The campaign by Early Years Childcare, which has nine settings in Sussex, Hampshire and south-east London, says that underfunding the free entitlement means that providers could be forced to make cutbacks that will impact on the quality of their provision. The nursery chain has set up a campaign website and petition at www.freechildcare.org.uk.
Kate Peach, managing director of Early Years Childcare (pictured right), said, 'We work with five different local 
authorities and on average, the funding that we receive covers around 80 per cent of the cost of providing the free place.
'We fully support the idea of the free entitlement, but this is not free. The PVI sector is subsidising it. If the Government cannot provide a more realistic level of funding then it should allow nurseries to charge top-up fees.'
The campaign also highlights problems with the new Code of Practice, which was published by the previous Government and is due to come into force in September. The Code has angered some providers who say that the rules are so restrictive, there is no room to make up any shortfalls in funding (Analysis, 31 March).
Prior to the general election, the Conservatives pledged to suspend the Code and allow nurseries to charge top-up fees. However, last month the coalition Government confirmed it would be going ahead with the Code (News, 26 July).
Early Years Childcare has raised its fees to cover the shortfall in funding for the free entitlement and has written to parents explaining that the increase is due to Government legislation. The letter says, 'It is with real regret that I have to inform you that we will be forced to increase our charges from 1 November 2010. I appreciate that this will be unwelcome news, particularly in these difficult times, but new Government legislation makes an increase in our fees inevitable.'
'This legislation increases the entitlement for free childcare for threetofive-year-olds to 15 hours per week (which we fully support). However, changes to the way funding is administered to providers is causing a significant shortfall between individual nursery providers' costs and the hourly rate paid by the local authority. Additionally, the legislation prohibits high-quality providers, such as us, from being able to charge "top-up" fees to meet these costs.
We are therefore being required to subsidise this benefit, resulting in a serious shortfall in our income.'
Ms Peach said, 'We have tried to identify where we can make savings, but it is not acceptable for us to have to scale back on the quality of our childcare. We want people to understand that underfunding the free entitlement is detrimental to the quality of childcare and threatens the sustainability of settings, which will eventually impact on parental choice. We want to get parents involved in the campaign because the Government is not listening to nurseries.'
