The Free Childcare Entitlements: Legal Framework, Provider Obligations and the 2024 Expansion

The free childcare entitlements are among the most significant interventions in the English childcare market. For parents they represent a meaningful reduction in costs. For providers they represent a significant share of income – and a source of controversy about underfunding. For practitioners and local authority officers, understanding the statutory basis of the entitlements is essential for navigating disputes, understanding provider obligations and advising families. This article traces each entitlement to its statutory source and explains the legal framework that governs how it is delivered.

The 15-Hour Universal Entitlement: Section 7, Childcare Act 2006

Section 7 of the Childcare Act 2006 (as amended) imposes a duty on local authorities in England to secure early years provision, free of charge, for every child in their area from the term following the child’s third birthday. The original statutory rate was 15 hours per week for 38 weeks per year (570 hours annually). This is often described as the “universal” or “15-hour” entitlement and it applies regardless of parental employment status or income.

The s.7 duty rests on the local authority, not on any individual provider. The local authority must secure sufficient provision to fulfil the entitlement – but individual providers are not legally required to offer funded places. A provider may choose to offer only private-pay places. In practice, most registered providers do participate in the funded entitlement because it forms a significant part of their business model, but the choice to participate brings with it contractual and regulatory obligations (see below).

The 15-Hour Entitlement for Eligible 2 Year Olds: Section 6(3A)

Section 6(3A) of the Childcare Act 2006, inserted by s.1 of the Children and Families Act 2014, extended the free entitlement to two-year-old children from lower-income families and other eligible groups. Eligibility is determined by the statutory criteria set out in the Childcare (Free of Charge for Eligible 2 Year Olds) Regulations 2014 (SI 2014/2147) and subsequent amending regulations. The eligibility criteria include families receiving Universal Credit below an income threshold, families in receipt of certain other benefits, and certain looked-after children and children with EHCPs. Local authorities have a duty to assess eligibility and to communicate available places to eligible families.

The 30-Hour Extended Entitlement: Childcare Act 2016

The Childcare Act 2016 introduced the extended 30-hour entitlement for three and four year olds from working families. Section 1 of the 2016 Act inserted s.7A into the Childcare Act 2006, placing a duty on local authorities to secure an additional 15 hours of free early years provision (making 30 hours per week for 38 weeks, or 1,140 hours annually) for children of eligible working parents. Eligibility is defined in the Childcare (Early Years Provision Free of Charge) (Extended Entitlement) Regulations 2016 (SI 2016/1257). Broadly, a child qualifies where each parent (or the sole parent in a single-parent household) earns at least the equivalent of 16 hours per week at the National Living Wage and does not earn more than £100,000 per year. Parents apply for the extended entitlement through the HMRC Childcare Service portal and receive an eligibility code to present to their provider.

The 2024 Expansion: Secondary Legislation Under Existing Powers

In the 2023 Budget, the government announced a phased expansion of funded childcare entitlements to cover younger children, with the aim of providing 15 hours for children from 9 months from April 2024 and 30 hours from September 2024. Rather than requiring new primary legislation, these expansions were made by amending existing secondary legislation under the powers already conferred by ss.6, 7 and 7A of the Childcare Act 2006 (as amended). The Childcare (Free of Charge for Eligible 2 Year Olds) (Amendment) Regulations 2024 and the Childcare (Early Years Provision Free of Charge) (Extended Entitlement) (Amendment) Regulations 2024 effected the changes.

The practical effect is that from April 2024, working parents of children aged 9 months to 3 years became entitled to 15 free hours per week, and from September 2024, working parents of children from 9 months to school age became entitled to 30 free hours per week (subject to the same income thresholds as the existing extended entitlement). This represents the most significant expansion of funded childcare since the original Act.

The National Funding Formula and Underfunding

The mechanism by which providers are paid is the national funding formula (NFF). The DfE sets a minimum hourly rate that local authorities must pass on to providers, calculated on a per-child, per-hour basis with adjustments for deprivation and other factors. Local authorities are required to pass through a minimum percentage of the funding they receive from the DfE (currently at least 95%) directly to providers, retaining no more than 5% for administration and sufficiency-building. The legal obligation to pass through sufficient funding to providers derives from the Secretary of State’s conditions attached to the s.7 duty, enforced via the Education Act 1996 and the funding agreement between the local authority and the DfE.

Underfunding of providers (the gap between what the NFF pays and the actual cost of delivering a funded hour) has been a source of sustained sector-wide concern. Providers who consider their local authority’s funding rate to be unlawfully below the NFF minimum can complain to the local authority, escalate to the DfE’s schools resource management team, and in extreme cases seek a judicial review of the local authority’s funding decision. The Secretary of State also has powers under s.13 of the Childcare Act 2006 to direct a local authority that is failing in its sufficiency duties.

Top-Up Fees: The Legal Position

Providers are not permitted to charge parents a “top-up” fee purely for the funded hours themselves – they cannot charge parents extra simply because the funding rate does not cover their costs. However, providers can charge for consumables (meals, nappies, trips), for optional extras (specific activities or sessions beyond the funded hours), and for additional privately-purchased hours beyond the funded entitlement. This distinction (between a prohibited top-up and a permissible charge for genuine extras) was clarified by DfE guidance and is now a condition of participation in the funded entitlement scheme. Providers who charge prohibited top-ups risk losing their right to deliver funded places.

Provider Obligations When Participating in the Funded Entitlement

A provider who chooses to deliver funded entitlement hours enters into a contractual arrangement with their local authority, governed by the Early Education and Childcare Statutory Guidance (2023) and the local authority’s own funding agreement. By signing the funding agreement, the provider agrees to:

• deliver the funded hours in accordance with the EYFS
• not charge prohibited top-up fees
• maintain accurate attendance records
• notify the local authority of changes
• participate in audits. Breach of the funding agreement is a contractual matter between the provider and the local authority –
• it can result in clawback of payments, suspension from the funded scheme and, in serious cases, a referral to Ofsted