalised at the beginning of this year.

The High Court agreed that the Local Government Ombudsman’s interpretation of the legal regime was correct: the High Court ruled that FEEE hours must be available free of charge. They explored the meaning of words such as ‘top up’ and ‘consumables’, concluding that whether a charge was actually a prohibited ‘top-up’ charge depended on the underlying purpose of that charge, as opposed to the title it was given. In this case, privately-funded parents were not charged separately for the additional activities, so the High Court concluded that the FEEE parent was therefore charged an unpermitted top-up fee.

As a consequence, the local authority guidance was significantly amended earlier this year. Under Part A of the new local authority guidance, the information is not only more detailed, but the language has also been changed, requiring the local authority to be more proactive in ensuring that the funding rules are correctly followed.

It’s expected that a local authority will enforce this by making changes to their funding agreements (contracts) with providers.

Settings can currently only apply a voluntarily charge for the following:

￭ 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 languages) or other activities that are not directly related or necessary for the effective delivery of the Early Years Foundation Stage (EYFS) statutory framework.

The setting must make it clear that any charges are voluntary, not mandatory, and that the parent can thus opt-out of payment. The previous suggestion of empowering the parent to provide certain items themselves, for example, by providing their child’s own food, sun cream, nappies and wipes, remains.

There’s no suggested solution as to how a provider resolves the practical dilemma of staffing costs where a parent opts out of an activity (for example, boogie tots) that’s made available during FEEE hours.

The guidance also specifies that local authorities must be transparent in their communication of charges to parents, whether via their website or through Family Information Services. They must also ensure that each early years setting issues itemised invoices that comply with the guidance in describing:

￭ the funded entitlement hours

￭ additional private paid hours

￭ food charges

￭ non-food consumables charges

￭ activities charges.

In addition, to ensure that the funded places are completely free for families, local authorities are obliged to ensure that, along with top-up fees, a provider does not charge for:

the supply of or use of any materials, including, but not limited to: craft materials, crayons, paper, books, instruments, toys, or other equipment or learning resources that are necessary for the effective delivery of childcare.

business running costs, including, but not limited to: rent, staff wages, cleaning materials, insurance, or utility bills such as energy, gas or water.

￭ registration fees as a condition of taking up a child’s funded entitlement place.

￭ non-refundable deposits as a condition of taking up a child’s entitlement place.

￭ general charges, including but not limited to: 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

￭ any additional fees that are not specifically identified and itemised as being for chargeable extras. (A1.33)

Bournemouth, Poole and Christchurch Council have received permission to appeal, and the case has been referred to the Court of Appeal. In the meantime, early years providers will have the very difficult task of balancing their revenue against the cost of meeting and sustaining the expected costs of ensuring FEEE hours are available free of charge.

As an Alliance member, you have access to Law-Call's 24-hour legal advice telephone service. Contact details for the Law-Call service, which is available 24/7, can be found in the Alliance member benefit overview section of EYA Central: bit.ly/U5Law-Call.