Childcare providers in England say the system is at “breaking point” as plans to double free provision for three and four-year-olds in England are sped up.
The warning from one industry body, the Pre-School Learning Alliance, comes as ministers say trials of the new scheme are being brought forward to 2016.
The current allowance of 570 hours a year for three and four-year-olds will be doubled for working parents.
David Cameron said it would “take time” to get the policy right.
The Pre-School Learning Alliance – which represents 14,000 private, voluntary and independent groups – is warning of “meltdown” in the system because of a shortfall in government funding.
It says the grant for the existing 15 hours falls, on average, around 20% short of the true cost of providing care – £3.88 per hour compared with £4.53.
Employment Minister Priti Patel told the BBC the government accepted “funding rates need to increase” and is launching a consultation on how the policy will work in practice.
Currently, all three and four-year-olds in England are entitled to 570 hours of free early education or childcare a year, which works out as 15 hours each week for 38 weeks of the year.
The Childcare Bill, announced in last week’s Queen’s Speech, would double this for working parents with a household income of less than £150,000 – although it is not clear yet how many hours they will have to work in order to qualify.
Ministers say up to 600,000 families could benefit, saving as much as £5,000 a year.
The change had been due to come into force from September 2017, but some working parents will be entitled to the extra help when pilots begin in September next year.
However, the alliance said many groups were already having to charge parents extra for hours of childcare not included in the scheme to make ends meet, and would struggle to deal with the changes.
“I think this is crunch time,” said chief executive Neil Leitch.
“While we of course welcome the drive to improve the availability of childcare in this country, these figures clearly show the government’s plan to extend funded childcare hours simply cannot work without a substantial increase in sector funding.
“The so-called ‘free’ childcare scheme is nothing of the sort. For years now, the initiative has been subsidised by providers and parents because of a lack of adequate government funding.”
Fiona Weir, chief executive of single-parent charity Gingerbread, said 30 free hours of childcare a week was “really good news” for those who will get it.
“The cost of childcare is one of the biggest barriers the UK’s two million single parents face to finding and staying in work. As the primary carers for their children, they can’t do the kind of ‘shift parenting’ couple parents often do.
“However, we look forward to seeing more detail on how parents will qualify for this extra support, and the way in which the extra hours will work.”
Following the announcement, the prime minister visited Buttercups Nursery in Teddington, south-west London.
Kate Thomas, 49, whose three-year-old daughter attends the nursery, said it was worrying that any shortfall in funding for the extra hours might be passed on to parents.
“Most mothers I know don’t work full time and if they are lucky they will have a job that covers their childcare and have a bit extra,” she said.
“But if that bit extra then ends up being what funds the extra cost of the nursery, what is the point of working?”
The National Day Nurseries Association welcomed the doubling of provision, but also said its members were “struggling with current levels of investment”.
“Funding is critical and it’s vital that the increase pledged by the government is meaningful,” chief executive Purnima Tanuku said.
Jill Rutter, from the Family and Childcare Trust, which campaigns for quality childcare that is affordable and accessible, said there was “no proper funding formula”.
“The money local authorities get from government to pass on to providers is very varied,” she said.
How do nurseries make up the shortfall?
The short answer is – from parents.
But as extra hourly fees are not legal, nurseries have worked out canny ways to get round this.
The most common technique is requiring parents to take more than the total number of free hours and charging a set fee for the extra time.