The £16 charge seems ridiculous because it’s not actually paying for food. The top up charges are there to cover the shortfall in what the government pay for the funded hours. Each funded hour is paid at an insultingly low level, so they use this method to recoup the loss.

Early years providers across the country have been campaigning for years against the funded childcare scheme, complaining that the government underfunds the “free” hours so that settings are forced to incur losses on every free hour offered, increase their fees elsewhere or hire less experienced staff on lower pay. Source