Fees, Funding, and Fragility - The Tightrope of Early Years Sustainability

Accompanying Episode 16 of the Atelier Podcast

Across the country, early years leaders are facing an impossible balancing act. Parents are told that childcare is ‘free’, local authorities are charged with stretching inadequate budgets, and settings are left to deliver high-quality education on funding that rarely covers their costs.

The promise of ‘funded hours’ was meant to empower families. Yet, for many nurseries, it has created a financial storm that threatens the very quality of provision it was designed to support.

The illusion of ‘free childcare’

Government messaging around the expansion of funded hours from nine months to school age by 2025 has been widely celebrated. However, sector leaders, including the Early Years Alliance and Early Years Voice, have consistently highlighted that ‘free childcare’ is NOT the same as ‘fully funded childcare’.

Current funding rates paid to providers through local authorities still fall significantly short of the true cost of delivery. Independent analyses show gaps of up to 20–30% between what the DfE provides and what settings must spend to maintain quality ratios, qualified staff, and resourced environments.

The human impact behind the numbers

Settings like Atelier Nursery are caught between their pedagogical values and the financial reality. With the majority of providers subsidising the shortfall in funding by charging for meals, consumables, or wraparound care.  But this can feel uncomfortable when relationships with parents are built on trust and partnership and parents have been sold by the government that the hours are ‘free’.

At the same time, leaders are navigating relationships with local authorities that vary widely in transparency and flexibility. Some LAs distribute funding equitably, while others retain large proportions of ‘centrally held’ funds. This inconsistency fuels frustration, as settings working just miles apart may receive drastically different hourly rates.

Meanwhile, parents already under cost-of-living pressures are often unaware that the ‘30 free hours’ offered nationally are not fully funded. The result is a climate of misunderstanding, where nurseries risk appearing unreasonable for simply covering their costs.

Sustaining quality under pressure

Behind every funded hour sits a team of practitioners, educational professionals who deserve fair pay and recognition. Yet recruitment and retention remain at crisis levels, with workforce turnover exceeding 25% nationally.

For many settings, maintaining ‘Outstanding’ practice requires continuous investment in professional development, reflective leadership, and resourcing. When budgets are squeezed, these are often the first to suffer despite being the core drivers of quality.

The sector’s voice, amplified by campaigns like Early Years Voice and Champagne Nurseries Lemonade Funding, is calling for a national funding review that is transparent, equitable, and rooted in the real cost of childcare. Until then, leaders must continue to balance sustainability with integrity, ensuring families understand that quality comes at a cost.

Looking forward

Parents and providers ultimately share the same goal: giving children the best start in life. Genuine partnership grounded in honesty about what ‘funded’ really means will be essential as new entitlements roll out.

Early years settings are not failing families; they are propping up a system that has been mis-sold. The hope is that, in time, government messaging will catch up with the lived experience of the sector it relies upon.